Vesting & Redemption Rights

Reward Vesting

Some point programs release rewards per a vesting schedule. These schedules require users to redeem their points for rewards over time rather than all at once. Rumpel is built to account for point programs with varied types of vesting schedules with a feature called Redemption Rights.

Basic point programs that allow users to convert all of their points to rewards without vesting do not need the redemption rights feature. However, more complicated point systems with different vesting flavors, make the redemption rights feature quite important.

To enable redemption rights, Rumpel uses merkle roots and proofs, to restrict how many pTokens a user can redeem at any given time.

The main vesting scenarios are:

1. Vanilla vesting - all users follow the same vesting schedule

2. Whale vesting - only large "whale" users have vesting applied

3. Minimum balance vesting - whales need to maintain a minimum balance of the deposit asset to receive linear vesting payments after an initial cliff

The goal is to allow pToken trading while distributing the vested reward tokens fairly to pToken holders over time.

Vanilla Vesting

In this situation, all users are tied to the same vesting schedule. For example, a point issuer might allow 50% of points to be redeemed day 1, and 10% of points to be redeemed starting on the first of the month every day thereafter.

Rumpel's Solution

On the day redemption begins, as always, Rumpel will claim the maximum amount of rewards possible across all Rumpel wallets. These rewards will be pooled in the Rumpel Vault.

Additionally, Rumpel will take an offchain snapshot of all pToken holders at the time of redemption, giving them Redemption Rights which correspond to 50% of their snapshot pToken balance. As more reward tokens vest from the airdrop, Rumpel will award new redemption rights to these initial pToken holders.

From this point on, only the original pToken holders in the initial redemption rights tree are the expected redeemers going forward and their relative ownership of pTokens at the original snapshot will determine their share of all future redemption rights.

They should not transfer the pToken, or they’ll need to buy it back to redeem it in the future. As redemption rewards are issued in the future, their redemption rights will increase.

For these reasons, we expect the pToken market to lose some liquidity after vesting has commenced.

Whale Vesting

Some projects selectively apply vesting only to their larger users.

Rumpel's Solution

If vesting applies to any Rumpel wallets, all users must adhere to the vesting schedule. Rumpel will determine which points are under the vesting program, applying a "vanilla vesting" strategy to distribute additional rewards based on the point program's release schedule.

This means whale vesting affects all pToken holders' redemption timelines, socializing the cost among them, even if an individual doesn't qualify for whale vesting directly.

If any depositor qualifies for whale vesting, all pToken reward claims follow a vesting schedule enforced by redemption rights. For example, if two whales qualify for whale vesting and hold 10% of pTokens, with a schedule allowing 50% reward claims on day one and 10% monthly thereafter, Rumpel could claim 9,000 rewards from unvested and 500 from vested depositors out of a 10,000 pToken supply. Thus, each user can claim 95% of their pToken rewards on day one, with an additional 1% monthly, preventing race conditions for pToken redemptions.

Minimum Balance Vesting

Minimum balance vesting requires that users maintain a certain minimum balance of tokens in order to receive their reward vesting.

Rumpel's solution for Known Min Balance Vesting

For projects with airdrops confirmed to have minimum balance vesting, Rumpel allows users to only mint X% of their points (or whatever the day 1 share is). After the airdrop is announced:

• Users can redeem their point tokens for X% of the airdrop.

• After the airdrop begins, the liquidity of the point token market decreases. Vesting wallets must decide whether to keep their principal locked to earn the vesting reward.

• The point token acts as an interim step towards obtaining the rewards, with no liquid point token market after the initial airdrop phase.

• Rumpel will mint the remaining point tokens for smaller wallets not subject to the vesting schedule, once it is determined they do not qualify for vesting and can claim their full rewards.

Rumpel's Solution for Surprise Min Balance Vesting

For projects with airdrops that unexpectedly have minimum balance vesting, Rumpel provides the following solution, after the airdrop announcement:

• Wallets meeting the minimum balance can "opt-in" and lock up their wallets, providing assurance of their compliance with the minimum balance requirement.

• pToken price may become highly volatile if the market isn't expecting the vesting schedule