We hope this article can help explain this inSPIRIT wrapper more clearly
- winSPIRIT = wrapped inSPIRIT = a general term for any wrapped inSPIRIT token such as ginSPIRIT. A few more wrapped inSPIRIT tokens are planned to launch upcoming.
- autofarm = yield optimizer (e.g. Reaper, Grim, Beefy, etc)
winSPIRIT → More SPIRIT locked forever and off market → Higher SPIRIT price → Higher farming APRs → More liquidity → More volume → More swap fees → More SPIRIT buybacks → More SPIRIT distributed to inSPIRIT holders
What is winSPIRIT?
winSPIRIT is a wrapped version of inSPIRIT that autofarms can create to incentivize their accumulation of inSPIRIT. An autofarm accumulates inSPIRIT in order to increase the APR of their SpiritSwap boosted farm vaults. Holding inSPIRIT enables the vaults to get the max boost of 2.5x for the boosted farms on SpiritSwap.
For autofarms to accumulate inSPIRIT, they offer winSPIRIT in return for SPIRIT deposits. The autofarm converts the deposited SPIRIT into inSPIRIT, and perpetually relocks that SPIRIT every 4 years. This means the deposited SPIRIT is locked in that smart contract forever. To be clear, the deposited SPIRIT will never be returned to the user or market. However, the user will receive winSPIRIT, which is transferable. It is up to the autofarm to provide sufficient incentives for users to lock their SPIRIT with them. Hence, each autofarm’s incentives may vary for SPIRIT holders.
We listened to the community’s concerns today regarding the upcoming release of numerous versions of winSPIRIT tokens. Not to worry, as these versions will help lock more SPIRIT up and benefit inSPIRIT holders. If you’ve already locked your SPIRIT for inSPIRIT, you’ve made a great choice! To be more transparent, we will go into detail below on the pros/cons of winSPIRIT and what it means for inSPIRIT holders.
inSPIRIT vs winSPIRIT
It is important to note that each autofarm’s implementation of winSPIRIT will have their own unique incentives. The following pros and cons are based on the Convex Finance implementation of their version of winSPIRIT for veCRV (cvxCRV).
- Earn protocol swap fees and deposit fees
- Farm Booster (get a multiplier on your farming rewards)
- Voting on Boosted Farm allocations
- Receive airdrops
- Get SPIRIT back after unlocked (peg is ensured)
- Pros can expand as more use cases are created
- Earn swap fees and deposit fees
- Pros can expand as more use cases are created
- No Farm Booster on SpiritSwap site
- No voting on Boosted Farm allocations
- No airdrops
- Can never be redeemed for SPIRIT, only sold to SPIRIT
- May become less valuable than SPIRIT due to people selling to get back to SPIRIT
- Smart contract risk. We do not build winSPIRIT contracts, and do not have the resources to audit them currently. Use at your own risk.
We have also seen some concerns about dilution of inSPIRIT holders. winSPIRIT will cause more SPIRIT to get locked up due to the perpetual locking nature of winSPIRIT mechanics (more on this below). In this process, a feedback loop is achieved, where more SPIRIT gets locked away, which raises the price of SPIRIT, leading to an increase of APRs across all SpiritSwap farms. Increased APRs means more liquidity flowing into SpiritSwap. More liquidity means more trading volume, and more trading volume means more fees for inSPIRIT holders. It all balances out.
It is also important to note that SPIRIT locked for winSPIRIT is locked FOREVER, not 1-4 years; it’s till the end of time. This is a big plus for all SPIRIT holders and our ecosystem. There is no dilution because this is a one-way bridge: you can only go from SPIRIT → winSPIRIT but not back.
Yes, you can sell winSPIRIT for SPIRIT, but this would cause winSPIRIT to be devalued in comparison to SPIRIT. So, all dilution comes in the form of devaluing winSPIRIT itself, NOT inSPIRIT. There is price risk to holding any form of winSPIRIT. For example, at some point, you may only be able to sell 1 winSPIRIT for 0.5 SPIRIT. This is the tradeoff for having a liquid inSPIRIT but also benefiting from the incentives inSPIRIT offers.
SpiritSwap does not create winSPIRIT token variations. These are developed by various autofarms who want to integrate the benefit of inSPIRIT within their vaults; this is not a product developed by SpiritSwap. This is a tool that autofarms make so that they can acquire large amounts of inSPIRIT to boost their vaults and make them more competitive with other autofarms, thus allowing them to offer higher APR’s. To do so, they incentivize you to lock your SPIRIT on their platform. These incentives will vary across all different winSPIRIT products. This was bound to happen eventually, as we’ve all seen it with CRV.
Convex and Yearn have been acquiring large amounts of CRV. This is a good thing for all of us. It provides autofarms a reason to accumulate SPIRIT. Prior to this, autofarms were constantly selling SPIRIT to compound rewards with their users. Now, we have a symbiotic relationship with them since they will have large SPIRIT holdings. It will be in their best interest that we succeed as a DEX. We’re confident our community members and inSPIRIT holders would love to see 2/3 of the circulating supply of SPIRIT locked forever; this is how we get there.
Here’s a real-life example: In a relatively short amount of time, Convex has acquired 90,382,845 CRV Yearn has acquired 21,000,000 CRV . This is the direction SPIRIT is heading.
We hope this explanation relieves any concerns surrounding the mechanics of how winSPIRIT products will impact not only inSPIRIT holders, but the SPIRIT ecosystem at large.
If any community members are still struggling to grasp the concept of inSPIRIT or subsequent winSPIRIT, then we welcome you to post any questions in FTM Alerts (inSPIRIT AMA channel) for our upcoming AMA so we can provide further clarity on any uncertainties.
Thank you for your continued support and constant feedback. SpiritSwap aims to deliver products that consistently improve capital efficiency and ensure that the mechanics of these products are communicated in a clear manner. We know these concepts are difficult to grasp at time, so this is not always easy. The feedback you continue to provide helps ensure we can continue to do so.
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