> For the complete documentation index, see [llms.txt](https://docs.sherpa.trade/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.sherpa.trade/general/tokenomics/token-incentive-programs/vested-rewards.md).

# 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                         |