Vector Reserve Introduces ‘Liquidity Position Derivative’

Amid the ongoing liquid restaking boom, Ethereum-based DeFi protocol Vector Reserve has launched vETH, a novel Liquidity Position Derivative (LPD) backed by a basket of yield-bearing tokens.

vETH, which can be minted with Lido’s stETH, Renzo’s ezETH, ether.fi’s eETH, KelpDAO’s rsETH and regular WETH, has achieved a market capitalization of $5.2M since launching five days ago.

Meanwhile, the project’s VEC token, which the documentation calls a “multi-dimensional reserve asset,” has tripled in value since its launch, trading at a circulating market cap of $35M.

Vector has incorporated the bonding mechanism pioneered by Olympus DAO to acquire protocol-owned liquidity for vETH and VEC. Traders can bond various liquidity provider (LP) tokens in exchange for discounted VEC that vests over seven days.

Investors have undoubtedly been lured in by the high staking yields, which stand at 230% for vETH and nearly 400% for VEC at the time of writing.

vETH captures yield from multiple sources in addition to the underlying staking and restaking yields – LP trading fees and token rewards from liquidity deployed on DEXs, and a portion of the VEC transaction tax. VEC levies a 3% tax on purchases and sales.

Vector plans to boost the yield further through superfluid staking on EigenLayer, which will allow LP tokens to be restaked on the platform once the functionality goes live. Currently, only native ETH and LSTs can be restaked.

The project is also collaborating with established DeFi protocols like Balancer, Aura and Hidden Hand to provide multiple avenues for vETH to be deployed for additional yield.

Airdrop mania is in full swing as Solana users rejoice over today’s $700M Jupiter airdrop.

Ethereum users have been piling into EigenLayer, a highly anticipated restaking protocol that launched last summer and currently has over $2B of ETH deposits. Restaking caps are set to be temporarily lifted on Feb. 5.