Contributor Token Ownership Plan

[Matthew_Graham]

This post is written with the intention of enticing thought-provoking conversation and to get a feel for the community’s sentiment around introducing an innovative rewards concept.

We all know the Index Coop is considering divesting some of its INDEX holding into other assets. The post by @DarkForestCapital can be found here.

What if, Index Coop did something a bit different? Something fresh that achieved the same goal but yielded more benefits to the broader community…

Introducing the concept of a Contributor Token Ownership Plan (CTOP).

What is it?

A Contributor Token Ownership Plan (CTOP) is a contributor benefit plan that gives token holders and contributors, the option to purchase IDEX tokens from the Index Coop. Index Coop, by selling INDEX tokens at a TBD discount, is able to diversify some of the treasury whilst rewarding community members for the involvement.

This concept is not new, as it is similar to an employee share buyback scheme, where employees can buy shares in the company they work for with their wages.

But Index Coop already rewards community contributors with INDEX tokens, so how could this idea be applied to Index Coop?

Very easily, a snapshot can be taken. This would determine eligible wallet addresses. We could then build on this concept and further increase the discount factor for those wallet address that receive community benefits from the prior month. So passive holders receive a discount, but active community members who hold INDEX tokens receive a larger discount…

What are the terms?

A snapshot determines who is eligible and the 20-day moving average at time of the snapshot determines the price prior to applying any discount.

How large is the discount?

Well, that is up for discussion.
To kick start conversation, companies raising capital tend to issue stock at between 5-25% based on demand for their stock. For Index Coop, we can simply let the community vote and got with consensus.

Given the volatility of the space, perhaps 15% for passive INDEX holders and 35% for contributors who hold INDEX.

Is there a catch?

It is not uncommon for there to be a vesting period on such an offer. The concept behind this initiative is to align the interest of contributors with token holders. The intent is to encourage contributors to do what is best for token holders and any vesting period not only ties up capital, but it reduces the appeal of partaking just to dump the token afterwards.

Any vesting period is up for discussion, perhaps we start with 2 months as that is like years in the traditional finance world.

Why?

There are many benefits and at Index Coop we aspire to innovate, bring the best products to market and creating a thriving culture. By granting INDEX holders and community contributors the opportunity to invest in Index Coop on favourable terms, it would lead to higher talent retention rates, bolster recruiting efforts and create a culture of ownership.

Quoting from one of the links below, “companies that have high-involvement, idea-generating cultures generate an incremental 6-11% added growth per year over their prior performance.”

Some articles that describe the benefits of employee ownership can be found below:

Ownership Culture | NCEO

The Truth about Employee Ownership and Employee Stock Ownership Plans (ESOP)

https://employeeownershipfoundation.org/articles/employee-stock-ownership-benefits

Sentiment Barometer

• I like this concept, lets discuss it further
• I don’t like this concept, lets park it

[DarkForestCapital]

Might be biased but I think this is a cool idea.

I like that it makes use of semi-random rewards as that’s something that has been shown to improve engagement. It’s a technique used by social media apps like the pull down to refresh on Instagram, you never know what you’re gonna get when it refreshes. So by signalling that we may spontaneously offer programs like the discount sale in future allowing only Index holders in, it adds another angle to being a token holder.

While I don’t want us to make token holding into a game, it does help us to diversify a little as it acts like an OTC deal for Index which is useful in the short term, while also increasing token distribution. Longer term, giving rewards for governance will help to distribute the bulk of Index tokens to committed token holders.

[Mringz]

I really like this idea. I am such an advocate for trying new things and I do not think a similar system exists in the crypto eco-system. However I do believe we have a system like this already as contributors to Index already get rewarded with shares in indexcoop in the form of the tokens. And I believe the system has worked is a key factor to our success thus far. I do believe having a vesting structure will further incentivise the contributors to build indexcoop especially long term. I would love to work with you @Matthew_Graham in discussing and pushing forward such a proposal, I already have an idea of how we can do this utilizing options offered exclusively to token holders, we can tie the execution of these options to the AUM of all indexcoop products. @DarkForestCapital I also fully agree with your point but I do not think it is a bad thing for tokenholders to hold $INDEX tokens, for me it just shows that the tokens have intrinsic value and it will actually increase the value of index tokens in the long run.

[verto0912]

hey @Matthew_Graham, great post.

I got some questions:

1. Is the purpose of this proposal to diversify the Treasury or reward holders/contributors? The design of such a program would heavily depend on the answer.

2. It sounds like you are proposing this to be available to both, passive holders and contributors. Why passive holders? What’s the rationale for rewarding them? If we are using TradFi analogies, that’s like giving every Apple shareholder an option to buy Apple shares at a 15% discount. Pretty generous. I can see enabling token holders buy INDEX from the Treasury at say a 5% discount with 2 month lock-up. But this is more about diversifying the treasury rather than rewarding contributors, which goes back to question 1 above.

3. I generally like the idea of giving contributors an option to further buy into INDEX at a discount (I suppose most of the contributors will like this idea given the inherent bias). But, once again, I’m not sure I agree with the execution. Why not simply have a standing offer for Gold, Silver and Bronze owls to buy INDEX from the Treasury at 10-15% discount to market with 2 month lock-up?

4. What’s the point of the snapshot in your proposal?

5. How does this fit with Treasury management? I suppose we still need some INDEX in the Treasury to run the Coop. There should be some cap on how much the Treasury can sell per month.

To sum up, I prefer the design where there is a standing offer to buy INDEX from the Treasury (for ETH, USDC or whatever we want to diversify into). The offer would be at a 5% discount for current INDEX tokenholders and 10-15% discount for Gold, Silver and Bronze Owls. Both would require a 2-month lock up (which means we need dev work on this?). Treasury will have a monthly or quarterly cap on how much can be sold through this scheme.

Obviously, all the parameters should be discussed and agreed on by the community.

[Matthew_Graham]

Hey AG, great questions

The timing of this lends itself to both objectives, but that is circumstantial. The main benefit is to align the goals of token holders and contributors. By contributors having tokens it motivates them to do what is best for the Index Coop, much like employees owning shares in their employer.

Very valid point. I wrote the post to be as inclusive as possible, presenting the options and to see where conversation goes. As the primary intent here is to align contributors with token holders, there is less benefit to rewarding passive (especially vested) holders. In my personal opinion, a 5% discount with 2 month escrow on something as volatile as a small cap crypto project is not really an incentive.

Having a discussion around the numbers is exactly where we want conversation to be and in the end, consensus is the winner. I’d be keen to see what number other think is fair. 15% is probably a bit heavy.

A reoccurring plan is definitely up for discussion and is a great idea. Point 5 is a big topic right now and my thinking was to do this once at first, then see if there was the appetite for it to grow into something more permanent. By doing it at set times, means we don’t commit to something longer term just now and give us a bit more flexibility. The snapshot was just a mechanism to allow it to be done at a set point in time. A bit of this is timing with @DarkForestCapital other post, we could get a fair bit of ETH or USDC doing by doing this.

This sounds like a solid long term plan and I would throw my support behind this. The timing with the treasury discussion might mean to delay any implementation until the larger picture is flushed out, as an ongoing plan would need deeper capital planning.

Regarding Gold, Silver & Bronze owls >> very interesting concept. Do others have comments on this ?

[MrMadila]

Hi @Matthew_Graham

Yet another interesting, creative and innovative idea for the forum!

Agreed this is a good way to simultaneously incentivise contributors as well as provide the opportunity for the community to increase their equity and align with the long term goals of the coop.

Apologies if this complicates the idea somewhat but… What if instead of offering discounts we offer staking contracts with different levels of return depending on contribution? This further increases long term incentives and distribution. It also helps to smooth out any cliff edge effects of said vesting periods due to the compounding nature of staking. (Similar concept of dividend reinvesting in some senses also)
I do acknowledge however it doesn’t offer the treasury the USD/ETH OTC trade.

This approach also offers an opportunity to (mildly) reward the loyalty of passive long term holders. @verto0912 mentioned the example of Apple giving shareholders a discount. This is a little off topic and getting into “tokenomics” but there is some precedent here in the tradfi world.

Along with the familiar concepts of dividends and capital appreciation there are also some mechanisms (known as “corporate actions”) such as.
DRIPS - Dividend re-investment plan (investor receives shares instead of cash)
SCRIPS - (Same as DRIP but investors receives newly issued shares)
And also rights issues - (Offers existing shareholders newly issued equity often at a discount to market price) (Companies use this to raise cash ie. Tesla in Dec)

[cmock13]

As a really small holder of Index, I really like the idea of buying tokens at a discount. Coming into this community, it seems difficult for someone to grow a standing after missing the initial airdrop. Question, how are Gold, Silver, and Bronze Owls defined? Is it similar to the “basic” tag in my member profile?

@MrMadila I don’t know if staking will help the second goal of diversifying the treasury, however it will align incentives for community members. Is there a mechanism that I’m not familiar with?

[DefiJesus]

Very interesting ideas.

Regarding the buy discount, as Matthew said above, INDEX is still such a highly volatile asset that the 15% discount is not worth it for the lock-up period.

In my POV, the main focus should be how to reward and encourage meaningful contributions. Passive holders already benefit from all the internal productivity.

Contribution rewards being locked for a multiplier is the simple solution that aligns everyone’s incentives. Passive enjoy knowing the contributors are motivated long term, and contributors receive extra long term rewards for their work.

To make this happen, I think we need a framework to clarify what a bronze/silver/gold owl even is. Maybe even form a working group to promote/demote owlets as the community grows bigger?

[0x_Dev]

Great post, great idea, great push.

I think this is generally another nudge to help ze Coop build a power lifting community. Another nudge to create the best investment products DAO in DeFi.

Voted FOR

[blurb]

I have been watching the Olympus protocol and they let people buy discounted bonds by selling LP tokens to the protocol. This ensures a guaranteed liquidity floor as the protocol won’t sell. In case Index Coop is interested in accumulating an LP position of it’s own, something similar could be offered to owls. Creating an IC LP position might be a topic for another thread but it would fit with the bond idea.

[Matthew_Graham]

Hi All,

I am thinking now might be a good time to revisit this CTOP.

If there is interest, we can revise an existing draft that captures the feedback above and progress it to the forum.

I’m keen to see what people think.