Premia Blue Tokenomics: vxPremia, Fee Structure & OLM

Earn Revenue Share, Reduce Fees, and Participate in Governance!

Author

Weka
September 07, 2023

Premia Blue is a first-of-its-kind non-custodial DeFi options exchange.

We’ve built a meta-economic model and a revamped “vx”-tokenomics system to create a positive-sum flywheel weaved directly into the core exchange.

PREMIA can be locked to tap into the economic extracts of Premia Blue: revenue share, fee discount, governance, and LM gauge voting.

Premia Blue’s revenue share consists of multiple different sources of protocol fees — vaults, liquidity pools, trading fees, and even fees from options liquidity mining flow back to vxPREMIA!

If you were one of the lucky few who locked before the AirDrip snapshot, that’s also in the cards for you…

We are currently in the midst of migrating liquidity from Premia v2 to Premia Blue — stay tuned for more details on our X (Twitter) or Discord!

Meta-Economic Overview

We’ve designed Premia Blue’s economic flywheel to reward active and committed users and contributors while ensuring the long-term sustainability of the protocol.

It’s a democracy where every holder of PREMIA or vxPREMIA has a voice, a vote, and a vital role in our joint odyssey across the infinite expanse of decentralized finance.

Premia Tokenomics

  • Total Supply: 100M

  • Initial Public Community Allocation: ~10M

  • General Course of Business: 7.4M

  • Liquidity Mining Emissions: ~30M

  • Blue Descent DAO: ~22M

  • Contributor Vesting: 21M

  • Premian Republic (Operating Group): 10M

At the time of writing, the circulating supply of PREMIA (including tokens locked as vxPREMIA for any duration) is ~35M.

Trading Fees & Revenue Share

In Premia Blue’s new model, protocol fees and commissions cascade into three distinct layers: base, margin, and vault.

All rates are subject to change via vxPREMIA governance vote and ratification.

  • Base Layer amasses commissions from the greater of either 3% of premiums paid or 0.3% of the notional value transacted. On settlement, a fee of 0.3% is collected, not to exceed 12.5% of the option’s value.

  • Margin Layer subtracts 0.4% from the Prime Rate (variable driven by supply and demand dynamics) charged to providers of margin lending liquidity. It also charges a dynamic liquidation fee.

  • Vault Layer includes a yearly 2% management fee and a 20% fee on positive returns for all native vaults built in-house. For vaults developed by third parties, fees will be negotiated on a case-by-case basis.

Cumulative fees from all sources will be divided to three parties: vxPREMIA holders, Premian Republic, and the Insurance Fund.

  • Staking Users receive 80% of base layer fees

  • Premian Republic receives 20% of base layer fees

  • Insurance Fund collects 100% of the fees from the vault and margin layers.

vxPremia Staking

Wallets can stake their PREMIA to partake in a pro-rata share of fees derived from the protocol.

Staked tokens become vxPREMIA when locked for a chosen period and cannot be unlocked or withdrawn until that period concludes.

It’s important to remember that every benefit from vxPREMIA scales with influence, which in turn scales with the size and length of the vxPREMIA lock.

Premia’s dual-token model serves four main purposes:

  1. Governance: vxPREMIA holders gain the right to vote on proposals affecting the platform

  2. Revenue Share: vxPREMIA holders receive 80% of protocol fees denominated in USDC

  3. Utility: Holding enough vxPREMIA provides discounts on trading fees

  4. Incentives: The amount of LM rewards allocated to each liquidity pool is managed by vxPREMIA voters.

  • Minimum lock-in period is 10 days

  • Maximum lock-in period is 4 years

  • Minimum withdrawal period is 10 days

  • The longer the lock, the more Influence a vxPREMIA position accrues per staked PREMIA

  • Revenue share, fee discounts, and voting power increase with Influence

  • Locked vxPREMIA allows for fee discounts of up to 60% for EOA’s and 30% for smart contracts.

Compounding vxPREMIA rewards:

The USDC.e rewards earned from staking vxPREMIA can be compounded to further increase rewards earned.

Remember that when compounding vxPREMIA rewards, the lock duration will be affected based on your current stake and lock duration left.

Let’s look at an example:

  • You initially staked 1000 PREMIA for 4 years, and you currently have 3 years left on your lock.

  • You want to compound 500 PREMIA worth of USDC rewards.

  • The added duration is based on your current stake and lock + the added stake.

  • 3y x 1000 PREMIA + 4y x 500 PREMIA / (1000+500) = 3.33y lock duration

More details can be found in the Premia Docs.

Options Liquidity Mining (OLM)

Premia Blue replaces the traditional token-based liquidity mining model with Options Liquidity Mining.

In OLM, liquidity providers are rewarded with PREMIA Call Options at a 45% discount to the underlying asset’s market price at the time of claiming. These options are physically settled using USDC, with a cost associated for exercising.

Here is an overview of Premia Blue’s OLM:

  1. Liquidity providers receive PREMIA Call Options that can be claimed at any time.

  1. The strike price for these options is set to 55% of the current market price at the time of claiming. E.g. if PREMIA is trading at $1, the strike price will be set to $0,55.

  1. The PREMIA Call Options will expire 30 days after claiming. Users are required to deposit sufficient collateral (USDC) for settling the options during this time.

  1. The required settlement cost equals option size x strike price. E.g. if there are 100 PREMIA Call Options with a strike price of $0.55, the settlement cost will be $55.

  1. At expiration, these options will be automatically settled, assuming the user has deposited sufficient collateral.

  1. Upon settlement, 90% of proceeds circulate to users holding vxPREMIA, while the remaining 10% is directed to the Blue Descent DAO.

  1. Protocol fees are collected on exercise, and taker fees are levied if the option is traded on the secondary market.

It’s important to note that any USDC deposited for settlement is not locked – instead, a protocol fee is deducted from the total deposited amount. If a user opts to withdraw their deposited collateral (effectively canceling settlement), they will receive their deposit - fees.

In the event that the liquidity provider only deposits a portion of the settlement cost, the appropriate amount of PREMIA Call Options will be exercised at maturity, while the remaining portion will be subject to the terms defined below.

Here is what happens if the liquidity provider opts not to deposit any collateral for the settlement cost within 30 days of claiming the options:

  1. If the options are not exercised, they will instead be locked for a one-year period.

  1. After conclusion of the one-year period, 25% of the options’ intrinsic value will be directly credited to the liquidity provider’s wallet. E.g. if the options could’ve been exercised for a net profit of $100 at expiration, the liquidity provider would earn $25.

OLM is designed to align the interests of liquidity providers, staking users, and the broader Premia Blue ecosystem. This mechanism is entirely modular, allowing any market to be deployed as a physically settled option.

This harmonic balance between LPs and vxPREMIA staking users is a novel mechanism where both parties will benefit from token emissions.

Join the Future of DeFi Options With Premia Blue!

Premia Blue is the first non-custodial options settlement layer with fully customizable options parameters and risk exposure.

Maximize capital efficiency, define your own risk, and optimize fees earned with Premia Blue on Arbitrum (very soon)!

Reply

or to participate.