TL;DR
Explainer guide on how Keep3r generates revenues & how vested KP3R token holders earn fees
Includes details on;
- all current revenue sources
- what factors impact revenue
- additional benefits
- current level of fees shared with vested token holders
- what’s to come in each area of revenue
Note; For the purposes of this publication v3 incentives & emissions revenues are not included since;
- v3 incentives were not implemented &;
- the 1% of revenues for future emissions was not established through prior governance, as planned.
Any member of the team or community is free to suggest additions, corrections or updates.
Revenues from Keep3r jobs network
How jobs generate revenues
Each time a new protocol lists a job they have to provide liquidity to the KP3R+ETH pair on Uni v3.
This LP is then bonded as kLP which generates newly minted KP3R tokens over time which the protocol Job owner can use to pay keepers. This is known as the credit mining process. When/if the protocol delists the Job, then all liquidity is returned to the Job owner.
Meanwhile, all liquidity provided by protocols to the KP3R+ETH pair is managed by Keep3r’s uni v3 pair manager contract which directs all trading profits from the LP to the Keep3r treasury - Essentially trading LP providers’ claim on fees in return for newly minted KP3R credits.
What factors impact Jobs revenue
- Volume of active jobs listed, and;
- Volume of protocols listing jobs.
Note; protocols can list multiple jobs.
Additional Benefits from Jobs
As protocols list jobs they have to acquire a volume of KP3R to pair with ETH in LP which creates a positive demand pressure on KP3R tokens.
The same is also true for individual keepers due to the need for keepers to also provide a number of KP3R tokens as a bond which proves credibility of the keeper as trustworthy, and also provides the keeper with an additional bonus for each job worked.
In v1 of the Keep3r jobs network Keepers can gain additional bonuses on rewards upto a total bond of 200 KP3R. This ensures active keepers have an incentive to bond KP3R earnt until they reach a bonded level that provides a stronger/higher level of bonus payments. In turn, this creates a disincentive for the keeper to immediately sell their KP3R payment.
However, in v2 of the Keep3r jobs network this has been adjusted to ensure that all active Keepers receive bonus at an expected 20%. As more keepers register for actively managing jobs the sell pressure on earnt KP3R may increase over time.
Current fees from Jobs shared with vested token holders
On v1 of the Keep3r job network 1% of job fees were intended to be distributed to vested KP3R token holders.
In v2 the design of tokenomics for the Keep3r job network completely changed, and vested token holders are intended to receive fees generated from the uni v3 LP trading profits.
What’s to come for Jobs revenues & fees?
Keep3r jobs network will soon go multichain opening up the potential for all protocols on any EVM chain to utilize Keep3r for automation of DevOps tasks.
Yearn v3 vaults will also be utilizing Keep3r v2 to automate all tasks.
This means as new jobs are listed demand for KP3R tokens should increase as both protocols and new keepers have need to purchase KP3R tokens. As more liquidity is provided to the uni KP3R+ETH LP & a higher volume of trade is routed via this LP then fees for vested token holders will increase.
Revenues from Options Liquidity Mining (OLM)
How OLM generates revenues
Keep3r, unlike other protocols, doesn’t incentivize liquidity through direct token emissions as rewards/incentives. Instead, it grants a token (rKP3R) that can be converted for a future option at a discount on the price of KP3R. This was set at 50% via a multisig txn on March 21st 2022 but is due to return to the previously set 10% discount upon implementation of V2.
Options are paid in USDC, with all revenue generated from the sale of options being considered OLM revenue.
rKP3R rewards are currently granted to;
- reward users providing liquidity to curve pools that contain ibXXX stable thus incentivizing liquidity &;
- provided to vested KP3R token holders weekly, which alongside the fees generated from options redemptions compensates vested token holders for possible dilution of their position due to new minting of KP3R
What factors impact OLM revenues
OLM revenues are greatly impacted by several factors;
- The price of KP3R token at sale of the option
- The level of discount offered on the option
- The volume of options redeemed
For each redemption of an option the amount of revenue generated is directly proportional to the value of the KP3R token at the time of sale.
For example; where the KP3R token price is equivalent to $100 & the option provides a discount of 10% then the revenue generated from the redemption of 1 option would be $90. Likewise, if the price was $1000 then the revenue generated would be $900. Therefore volatility in token price has a large bearing on OLM revenues.
Similarly, the total volume of options redeemed in any given period impacts the amount of revenue generated from OLM.
For example; in a week where 5,000 options are redeemed the revenue will be greater than in a week where 1,000 options are redeemed.
Additional benefits from OLM
OLM mechanisms help protocols manage emissions of new token supply, by utilizing options rather than direct token issuance to reward liquidity
This benefits all KP3R token holders, as any inactivated options remain locked in the contract. KP3R currently locked in the rKP3R contract can be viewed in rKP3R contract address & are therefore not a part of the current circulating supply of KP3R tokens until such time that they are redeemed
As detailed above, this also directly benefits vested token holders in two key ways;
- They receive revenues generated from the redemption of options on KP3R
- They are granted options weekly which they can redeem, and if so wish, increase their vested position
This ensures that vested token holders are both compensated for possible dilution & provided with an opportunity to increase their vested position.
Current fees from OLM shared with vested token holders
All fees generated from the redemption of options are passed onto vested token holders
For example; if a user redeems 100 rKP3R where the KP3R token price is equivalent to $100 & where the discount remains 50% then the fees generated would be 5000 USDC. All of this revenue is directly passed to vested token holders as fees.
What’s to come for OLM revenues & fees
rKP3R is planned to migrate to a v2 implementation that simplifies the redemption process steps.
Note; OLM was originally intended to be offered as an external service to other protocols looking to implement a similar mechanism (known as “foreign options”), with 1% of fees being directed to vested token holders. Unfortunately, this feature has not been implemented thus far.
Revenues from Fixed Forex minting & reserves
How Minting & Reserve fees generate revenues
Keep3r’s Fixed Forex platform owns ibXXX stable assets, which can only be borrowed via the Iron Bank by providing accepted collateral.
As ibXXX assets are borrowed Keep3r generates revenue’s from two sources;
- Reserves.
- Minting (aka borrowing).
For reserves, Iron Bank applies a 10% reserve factor on all Fixed Forex ibXXX stables which is generated from the interest borrowers pay on ibXXX assets. Similarly, a variable reserve rate is applied to all assets that are accepted as collateral.
The reserve is Keep3r’s percentage share of all generated reserve factor fees, including the assets provided as collateral in order to borrow ibXXX assets (previously set at 70%). This scales as more ibXXX assets are borrowed.
For minting, whenever an ibXXX is borrowed the user has to pay interest. This scales with demand and generates revenue for Keep3r.
What additional factors impact Minting & Reserve revenues
ibXXX assets’ main use case today remains borrowing for the purpose of farming, which requires the incentivization of curve pools.
This means Keep3r has to utilize treasury held assets that have the power to direct votes to curve gauges for pools that contain Keep3r assets.
The yield available for farmers will be impacted by two major factors;
- What level of votes are used to vote for each gauge, as this determines what share of newly issued CRV will be emitted to the pool
- What total value is locked (TVL) in the pool, as yields scale downwards with increase in TVL. Meaning a larger share of votes is required to maintain yields as TVL increases
Keep3r total share of vote directing assets can be viewed under the “Voting Escrow CVX” heading included here
Additional benefits from Minting & Reserves
Fixed Forex’s internal AMM utilizes Iron Bank’s protocol to protocol lending facility to borrow ibXXX assets in order to offer swaps from USD stables to ibXXX assets to users of the AMM. This drives large volumes of revenue for vested token holders as demand for swaps increases.
The level of ibXXX assets borrowed by Keep3r can be viewed here
Current fees from Minting & Reserve shared with vested token holders
Fees scale with demand, with profits claimed via the ib_controller contract
Historical fees from Minting & Reserves, broken down by each ibXXX asset, can be viewed at Chainsight Analytics Fixed Forex dune dashboard
What’s to come for Minting & Reserve fees
Fee claims will soon be automated as a Keep3r jobs task ensuring regular claim of revenues & payment of fees to Keep3r
Revenues from Swaps
Keep3r’s Fixed Forex doesn’t currently generate any revenue from swaps between assets but does have the potential to do so via the internal AMM hosted at Fixed Forex
This feature may be implemented at a future date.
Directions for raising additional questions or queries on revenues or fees to vested token holders
Please use the comments section below to add any questions or queries regarding revenues or fees, their mechanisms, and how to claim them.