oPEP
PEP has one primary purpose: Volume Incentive Rewards
As oPEP is an option token for PEP, it lets the holder purchase PEP at a sliding discount to the market price depending on the duration they choose to lock/stake PEP. All conversions of oPEP to PEP can only be made by the holder using USDC. This will allow the PepperDEX to acquire a robust treasury through the redemption of oPEP. The treasury will also use 20% of the DEX transaction plus USDC fees used to redeem oPEP to acquire and stake HXRO to the Hxro Network staking contract with the 3-year max lock to maximize its stake weight. Rewards received from Hxro Network will then be passed on to PEP stakers as rewards.
The Purpose of oPEP
When users claim their oPEP rewards, they are given the option to exercise their oPEP. Since oPEP is an options token, it gives the holder the right to purchase PEP from the protocol at a discounted price. This allows the protocol to accumulate a large reserve, which will strengthen the protocol's treasury, promoting the long-term success of the protocol while also rewarding PEP stakers as oPEP redemption fees count towards protocol revenue. This model also allows the PepperDEX community to purchase PEP at a discount.
oPEP Reward Epochs
oPEP options will be distributed on a biweekly epoch basis, beginning and ending every other Friday. For each epoch traders will earn a share of oPEP allocated to that epoch. A user's share of rewards will depend on their share of volume and their oPEP earn rate which is dictated by their stake in the protocol. At the end of each epoch, traders can claim their rewards by claiming and exercising oPEP. Users will have 14 days to exercise their oPEP options. Unclaimed oPEP rewards will be burned, and the underlying PEP will be used for future incentives.
A user's share of oPEP in the current epoch is quantified in not quantified in points but rather in oPEP A trader's oPEP is calculated as follows:
A user's share of the epoch's rewards calculated by:
oPEP Earn Rate
By staking PEP, users can level up through reward tiers. Each reward tier will provide increased oPEP rewards for volume traded. The table below shows the required stake weight for each reward tier and the resulting earn rate rewarded.
oPEP's Sliding Strike Price
PepperDEX has designed oPEP in a way that it can be exercised at various discounts that correlate to various lockup periods via a sliding discount. For example, A user may choose to claim their trading rewards and exercise oPEP for a 15% discount on liquid oPEP. Another user seeking long-term alignment with the protocol may chose to exercise their oPEP for max locked max staked PEP with a 3-year unlock period at a 85% discount. The full range of exercise options is included below.
The discount from the market price at the time the oPEP is claimed is oPEP's strike price. This strike price is the price at which users can purchase PEP from the DAO. The market price for each epoch is determined based on a 14-day TWAP over the duration of the epoch. Call options are not like bonds, meaning the discount is not constant. Therefore, if the price of PEP changes after a user claims oPEP, the strike price does not change. After oPEP is claimed, it can be immediately redeemed through a second transaction with the selected discount and lock/stake period applied.
Claiming and exercising needs to be done within 14 days of earning rewards otherwise, oPEP will be burned, and the protocol will retain the underlying PEP for future incentives. If a user chooses to claim but not redeem oPEP, their potential profit could increase or decrease depending on the price action of PEP between claiming and redeeming. Out of the Money oPEP / unredeemed options will be burned resulting in the underlying PEP remaining in the treasury. It will stay in the "rewards" pool for future distribution.
How to get oPEP
oPEP is a reward token that adds a bold new flavor to the stale mechanics of previous liquidity mining incentive programs. oPEP emissions can be earned by trading on PepperDEX. Traders can increase their oPEP earning rate by increasing their stake weight (staking more PEP and/or locking for a longer time). To maximize the potential of this incentive system; users will want to claim and stake PEP from their oPEP to continuously pay less and earn more.
How to use oPEP
oPEP can be used to purchase PEP at a discount. Visit the oPEP page on the PepperDEX website to do so.
oPEP Redemption Fees
All USDC used to redeem oPEP will be distributed in accordance with the allocations listed in the DEX Fee distribution section of these docs. This fee distribution has been included again below.
DEX Transaction Fees (0.025%) & oPEP Redemption Fees
30% - PEP Staking Rewards
20% - PEP/USDC LP Protocol Owned Liquidity (POL) up to $5m & Trading Incentives
20% - DAO Treasury (Maintenance + Insurance)
20% - HXRO Buyback and Stake with the Maximum Locking Period
10% - Referrals
*For fees paid by unreferred traders, this 10% will go to PEP stakers.*
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