NEPRIV - Risk-Tokenized Protocol
The NEPRIV system will consist of pools of liquidity. Pools in NEPRIV collect deposited base assets from liquidity providers and deploy them on platforms to earn interest. For example, the first NEPRIV pool will be the DAI pool, which will launch with a DAI/Compound adapter.
Adapters connect pooled capital to platforms. The first adapter will be a DAI/Compound adapter. The DAI/Compound adapter, as its name suggests, will connect to the DAI pool to the Compound platform giving DAI pool LPs the opportunity to pool together and earn interest on Compound.
The strategy connects all pools and adapters together and selects the best adapter to deploy capital to every hour for each pool. It also generates and distributes nYUSD and $NEPV tokens (NEPRIV’s native token) to LPs at the end of every epic.
Epic are two-week periods where liquidity is locked up and deployed to platforms by the system. At the end of an epic it is wound down and the interest earned is calculated and can be distributed to LPs according to their proportional tranche ownership. During the wind-down, nYUSD and $NEPV are generated and can be redeemed using the same proportional calculation used to redeem interest. In NEPRIV, capital will be deployed on yield farming platforms, and dynamic risk selection for LPs by adapting to different types of DeFi protocols.
The $NEPV token will be capped at 100,000,000 and is generated every 2 weeks during the wind down of an epic. Tokens are earned by LPs proportional to how many dollars per second (dsec) they provided to the system for the duration of an epic. NEP subsidy is halved every epic until epic 8. From that point on, the system steadily releases 1000000 NEP per epic, until reaching the 100,000,000 cap.
Later versions will introduce NEPRIV platform fees, and at that time, staking $NEPV will earn $NEPV holders a proportion of fees incurred by users. When $NEPV token generation ends, fees will continue to provide incentives to liquidity providers. $NEPV tokens must be staked for LPs to join the enhanced return A tranche.
Pools are divided up into tranches each with their own unique properties. There are three user-facing tranches for LPs to add liquidity into and two backend tranches that exist only at the smart contract level to provide LPs with additional optionality when adding liquidity. The risky, high interest-earning tranche (tranche A) earns interest according to its principal contribution multiplied by the tranche interest multiplier. The tranche interest multiplier defaults to 10. As a result, A tranche LPs earn 10x more interest than they would without NEPRIV, likewise AA tranche LPs earn 1/10th of the interest they normally would.
AA Tranche: LPs adding liquidity to the AA tranche earn less interest but are covered in the case of loss from platform risk. That covered capital comes from the principal and interest earnings of A tranche LPs. AA tranche LPs are awarded with 95% of the $NEPV token generation. (Currently merged with Y tranche).
A Tranche: LPs adding liquidity to the A tranche earn more interest but lose their principal and interest earnings in case of loss from platform risk. A tranche LPs earn 5% of the $NEPV tokens generated per epic. nYUSD earnings are not included in covering first loss for AA tranche LPs.
Y Tranche: The Y tranche (currently merged with AA) earns 95% of nYUSD generated per epic. The system uses the Y tranche to balance the A and AA tranches such that they are always in a perfect equilibrium with each other such that the tranche interest multiplier is maintained at its exact value. For example, with a tranche interest multiplier of 10, the AA:A ratio in a pool is always 10:1.