USH - Docs

vdUSH: Validator Decentralization USH

USH

USH is the governance token and incentive layer for unshETH. It is used to grow unshETH TVL and liquidity, and to foster competition among liquid staking protocols. Staked USH (vdUSH) governs the following:

unshETH protocol composition (inclusion / exclusion of LSDs, target weight, and maximum weight)
How to direct USH incentives and partner protocol incentives
Fee curve parameters and fee switch

The USH token holders can participate in voting on proposals and make decisions on the governance of the protocol. They can also stake their USH to receive vdUSH, which can be used to participate in the governance and earn a share of the protocol's revenue.

Participating in unshETH governance is enabled through validator decentralization USH, abbreviated as vdUSH. vdUSH stakers govern the index composition, risk parameters, and fee settings. vdUSH balances are also eligible for boosted rewards in co-incentivized liquidity mining farms.

vdUSH is a non-transferable token that represents the voting power of an address. vdUSH can be obtained by locking USH/ETH Sushi LP, USH/unshETH 80/20 BPT, or USH. The maximum lock time is 1 year, and the minimum lock time is one month.

Voting Power

Maximum voting power is obtained by minting vdUSH with USH/unshETH 80/20 BPT (or Sushi USH/ETH LP on ETH or Pancake USH/BNB LP) and locking for the maximum lock time of 1 year.

Voting power then decays linearly from the time the lock is created. Users can increase their lock time, or lock more assets in order to increase voting power.

Minting vdUSH against USH/ETH Sushi LP, USH/unshETH 80/20 BPT, and USH

The conversion of USH to vdUSH is determined by the following rules:

1 vdUSH is equal to 1 1-year locked USH.
Locking 80-20 BPT gets you a 2.5x boost on the USH amount.
Locking USH/ETH Sushi LP gets you a 3.5x boost on the USH amount

For instance, locking $100 of BPT (which has ~$80 worth of USH) for 1 year is equivalent to locking $100 * 80% * 1.5x = $120 worth of USH. A few more examples:

Alice locks 100 USH for 1 year, which grants her 100 vdUSH.
Bob locks 200 USH for 6 months, which grants him 100 vdUSH, as the lock duration is only half of the maximum lock time.
Charlie locks 500 USH worth of USH/ETH Sushi LP for 1 year, and receives a 3.5x multiplier. This means Charlie will receive 500 * 3.5 = 1750 vdUSH.

In summary, the formula for calculating vdUSH minted is: vdUSH = Locked USH * Lock Duration Multiplier * Boost Multiplier.

The Lock Duration Multiplier ranges from 0.0833 (1 month) to 1 (1 year), and the Boost Multiplier is 2.5 for USH/unshETH 80/20 BPT and 3.5 for USH/ETH Sushi LP.

vdUSH is the first dual-token locked governance staking model. Additionally, vdUSH will also be available Omnichain, users on any deployed chain will be able to participate without bridging back to ETH Mainnet. For BNB Chain, since Balancer isn’t deployed there, vdUSH staking will only work with locking single-sided USH and USH/BNB PancakeSwap LP.

Co-Incentivized Governance Mining

Users participating in the governance process by holding vdUSH are rewarded not only with USH tokens but also with governance tokens from partner protocols. They don't have to stake anything, as their balances are read directly from the vdUSH contract.

Emissions

Going forward, USH rewards for farms (unshETH, LP, and USH) will have a base APR and a boost APR based on vdUSH balances. Boosted rewards are proportional to vdUSH balances (which are proportionally higher for higher lock duration), and will be claimable for staked/locked USH or 80/20 USH-unshETH BPT and increases vdUSH balances. Partner protocol rewards will be fully claimable.

This dual-reward system ensures that users with higher vdUSH balances benefit from increased rewards, promoting long-term commitment to the governance process and incentivizing users to lock their tokens for longer durations. As new partner protocols join and are approved by the community, their governance tokens will be added to the rewards pool, further enriching the ecosystem and creating synergies between the participating projects.

Framework for Onboarding New LSDs

The unshETH index is composed of several liquid staked derivatives (LSDs) wrapped into a single Omnichain ERC20 token. Each LSD asset has a target weight and maximum weight. When an LSD joins, they get guaranteed total value locked (TVL) up to the target weight and concentrated liquidity up to the maximum weight, benefiting from the shared liquidity of every asset in the index. The unshETH index composition is determined by the governance process.

To onboard a new LSD, there will be an initial liquidity and governance bootstrapping period where co-marketing and co-incentives are run, similar to any decentralized exchange (DEX), to include the asset at a small < 5% weight. The initial target weight is determined primarily based on our risk framework, but also based on the LSD protocol's participation and co-incentives in the governance process. Afterward, there will be a gauge-style monthly process for index weight setting, where projects can participate directly by staking USH or through a governance incentive marketplace (e.g. Hidden Hand) by flowing incentives to vdUSH stakers.

This approach ensures that users with higher vdUSH balances benefit from increased rewards and promotes long-term commitment to the governance process while incentivizing users to lock their tokens for longer durations. Over the next 3 months, unshETH will be onboarding several new LSD protocols - this involves technical due diligence, technical integration, and governance votes. As new partner protocols join and are approved by the community, their governance tokens will be added to the rewards pool for the “governance mining” farm, further enriching the ecosystem and creating synergies between the participating projects.