Nitro Point system

Nitro Point is a measure of protocol utilization, serving as a reward mechanism that governs revenue sharing and token emissions, allocated to utilizoors—including Liquidity Providers, Borrowers, and Blacklistoors—as well as the community.

Key Metrics for NP Allocation

The total Nitro Points emitted cannot exceed the revenue generated by the protocol during the same period.

$∑NP≤Totalrevenue​$

• Utilization Value (UV):

  Represents the value of liquidity utilized in swaps and borrowing, as well as the value of debt blacklisted.

  • $UV=∑(liquidity_{event​})$

• Utilization Fee (UF):

  the fee generated during utilization in either swaps or debt interactions.

  • $UF=UV×fee_{percentage​}$

• Utilization Fee (UF):

  the fee generated during utilization in either swaps or debt interactions.

  • $UF=UV×fee_{percentage​}$

• Treasury Fee Share (TFS):

  The revenue generated by the protocol, which is a percentage share of the utilization fees allocated to the protocol’s treasury.

  • $TFS=UF×0.25$ (Assuming Treasury Fee = 25%)

Point Allocation Breakdown

Liquidity providers:

LPs earn points$(NP_{LP})$ based on the utilization of their liquidity in both swaps and debt interactions.

• $NP_{LP}=TFS_{swap}+TFS_{debt}$

Mechanism:

To earn NP, LPs must deposit their LP tokens into the LP Nitro Point Allocator.

• On deposit, the current value of the LP token is recorded.

• On claiming NP or withdrawal, the system calculates the change in value of the deposited LP tokens, reflecting the fees earned.

Nitro Points Calculation:

• The protocol retains 25% of the fees as TFS. This portion is used to mint NP for LPs.

• $\text{Total Fees Earned} = \text{Value at Claim or Withdrawal} - \text{Value at Deposit}$

• $NP_{LP} = \dfrac{\text{Total Fees Earned} - \text{TFS}}{1- \text {TFS}}$

LPs can withdraw their tokens anytime, even immediately after deposit, as the system does not lock LP tokens.

Borrowers:

Borrowers earn Nitro Points $(NP_{borrower})$ based on the $TFS_{debt}$, with the rewards boosted by the effective distance $(D\%)$ of the borrow bin from the active bin. Borrowers closer to the active bin earn fewer points, while those farther away are incentivized with higher rewards.

The effective distance ($D\%$) in terms of bin step(s):

• $D\%=(\text{Borrow range - Buffer range})$

• $NP_{borrower} = TFS_{debt} + \min\left(D\%, 100\% \right)$

Where:

• Borrow Range: The percentage difference between the active bin and the borrow bin.

• Buffer Range: The percentage range on either side of the active bin where borrowing is restricted.

• Effective Distance (D%): Borrow Range minus Buffer Range

This boost mechanism (+D%) aligns borrower rewards with the protocol’s capital efficiency goals, encouraging the utilization of inactive liquidity bins.

Blacklistoors:

Blacklistoors earn Nitro Points for blacklisting expired Debt NFTs, a process that triggers the automated recovery of debt and safeguards the protocol.

blacklistoors points $(NP_{blacklistor})$ focus on the efficiency and timeliness of blacklisting expired debts.

• $NP_{blacklistoor​}= \min \left( \dfrac{n}{T},1 \right)\times TFS_{debt}$

Where:

• $T=\text{Time at blacklist - Time at debt expiry}$. Time elapsed since debt expiry.

• $n$: Time threshold (in seconds) for full reward allocation.

• If blacklisting occurs within n, the reward is $TFS_{debt}$

• Delays beyond n proportionally reduce the reward