What is pVHP and how does it work? (example included)

BurnKoin introduces a liquidity token called pVHP which stands for pooled VHP. This is not to be confused with “The Pool’s VHP”, which is a possessive references to the BurnKoin smart contract’s pool of VHP tokens.

Background information: I talked about $KOIN and $VHP in this post: Differences between $KOIN and $VHP.

The BurnKoin treasury consist ONLY of $KOIN and $VHP. pVHP is NOT part of the BurnKoin treasury. BurnKoin never holds pVHP, it only mints upon depsoit and destroys upon withdrawal. BurnKoin’s treasury can only change whenever any of these 5 events occur.

  • Depositing $KOIN
  • Depositing $VHP
  • Withdrawing $KOIN
  • Withdrawing $VHP
  • Block is produced (reducing $VHP) and new $KOIN is issued.

Naturally, regardless if a user enters or exits the pool, the pool’s value is always increasing by the new $KOIN received as reward for block production. To keep track of this constant increase in value, pVHP was created. The result is that the amount of pVHP in existance will always be numerically less than the sum of the pool’s $VHP and $KOIN.

Another way of describing this is that pVHP will always be worth more than 1 $VHP or $KOIN.

By design, pVHP will also always be 100% backed by the BurnKoin treasury and may also be used as collateral in DeFi oppritunities due to the decentralized nature of it.

In other words, ANYONE holding pVHP, regardless if they made the initial deposit into the pool, may collect the $KOIN or $VHP value from the BurnKoin pool!

EXAMPLE

BurnKoin is initialized with 100 $KOIN and 100 $VHP. Currently at this initialized state, no blocks have been produced. 200 pVHP currently exists to represent the initial $KOIN and $VHP.

Immediately after initialization, Joe deposits 1,000 $KOIN which is instantly converted to $VHP. BurnKoin treasury now has +1,000 $VHP.

Joe’s deposit is represented as follows

His Share ÷ (Burn Koin Treasury + His Share)

or

 1,000 $VHP / (100 $VHP + 100 $KOIN + 1000 $VHP) = 83.3%

Therefore BurnKoin will mint and issue pVHP to Joe such that he owns 83.3% of all pVHP. Since there is only 200 pVHP in existence, 997.6 pVHP is minted and issued to Joe. Let’s check to make sure that represents 83.3%

997.6 ÷ (997.6+200) = 83.3%.

If Joe were to immediately withdraw out of BurnKoin,the 997.6 pVHP would immediately be burned and Joe has the full claim over is 1,000 $VHP in BurnKoin’s VHP pool. It would be as though he was solo mining and never turned on his mining node.

If Joe left his deposit in BurnKoin and blocks were produced (assuming no other depositors), then the treasury would have a net increase in value due to the rewarded $KOIN from block production and Joe’s 997.6 pVHP is worth MORE than his initial 1,000 $KOIN deposit.

To get his deposit back, he can withdraw $KOIN as it becomes available, or withdraw $VHP in bulk and perform a VHP/KOIN swap on KoinDX. This is covered in this post: How do I get $KOIN after depositing into BurnKoin?