veBUG

veBUG is an innovative system designed to tackle some of the challenges faced by existing voting escrow models, such as insufficient incentives and inadequate distribution of voting power. By staking liquidity pool (LP) tokens paired with $BUG, users can acquire veBUG, which is used for voting and influencing the distribution of emissions in the Bug Finance ecosystem. The system now includes several enhancements, such as single-sided staking and a refined exit mechanism.

Key Features of veBUG

Liquidity Staking: To acquire veBUG, users, and protocols need to stake LP tokens paired with $BUG, such as BUG/MATIC and BUG/USDC & any other partner protocols whitelisted such as BUG/fBOMB. This ensures deep liquidity across the platform for the $BUG token and any partner protocols with BUG pairs.

Double Incentives: Staking LP tokens into veBUG generates emissions, providing a dual incentive system for users. In addition to receiving bribes for voting with veBUG, users also earn emissions for the pool they've staked into veBUG. Since we expect the APRs for the BUG LP pools to be quite high since a lot of people will vote for their own LP to get emissions, we only direct $BUG emissions to users who stake their BUG LP into veBUG. It is very important to know that this is only the case for BUG LPs with a partner token, and not with BUG/MATIC & BUG/USDC. All LPs that do not have BUG in them will receive emissions as usual.

Exit Mechanism: To maintain the balance of the ecosystem and ensure users have a reasonable option to exit veBUG, an exit fee has been introduced. For BUG LP staking, the exit fee starts at 20% and decreases by 0.33% weekly over the course of a year to end up at 2.5%. The exit fee is distributed as follows:

• 40% for bribes in the exited pool, distributed evenly over four weeks.

• 40% for lock bonuses for new users who stake LP for veBUG in the exited pool.

• 20% for Protocol Owned Liquidity, strengthening the protocol over time.

This creates a system where someone exiting increases Protocol owned Liquidity (which makes the protocol forever stronger), increases yields for people voting in that pool and thus liquidity providers, and incentivizes new people to jump into the pool for the bonus. And if they decide they want to exit, everybody benefits again.

Single-Sided Staking: In order to reduce selling pressure and provide an alternative way to acquire veBUG, users can stake $BUG without needing to sell a portion of their tokens to compound. This staking method offers 30% of the voting power compared to staking BUG LP. There is no direct option to exit here, you do however have the option to upgrade your position to a 100% veBUG position. This means you have the option to add any whitelisted token for BUG LP (such as MATIC, USDC, fBOMB) and upgrade your position to a 100% veBUG position that is exitable via the mechanism described above.

Fee Distribution: veBUG holders receive a share of the trading fees generated on the platform, with the percentage increasing from 80% to 90% over six months. This incentivizes users to participate in voting and rewards them for their contribution to the ecosystem.

Benefits of veBUG

Incentivized Voting: veBUG encourages users to vote and participate in the decision-making process, resulting in a more active and engaged community.

Deep Liquidity: By requiring users to stake LP tokens paired with $BUG to acquire veBUG, the system ensures stable and deep liquidity for the $BUG token and its associated pairs.

Emission Distribution: The distribution of emissions is determined by veBUG holders, ensuring a fair, balanced, and decentralized allocation of rewards.

Platform Stability: The refined exit mechanism contributes to the long-term stability of the platform by creating a balance between user incentives and the overall health of the ecosystem while benefiting the protocol.

Reduced Selling Pressure: The introduction of single-sided staking allows users to acquire more veBUG without selling their $BUG, thereby reducing selling pressure.

In conclusion, veBUG is a powerful and innovative system that addresses many of the challenges faced by traditional voting escrow models. By focusing on liquidity staking, incentivized voting, single-sided staking, and a balanced distribution of emissions and fees, veBUG ensures the long-term success and sustainability of the Bug Finance platform.