The Vertical Program – Enduring Tokenomics & Community Alignment
Approximately two months ago, Vertex launched the Vertical Program – a comprehensive three-part initiative aimed at revolutionizing the tokenomics of VRTX and fortifying the protocol’s growth trajectory over the long-term.
The culmination of the Vertical Program is poised to redefine the Vertex’s role as a pioneering DEX within DeFi – unleashing profound improvements across sustainability and long-term alignment between the protocol and community.
The foundation of the VRTX changes in the Vertical Program may be completed, but Vertex’s journey is only just beginning.
Comprising emissions reductions, V2 staking upgrades, and a refreshed take on market-maker alignment, let’s rewind and review the different Vertical Program stages.
A Recap of the Vertical Program: A Multi-Faceted Transformation
The Vertical Program was designed to address critical areas impacting the VRTX token, primarily derived from community and partner feedback. Its holistic approach to revamping the VRTX tokenomics underscores Vertex’s vision of fostering a balanced, long-term alignment between the protocol and its community.
Now fully live and implemented, it’s time to unpack the VRTX Vertical Program once more – a final summary of the upgrades implemented to the VRTX token over the past 2 months.
Stage 1: The Foundation of Sustainability Via Emission Reduction
The inaugural phase of the Vertical Program targeted one of the most pressing challenges in tokenomics: inflation.
High emissions can dilute value, discouraging long-term holding and destabilizing growth. To counter this, Vertex implemented a significant 50% reduction in emissions, effective on September 11th, 2024.
Recognizing the need to redirect incentives more towards fostering ecosystem growth instead of bootstrapping liquidity, the decrease in VRTX inflation is already down more than 40%, compared to just 6 months ago. And this will decrease up to additional 50% – with sharper reductions to come over the ensuing months.
You can find a comparison of the updated and original emissions schedules in the following Google Sheets:
After initially helping to bootstrap liquidity with trading incentives, it became evident that it was time to channel incentives towards more diverse and productive avenues moving forward. Lower emissions naturally contribute to a more balanced token economy, which helps to redirect token holdings to support broader growth initiatives beyond trading rewards.
Stage 1 also brought notable changes to the maker / taker split in VRTX trading rewards.
Effective the same day as the emissions reduction, the revised structure boosted maker rewards by 25%, raising them to 75%, while taker rewards were adjusted to 25%. The recalibration of trading reward splits better incentivizes liquidity provision and active participation.
Moreover, transitioning from monthly to weekly reward epochs completed the Stage 1 enhancements, creating a smoother and more responsive reward system. These foundational adjustments set the stage for the substantial staking upgrades introduced in Stage 2.
Stage 2: Redefining Staking with the V2 Upgrade
The second phase of the Vertical Program unveiled a pioneering staking model that transforms user engagement with Vertex. The V2 staking upgrade reshapes how community members engage with the protocol, unlocking new opportunities for both existing and rookie Vertex users alike.
Central to the V2 upgrade were four major changes:
- Auto-Compounding Rewards: The new model automates the reinvestment of staking yields, ensuring that user returns grow consistently over time without requiring manual input.
- Immediate Access to Full Rewards: Unlike prior mechanisms that delayed access to maximum yield, the updated design enables stakers to enjoy full benefits as soon as they stake, reinforcing immediate value.
- Flexible Unstaking Options: Flexibility is key to user retention, and the V2 upgrade introduces options that cater to various user strategies, balancing freedom with incentives for long-term participation.
- A Multi-Tier Yield Model: This includes Base APY, Fee APY, and Loyalty APY components, distinguishing the new system from its predecessor, which distributed weekly USDC rewards. The new model enhances yield through VRTX buybacks funded by protocol revenue.
Initially, 50% of all protocol revenue will be allocated to VRTX buybacks, a proportion set to gradually rise to encompass 100% of total protocol revenue. This approach ensures that value is consolidated and cycled within the Vertex ecosystem, empowering stakers to grow their total VRTX holdings more effectively.
The shift has been impactful, as pre-Vertical Program APY for voVRTX stakers stood at 19%, whereas projections following full implementation suggest a robust 32% APY under equivalent market conditions.
Currently, 66.7% of the circulating VRTX supply is staked – totaling 244 million VRTX. The staking APR is also roughly 78% at the time of writing.
Lastly, a distinctive feature of the V2 staking model is the 10% penalty fee applied to the immediate unstaking option. Forfeited tokens are redirected to the rewards pool, benefiting long-term participants and reinforcing a culture of sustained commitment in the community.
Stage 3: Incentivizing Liquidity with Market-Maker Alignment
The final stage of the Vertical Program focused on aligning incentives with market makers to bolster Vertex’s liquidity infrastructure.
Market makers are vital for seamless trading and maintaining competitive spreads. Recognizing this, Vertex introduced tiered maker rebate structures based on the total amount of VRTX staked – a departure from the previous flat rate of 0.5 basis points for maker rebates across all markets.
In short, more VRTX staked equates to higher maker rebates.
Maker rebates operate independently of the Maker Program's Q-score function and eligibility criteria, such as uptime and market support, used to determine a maker's share of the VRTX trading rewards pool.
For instance, any user who meets the minimum staked VRTX requirement for a specific rebate tier qualifies for the corresponding rebate. As long as their activity involves maker trades—such as limit orders being filled—they will automatically earn the appropriate maker rebate for those trades.
Strategically realigning maker rebates with a stratified tier model offers tangible benefits to market makers who hold and stake VRTX, enhancing both liquidity and user experience across Vertex’s multi-chain network of exchanges where maker liquidity is paramount.
By embedding active market engagement within staking, Vertex has solidified its position as a dynamic and liquid trading venue that benefits all users.
Looking Ahead: The Dawn of a New Era for VRTX
The culmination of the Vertical Program’s technical implementation marks the beginning of a transformative chapter for Vertex.
Each stage—from emission reduction and staking innovations to market-maker alignment—establishes a robust framework for future growth, deeper liquidity, and closer community alignment.
Collectively, the Vertical Program’s three stages empower the protocol to mitigate inflation, offer superior and diverse sources of yield rewards to users, and cultivate a thriving, engaged user base.
Key Takeaways from the Vertical Program:
- Emission Reduction: Establishes a more balanced token economy, mitigating inflation, ensuring sustainable growth with an emphasis on long-term time horizons, and forms a strong baseline of maker liquidity for users to trade against.
- Staking Innovations: Focuses on VRTX buybacks with protocol revenue, boosts staker rewards, provides auto-compounding benefits, and redistributes penalties from early unstaking – augmenting the long-term appeal of staking.
- Market-Maker Incentives: Strengthens liquidity through tiered rebates, enhancing trading conditions for all users, embedding staking dynamics into maker incentives, and producing a synergistic alignment between the protocol and users – both takers and makers.
As we look to the future, Vertex’s evolution showcases its devotion to being more than just a perp DEX – it aims to be a premier, multi-chain network of exchanges that serves as a cornerstone for users seeking a premier on-chain trading venue.
As the Vertical Program draws to a close, its legacy sets a high bar for what comes next.
The upgrades signify more than operational refinements – they represent a commitment to innovation, sustainability, and user empowerment. Vertex is ready for the next phase of its journey, fortified by the unwavering support and enthusiasm of you – the community.
Stay tuned for more developments as we build on this strong foundation moving forward.
And welcome to the new VRTX, anon.
If you’d like to learn more about the Vertical Program, make sure to check out the original 3 stages published independently below, along with the recent release of the V2 Staking Launch Guide:
- Stage 1: Introducing the $VRTX Vertical Program
- Stage 2: Unveiling the Staking Upgrades in V2
- Stage 3: Market Maker Alignment
- V2 Staking Launch Guide
About Vertex
Vertex was founded by a team of seasoned traders and engineers from both traditional finance and DeFi markets. Recognizing the need for more flexible DeFi trading, Vertex launched on Arbitrum and now is proud to play a role in the innovation of a multi-chain DeFi ecosystem.