# Vested Rewards

Rewards allocated to the following protocols incentive programs are subject to a vesting mechanism:

* Staking `SHERP` via the `mSHERP` framework,
* Holding an active Position
* Providing liquidity `SHERP/WMONAD` or `SHERP/USDT`
* Using a strategy which `mSHERP` voters have channeled incentives into

{% hint style="info" %}
NFT staking and Referral rewards are not subject to rewards vesting and are paid out in `SHERP` tokens directly as opposed to `mSHERP`.
{% endhint %}

### Vesting Mechanism <a href="#vesting-mechanism" id="vesting-mechanism"></a>

The rewards vesting mechanisms works as follows:

* Rewards are initially paid out in the form of `mSHERP`, these rewards can be converted into `SHERP` anytime at a ratio determined by the time-lock penalty.
* The time-lock penalty decays until a full 12 month period elapses. At this point `mSHERP` becomes `SHERP` at a 1:1 ratio.
* Time-locked `mSHERP` is considered staked and will continue to accrue additional rewards until the user claims into `SHERP` or after the 12 month time-lock period has elapsed.
* For `SHERP` stakers, their `mSHERP` rewards will be compounded directly into their `mSHERP` staking positions. Note that `mSHERP` earned as rewards will be converted back to `SHERP` in a manner that is separate than the principal `mSHERP` that was minted through `SHERP` staking directly. See Unlocking `mSHERP` for additional details.
* Time-locked `mSHERP` rewards are equivalent to `mSHERP` minted via the `SHERP` staking mechanism in the context of VIP tiers qualification.
* Users can claim their `mSHERP` into `SHERP` at any time, however they will incur conversion penalties of up to a 97% loss (if within 1st month) versus holding for the entire period. The penalty decays using a quadratic formula, therefore the user's rewards become exponentially larger the longer they wait. Full time-lock penalty schedule is below:

| mSHERP Rewards Time-lock (Months) | % Recieved in form of SHERP |
| --------------------------------- | --------------------------- |
| 0                                 | 3                           |
| 1                                 | 4                           |
| 2                                 | 5.5                         |
| 3                                 | 7.5                         |
| 4                                 | 10                          |
| 5                                 | 13.5                        |
| 6                                 | 18                          |
| 7                                 | 24                          |
| 8                                 | 32                          |
| 9                                 | 42                          |
| 10                                | 56.5                        |
| 11                                | 75                          |
| 12                                | 100                         |


---

# Agent Instructions: Querying This Documentation

If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question.

Perform an HTTP GET request on the current page URL with the `ask` query parameter:

```
GET https://docs.sherpa.trade/general/tokenomics/token-incentive-programs/vested-rewards.md?ask=<question>
```

The question should be specific, self-contained, and written in natural language.
The response will contain a direct answer to the question and relevant excerpts and sources from the documentation.

Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.