Vesq: A One Stop Access To DeFi On Polygon

On January 1st of this year we saw the introduction of a new project on Polygon, Vesq.

A project that started off as another Olympus DAO fork, is now transitioning to become the “one stop access to all of DeFi on Polygon,” with the introduction of Vesq2.0.

In this article I’ll be going over what Vesq was during its initial version, as well as what it is transitioning into this month, following the release of version 2.0 of the project. I’ll also go over some key mechanics of the protocol, including staking and bonding.


Zackary Gates and Syed Habib launched Vesq on January 1st of this year.

Initially the project started off as an Olympus DAO fork, with the goal of creating a decentralized reserve currency on Polygon.

The problem they were trying to solve was around the fact that we still didn’t have a true crypto currency — Bitcoin and Ethereum are more hard assets, rather than actual currency. This led us as a crypto industry to adopt stable coins like DAI, UST, USDC, etc, and while these stable coins are great, they’re still pegged to USD, meaning these stable tokens are stable to USD, not to purchasing power.

Vesq wanted to solve this problem through the use of their native token, VSQ.

The VSQ token was backed by a basket of assets that the Vesq protocol held in its treasury.

It was able to get these treasury funds through bond sales, which I’ll go over in more detail down below.

Most of the revenue that came from bond sales went to stakers, who would stake their VSQ tokens in return for more VSQ tokens (the APY, just like any other Olympus fork, was insane).

The amount of VSQ tokens that are distributed to stakers depends on the amount of value in its treasury. The protocol automatically mints new tokens whenever additional funds are added to the treasury, with the requirement being that each newly minted VSQ token is backed by at least 1 DAI. If the value of VSQ falls below 1 DAI, then the protocol will automatically burn as many tokens as it takes, to bring the value back above 1 DAI.


If you’re familiar with this type of model, then you’re probably already familiar with the following image:

(3,3) model

The idea behind this (3,3) model was that if everyone cooperates, everyone wins.

There’s 3 actions a user can take:

  • Staking (+2)
  • Bonding (+1)
  • Selling (-2)

Let’s imagine a scenario with 2 actors. Both of them staking is the best outcome (3 + 3 = 6) for the VSQ token to shoot up in price, as more stakers means more and more VSQ off the market.

1 bonder and 1 staker is also good (3 + 1 = 4), as the bonder provides liquidity for the treasury, and the staker takes VSQ off the market.

1 seller diminishes the effect of the other, and 2 sellers is the worst outcome for everyone (-3 -3 = -6).

This model works great for token holders when everyone is staking or bonding, as we saw VSQ hit a high of $155. However, as we’ve now seen with every Olympus fork, it doesn’t work when everyone sells.

It’s been exactly 4 months since the initial release Vesq now, and I think it’s fair to say a lot will be changing following the release of version 2.0, which is expected to happen sometime this month.

The current V1 mechanics are aimed towards dilution and inflation, which is good for short term growth, but not good for long term retainment of community and assets. That being said, the main goal for version 2.0 is sustainability.


Part of the reasoning for the release of V2.0 was due to the fact that they didn’t want to be “just another OHM fork.” Vesq wanted to expand to become something much bigger.

The release of V2.0 will mark the shift from trying to become “a decentralized reserve currency,” to “the one stop access to all of DeFi on Polygon.”

The idea is that by simply holding and locking your VSQ tokens, you’ll have access to different DeFi projects on Polygon. You don’t have to do any homework on all the different DeFi projects, instead you set a time period in which you lock your VSQ tokens for, and after your lock up period, you get a reward consisting of a basket of different assets, including VSQ, MATIC, and any other tokens from projects they partner and work with in the future.

There’s a lot going on with this project, so I would recommend jumping in their discord server or reading some of their blog posts if you’re interested in diving deeper on the project. That being said, I’ll try my best to explain some of the different mechanisms within this new 2.0 version as simply as possible.

Staking 2.0

The idea behind staking VSQ is pretty similar to how its always been. except for the added “lock” feature.

When you stake your VSQ, you get an equal amount of sVSQ in return. This sVSQ increases over time according to the rebase reward rate. The rebase rate is the percentage by which your staked VSQ increases in the next epoch (or time period — 8 hours). When you retrieve your staked VSQ, you receive the initial amount of VSQ tokens you initially staked, as well as any rebase rewards.

A way to gain even more rewards is thorugh the new mechanism Vesq will be introducing soon, “locking.” Essentially, instead of just taking your VSQ and staking them, you could “lock” them for a certain amount of time, 1 week, 1 month, 1 year, all the way up to 3 years.

So if I go on to Sushiswap and buy some VSQ tokens, I can take those tokens and lock them up for let’s say 1 year (each user gets to choose their own lock period).

In return for locking my VSQ, I’ll receive more VSQ and MATIC tokens, which will remain locked until the end of the lock period I set (1 year in this example).

While these VSQ and MATIC rewards are illiquid until the end of the lock period, I’ll also be earning liquid rewards consisting of a basket of different tokens, like CRV, CVX, FXS, etc.

This is why Vesq wants to refer to itself as the one stop access to defi on Polygon — because by simply locking your VSQ tokens for a certain amount of time that you as the user sets, you can earn different types of defi tokens from across the Polygon ecosystem.

The goal is for this “locker” model to help keep long term holders, and “reducing the APY to a sustainable model, rather than the degen model.”

Bonding 2.0

Bond sales are one of the sources of profit for the protocol and for the VSQ token holders. The protocol uses the profit from bond sales to mint more VSQ to distribute to stakers — the bonded asset backs the VSQ token.

The way this works is bonders provide either DAI or an LP position in return for multi asset rewards.

So for example I can go provide liquidity to a pool on Sushiswap (check the vesq website to see which LP they’re offering bonds for), then go to the Vesq site and click on “Bonds,” where it will quote me a bond price and timeframe. If I accept, that LP position goes to the Vesq treasury and you get multi asset rewards. The VSQ rewards you get from bonding won’t be at a discount anymore (as it worked during the initial version), however the other assets you receive will be. Recall that these multi asset rewards can consist of CRV, CRX, and any other tokens from projects they partner with over time.

The benefit to bonders is price consistency. You commit a certain amount of capital upfront, and are promised a fixed return at a set point in time.

At any point after the bond period, you can click on “redeem bond” and claim your rewards — any VSQ rewards can be staked for even more rewards too.

What makes bonding such a unique mechanism, is that it allows the protocol to own its own liquidity.

Protocol Owned Liquidity

What does owning your own liquidity mean?

If we look at a typical DeFi project, like Uniswap for example, they’re essentially renting their liquidity.

Users get paid a certain percentage to deposit their tokens into the DeFi protocol. Users are providing the liquidity for a percent reward.

With Vesq, they own their liquidity. How? Well when bonders give up their LP positions for those multi asset rewards, Vesq keeps those LP positions and all the revenue that comes from owning those LP positions. As said by one of the co-founders of the project: “We own the pools, so any trading, anything that happens there, we get the fees directly into the treasury, bringing up the backing price as well.”

Overall, owning your own liquidity is good because it means there is always locked exit liquidity in their trading pools, and on top of this added security for investors, the protocol accrues revenue from LP rewards for the treasury.

Launchpad Bonds

Another new feature Vesq will be offering is a bond launchpad.

This feature is targeted for new projects, or for any projects migrating from L1.

Projects will build a fixed supply of bonds on Vesq to build up their own liquidity. So the same way Vesq offers bonds for its own liquidity now, it can do for other projects as well. Initially the other projects liquidity will be owned by Vesq, but the project will pay a certain fee in return for that liquidity.

This all means more rewards for VSQ holders.

Protocol Partnerships

It was announced during one of the Vesq AMA’s, that there are about 20–30 interested projects in using the Vesq platform for liquidity.

According to the team, “essentially, we will be the owners of a percentage of these projects coming to Polygon, and they will be directed to us through Polygon.”

A small portion of this revenue stream will go towards the DAO treasury, but most of it will go back to VSQ token holders.

Lending & Borrowing — Introducing (9,9) model

Lending and borrowing is another feature that will be added in the future. According to one of the co-founders, this feature is ready, however not out yet as they want to make sure it’s as secure as possible first.

This lending feature will also introduce, what the team refers to as the (9,9) model.

Polygon LM Program

It was recently announced that Vesq will partner with polygon to help bootstrap its liquidity mining program.

Vesq built the infrastructure for this Polygon liquidity mining program in return for 150,000 MATIC tokens, which will be going back to VSQ holders through rewards.

This program consists of $15 million being distributed to several protocols. If you’re interested in learning more about this liquidity mining program, you can check this post out.


Vesq plans on using NFT’s in different ways, including NFT’s for the treasury, and plans for NFT bonds.

In fact, Vesq announced the release of their own set of NFT’s not too long ago. These NFT’s have already been distributed to a select group of early community members, and will feature unique utility within Vesq itself, like higher APY, airdrops specific to that NFT, and maybe even access to a launchpad (none of this utility is set in stone by the way, these are just ideas that have been thrown out by the team in recent AMA interviews).

That being said, NFT’s will 100% have utility within Vesq. NFT’s are still in the very early R&D stages of Vesq, so I would keep up with their twitter or blog to stay up to date with more details on this in the future.

VSQ Token

One of the key changes to the protocol is the 10 million VSQ token cap.

Initially there was no cap on the supply of tokens, as every other Olympus fork, however this changed in an effort of long term sustainability.

Once this 10 million token cap is reached, the protocol will work on becoming deflationary through transaction fee burns, as well as quarterly and monthly token burns.

As mentioned throughout this article, VSQ token holders will receive revenue from different streams, including the incubation of other projects into the Polygon ecosystem, bond sales, and the launchpad.

The VSQ token will also be used for governance within the protocol, as well as leveraged for the lending and borrowing feature Vesq will implement in the future.

Final Thoughts

Vesq is a very unique project with strong ambitions. If they’re able to achieve their goals, then not only will VSQ holders benefit, but the Polygon ecosystem as a whole will as well. Either through incubating great startup projects, or migrating projects from L1, the whole ecosystem benefits from the added projects and tokens. One example is the Convex token that Vesq is not only bringing over, but rewarding platform users with.

VSQ is trading at around $6.50, all the way down from $150 earlier in the year. To be fair, they had to deal with not only the start of the crypto bear market, but every Olympus fork suffered this fate following the Wonderland situation. It’s a good thing Vesq is transitioning to become something different.

Vesq has a market cap of around $4.2 million, with $3.8 in its treasury.

Here are some of the additional stats listed on the project website:

All this being said, none of this was financial advice. I have no idea what the VSQ token is going to do tomorrow, I just wanted to let people know what Vesq is and what it does.


Excellent write up, brother!

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