Current State of $INDEX Distribution Programs

We are approaching the 2nd month of DPI/ETH liquidity mining and have desires to grow the Index Coop. As of November 12, 2020, the Index Coop treasury currently has 741,865 INDEX (~$3.7M at $5 INDEX) at its disposal (5% initially vested + amount vested from treasury).

To review, some of the existing programs we have already set forth include:

To continue growing, the Index Coop needs to (these are debatable):

  • Acquire high value, retention DPI holders that will hold the DPI for the long-run
  • Grow awareness by a magnitude of 10-100x.
  • Ensure sufficient liquidity ($75-100k spread at 1%) of the DPI for lending protocol liquidations and large purchases
  • Ensure the critical functions of marketing, content generation, product advancement, integrations, BD, organizational development, and product development are properly incentivized

Below are some ideas of programs that can help achieve the above:

This is a post that is just meant to summarize and begin a discussion of things we can do with the $INDEX treasury to keep advancing the Index Coop forward.

Questions:

  • What do y’all think about the programs and which ones should we definitely implement?
  • What other programs may be high-impact?
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Just an idea, for the larger holder program you can set something that reward INDEX to subsidize the streaming fees after 1 month in the program (or directly not sure). You can limit the program amount (20M, 50M, 100M?) so when it’s full anyone knows that leaving means you probably lose your place forever.

Same can be done for ETH-DPI.

1x or 2x the streaming fees should be enough.

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Great ideas, personally I think

  1. INDEX should be distributed widely in order to form a community
  2. Not a fan of incentivizing ppl to lock up DPI / INDEX bc that’s what foodtokens do. DPI and INDEX should be strong-fundamental-tokens that ppl like to hold without getting paid to do so.
  3. LPs should be rewarded bc they take some risk to support the ecosystem
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I would agree that 1x or 2x streaming fees should be enough to incentivise DPI lock up.

It retains AUV and allows us the opportunity to work on intrinsic productivity. The downside, is that we stop the holder using Maker / AAVE etc (unless we put the locked up DPI into AAVE as an alternative)

The downside is we are guaranteeing to pay INDEX to match DPI, what happens if the prices diverge (PDI moons, streaming fees moon, INDEX price collapses, if we don’t match the liability with the reserve we are exposed - Sell INDEX for DPI at the start of the luck up?

We need to ensure liquidity, so some rewards there would be good (I’m a fan of rewarding lockups for LP to secure the pool).

We could also consider moving to Balancer and using a different weight (I think that has some benefits in terms of less capital required for LPs and BAL rewards).

I think INDEX staking is useful as a way to back stop any potential farming and rewarding INDEX holders. Possibly mimic the AAVE mechanism of using staked tokens to maintain pool 2 liquidity. Or statr rewarding pool 2 (with a lock up because I’m like that :slight_smile: )

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Our two main goals atm are to increase/maintain DPI AUV and further distribute $index tokens. There is one option that does both and that is to reward DPI holders who stake with Index Coop for a lockup period with $index tokens. The added bonus being locked tokens can be used to kick-off intrinsic productivity so I think this one is a must.

Liquidity mining will continue to be important if we want to increase AUV but how to balance that against the goal of locking up DPI? Is there a technical solution to doing both, not sure if that’s how Alpha Homura works?

As I posted here I don’t agree with referral programs, I think it devalues the token for little gain. Same with the fundraise, why reward teams that haven’t taken an interest in working with us already.

Also in my linked post I think we could be running a constant task bounty program which will bring new people to the community as we share externally the things we need help with and they earn associated $index rewards. This can be small in size, say OA needs help creating a chart from some data or I need a piece for the newsletter, or something major like hiring a graphic designer.

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If someone locks in LP pool tokens, then we can remove and farm the equivalent DPI just as we could the locked DPI.

So I would look to lock both simultaneously to produce a larger pool, it also allows DPI holders to decide if they want the additional risks and rewards for LP. If we combination of locked LP, and unrewarded LP is insufficient to maintain slippage, then we can launch additional rewards for standard (no time lock) LPs.

The LP pool is currently earning ~9% pa in LP fees. I think if we maintain trade volumes, then we are likely to have lots of LP’s staying after the 6th Dec. To get 10$ divergence loss, we would need a x150 increase in 1 vs the other (or a 60% drop). I don’t see ETH hitting $1,150 while DPI sits static at $90 [I suppose $36 DPI and $460 ETH is possible, but pretty unlikely].

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I really like the sound of that, offering the option to lock LP tokens. Seems like with all the options available and tuneable rewards it’s possible to balance the trade-off between slippage and offering DPI holders a choice.

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OK, Looking at:

I’m leaning towards the following:

  • Run DPI-ETH LP rewards from the 6th Dec to 3rd Jan, with a lower emission rate (5,000 INDEX per day compared to 15,000 ???)
  • Run the a 28 day DPI and DPI-ETH staking trial ~5th Jan to ~3rd Feb (with the farming running between the Jan and Feb rebalances to make it simpler).
  • Retain the option to incentivise DPI-ETH LP in Jan if we see an unacceptable drop in the Uniswap pool size.

I would like to include staking INDEX as a demonstration of intent for backstop and INDEX income (as INDEX, streaming fees, and / or DPI farm…).

Please go and look at the polls and help us reach consensus.

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Reward all LPs and DPI holders with some INDEX. Reward governance participation.

Let’s build a passionate community that gets rewarded for supporting the ecosystem.

I know some ppl care much about this project and they should be rewarded too, but I dont think its a good idea to reward ppl based on subjective metrics. I would prefer onchain-metrics first. And from there we can explore.

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The DPI/ETH Liquidity Mining definitely worked. Liquidity is very much needed. I personally love being a ETH/DPI LP as the “invariant loss” makes me accrue either ETH or DPI which I’ll be satisfied either way.
Also it is risky to just terminate this program. Let’s look at the end of the Uniswap UNI distribution period this week and try to see what we can learn from it.
The “larger holder program” sounds interesting too if we are mixing it with the idea of making underlying assets productive at the same time. But maybe we are talking about a different thing.
For the other points I’d like to go on a more fine-grained fashion. Specific proposals could be made and approved/rejected and the amount decided on an individual basis.

Any effort targeting $DPI integration in other DeFi products is crucial and should be valued through a grants (pre) or reward (post) system. Integration in other DeFi products (or exchanges) increases the value of $DPI and creates awareness de-facto. One might not be aware of $DPI at all before someone posts a collateral proposal on Maker, proposes to enable BAL rewards on a ETH/DPI pool on Balancer or see $DPI as one of the deposit-able assets on Compound.

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All these incentives programs are great, especially the focus to make DPI a highly liquid token for larger-scale funds to get involved. I especially like the idea of locking LP tokens for longer periods of time for higher APYs (denominated in INDEX rewards).

I’d be most curious in exploring something similar to UMA’s developer mining program to encourage the creation of new indexes. While the DPI has been a great foundation, it’s my strong belief that the issuance and diversification of new indexes will prove out the value prop more so than leaning on DPI for the medium term as the largest indicator of the project’s success.

On the community front, more rigorous definition around different engagement allocations (referral and marketing specifically) will be important to ensure contributions are being properly valued relative to the work being put in.

I’m all for giving early adopters fat loot for their initial contributions, but we should be conscious that the first wave of Contributor Rewards saw many recipients earning thousands of dollars worth of INDEX for a couple hours of work. I’m totally in favor and supportive of this program, but think standardizing and monitoring this more dynamically will be a good foundation to iron out.

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We need liquidity but liquidity isn’t loyal so LM will always be a temporary and unsustainable solution and gives INDEX to people that don’t care about the Coop. The better solution is to ingrain DPI into the DeFi ecosystem so there is plenty of volume so LPs will want to be in that pool naturally. As you already said DPI/ETH is a great pool to be even without incentives. YFI/ETH has $6M in liquidity without incentives for these reasons which according to Brian is about how much we need for DPI/ETH.

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I am working to put together a more exact cost estimate on locking down market-making partners, but at current prices 200K index is $2M for 2 months of liquidity mining

That is way more expensive than working with market-makers to get $DPI on centralized exchanges

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One problem with a CEX is that it makes it harder for vault liquidators to access the liquidity.

Uniswap is live 24/7 with no KYC, registration or withdraw delays. DeFi use cases need onchain liquidityt.

However, I think we can pay a lot less for it.

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Yep they are definitely different use cases

But CEX market size is 1000x bigger than Uniswap

We need to get into it if we want to scale

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I thought about this a bit more - I don’t think 1-2% rewards to subsidize staking for twelve months would be attractive to anyone. Even 1% subsidy for locking something for 3 months just seems like a poor risk/reward ratio

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I think it has to be a combination of

-Increased yield bc we feel more comfortable putting locked assets to productive uses
-Rebates on streaming fees

But even that, what is max APY you could offer here realistically? 5%?

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For referral program INDEX rewards go to the salesperson, not the DPI staker. INDEX to DPI stakers is also a separate convo and I’ve also said that’s a bad idea

Stakers get reasonable yield from us using the underlying but we aren’t targeting traders/degens hunting for the best yield, we want people looking for longterm,stable exposure to DeFi industry as a whole. Completely different users. DPI has lower risk/reward then going into any individual token so it’s a safer bet than holding YFI for a year.

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