Litepaper

Vessel publishes a litepaper, not a formal whitepaper. A formal whitepaper does not exist yet. The litepaper is the most complete published description of the protocol, and it lives at vessel.wtf/litepaper. Vessel is experimental software in testnet, and it is unaudited.

This page is a faithful one-screen summary. Where the litepaper disagrees with a primary source on a number, the disagreement is recorded rather than smoothed over. The last section shows the one case found so far.

Mechanism

Vessel runs a delta-neutral position: long spot, short the equivalent notional on a perp CLOB, earning the funding rate, which the litepaper calls "the market price of leverage." Net delta is kept within 1% of gross notional. The position rebalances on a band breach or on a 4-hour timer.

The litepaper names Perpl for the short leg. Today the deployed contracts hedge against SimVenue SIMVENUE — SIMULATED, a simulated venue with an owner-settable funding rate behind the IVenue interface. Perpl integration is next.

The short leg's liquidation price sits ≥ 40% above mark. Margin maintenance draws on the idle buffer, and a buffer breach triggers automatic de-risking, never added leverage. Margin top-ups, rebalancing, and funding harvest are executed permissionlessly by keepers.

Capital structure

At leverage λ, capped at λ ≤ 2 for launch, each unit of TVL splits as:

Component	Fraction	At λ = 2
Spot	λ/(1+λ)	66.7%
Short margin	1/(1+λ)	33.3%
Hedged notional	λ/(1+λ)	66.7%

A 10% idle USDC buffer is held unhedged; it is what margin maintenance draws on.

Hull and Ballast

Hull is the senior deck: fixed-maturity series (4-week at launch), transferable tokens, principal plus fixed yield at maturity. Early exit is by secondary sale only. The rate is a contract parameter. It is not a forecast and not historical performance:

r_H   = clamp(EWMA_30d(net funding APR) × (1 − h), 0, r_cap)
h     = 40%       haircut
r_cap = 15% APR   cap (a contract parameter, like r_H itself)

Ballast is the junior deck: a perpetual rolling tranche that absorbs losses first and earns the levered residual. Withdrawals carry two constraints: a 48-hour cooldown, and the subordination floor B / (H + B) ≥ θ_min = 20%, enforced at all times. The same floor constrains new Hull issuance.

Waterfall and loss ordering

Yield accrues daily against continuous NAV, in this order:

1. Protocol fee: 10% of max(G, 0). Half goes to the Reserve until it reaches its target; the rest goes to the treasury.
2. Hull accrual: A_H = r_H × H × Δt.
3. The residual goes to Ballast.

Shortfalls are absorbed in a fixed order: Ballast NAV first, then the Reserve. Only then is Hull principal impaired, which the protocol treats as a credit event.

One conservation invariant ties the ledger together, enforced in code and fuzzed:

ΔNAV_Hull + ΔNAV_Ballast + ΔReserve + fees = G   for every epoch

The Reserve targets 2% of TVL, is funded from the protocol-fee split, and exists to smooth transient negative funding.

vUSD: Phase 3, post-audit

Phase 3 ships after an audit. It adds vUSD, minted 1:1 against the delta-neutral book and overcollateralized by Ballast plus the Reserve. The litepaper's standing constraint: no privileged mint path exists in any Vessel contract. svUSD, the staked variant, directs engine yield to stakers.

Fees

• 10% of gross positive yield, half to the Reserve until the 2% target is met.
• The Hull spread accrues to the waterfall.
• Execution rebates via the Perpl builder code.
• Phase 3 adds vUSD mint/redeem and svUSD fees.

LEDGER DISCIPLINE

Where the litepaper is out of date

The litepaper cites 400ms Monad blocks. Current official Monad documentation says 300ms. These docs ship the primary source's figure and record the conflict in the verification ledger; Vessel's own litepaper does not outrank docs.monad.xyz on a network number. This is the discipline in action: the number is corrected, the discrepancy is logged, and the litepaper is otherwise summarized faithfully above.