oREST Mechanics

Aligning User Incentives with Protocol Growth

Rest Finance incentivizes various behaviours using emissions of a derivative token called oREST: a call option on REST. oREST gives holders the right to purchase REST tokens at a discount to market price, creating an arbitrage opportunity for the user that yields immediate profit. Simultaneously, exercising oREST results in a premium payment directly to the protocol, supercharging treasury growth. Rest-issued options are different from traditional options in the sense that they are both perpetual (non-expiring) and fixed discount. Let's go through an example of how a user might interact with oREST.

Vitalik has been holding restETH for some time, and he's earned 100 oREST tokens during this period. REST is currently trading for $3 on Uniswap. Vitalik has the right to purchase 100 REST tokens, not at $3, but at $2.25 - a 25% discount! Vitalik can immediately sell his tokens on Uniswap to lock in a $75, risk free gain.

Every year at the same time, the rate of oREST emission decreases by 15%, up until the point that all tokens are fully distributed. At launch, the rate of emission for REST will be ~6,600 tokens per day, which is a 0.066% daily inflation rate. This annualizes to 24.09% for the first year, with 60% of inflation being in oREST emissions, 10% to the DAO reserve that can only be accessed by governance for partnership/grant purposals, and 30% towards unvesting shareholders. Note that 60% of total inflation is in the form of oREST, which incurs a cost when exercised for liquid REST. The profit derived from exercising costs is critically important for controlling the inflation of REST.