Early Expiry with Penalty

Overview

Early Expiry is a feature of the veCVE system that allows users to exit their lock positions before the normal unlock time in exchange for paying a penalty. This feature provides liquidity and flexibility for veCVE holders who need to access their locked CVE tokens before the standard one-year lock duration ends.

How Early Expiry Works

Dataflow

1. User requests to early expire a lock by calling earlyExpireLock with their lock index

2. The contract calculates the penalty amount based on:

   1. The lock amount

   2. The current penalty multiplier (configurable by Curvance DAO)

   3. The remaining time until unlock (linearly scaled)

3. The user's veCVE tokens are burned

4. The calculated penalty amount is sent to the Curvance DAO treasury

5. The remaining CVE tokens (original amount minus penalty) are returned to the user

State Changes

When a lock is early expired, the following state changes occur:

1. The user's veCVE balance is reduced by the lock amount (tokens are burned)

2. The lock entry is removed from the user's locks array

3. User points are reduced to reflect the removed lock

4. Token unlock data is updated to remove the future unlock entry

5. If the user has no remaining locks, their claim index is reset

Penalty Calculation

The penalty is calculated based on a linear scaling model:

• For continuous locks: full penalty is applied (amount penalty multiplier)

• For standard locks: penalty scales down linearly as the unlock time approaches

• Formula: amount * penalty * (remaining time / lock duration) / DENOMINATOR

This creates a fair system where the penalty decreases as the lock approaches its natural expiry.

User Functions

earlyExpireLock()

Processes an active lock as if it's expired, with a penalty applied.

Function signature:

function earlyExpireLock(
    uint256 lockIndex,
    RewardsData calldata rewardsData,
    bytes calldata params,
    uint256 aux
) external nonReentrant

Parameter	Type	Description
lockIndex	uint256	The index of the lock to process early
rewardsData	RewardsData	Rewards data for desired Reward Manager action
params	bytes	Parameters for rewards claim function
aux	uint256	Auxiliary data

Requirements:

• The contract must not be shut down

• Lock index must be valid

• Lock must not already be expired

• Early unlock penalty multiplier must be greater than 0

Emits:

• UnlockedWithPenalty event with the user address, unlocked amount, and penalty amount

getUnlockPenalty()

Calculates the penalty amount for early expiring a lock.

Function signature:

function getUnlockPenalty(
    address user,
    uint256 lockIndex
) public view returns (uint256)

Parameter	Type	Description
user	address	The address of the user whose lock is being queried
lockIndex	uint256	The index of the lock to calculate penalty for

Returns:

• The calculated penalty amount in CVE tokens

Notes:

• Returns 0 if the lock is already expired

• Returns 0 if early unlock is disabled (penalty multiplier = 0)

• For continuous locks, returns the full penalty

• For standard locks, returns a linearly scaled penalty based on remaining time

Events

    // Emitted when a lock is unlocked with a penalty
    event UnlockedWithPenalty(
        address indexed user,
        uint256 amount,
        uint256 penaltyAmount
    );

Example Flow

1. User has a locked position of 1000 CVE for one year

2. After 6 months, user decides to early expire the lock

3. The current penalty multiplier is 5000 (50%)

4. Since half the lock duration remains, the penalty would be:

1000 * 5000 * (0.5 * 1 year) / 10000 = 250 CVE

5. User calls earlyExpireLock with the correct lock index

• 250 CVE is sent to the DAO treasury

• 750 CVE is returned to the user

• The veCVE lock is removed and the user's veCVE balance is reduced by 1000

Technical Considerations

• Early unlock penalty multiplier must be configured by the DAO (through CentralRegistry.setEarlyUnlockPenaltyMultiplier)

• Locks cannot be early expired during epoch restriction periods

• For continuous locks, the penalty is applied in full since they don't have a regular expiry time

• The function claims any pending rewards before processing the lock, ensuring users don't lose rewards

By providing the Early Expiry mechanism, Curvance offers flexibility to veCVE holders while maintaining economic incentives for long-term commitment, as exiting early comes with a cost that benefits the protocol.