Title: MVI Revised Fee Split and Streaming Fee Increase
Reviewers: @edwardk @Cavalier_Eth
Gov Review : @asira
Created: 7th March 2022
Having studied the revised economic arrangement for the DATA index in IIP-117, and after working closely with IC product and Set engineering to try and reduce gas costs during rebalances, we propose bringing MVI in-line with a consistent and more long-term fee split arrangement to improve product sustainability.
TL;DR on the proposed changes:
- Streaming fee increases from 0.95% to 1.5%
- Revenue is split between Index Coop and MetaPortal 60/40 after gas costs are paid for rebalancing.
- Rebalancing itself reduces frequency to be at least quarterly, with some discretion to rebalance sooner if beneficial.
- MVI baseManager contract is upgraded, as per IIP-64 to include the MetaPortal multi-sig as a signer for changes.
- Assuming the IIP travels smoothly through the governance process, we would aim for the changes to take effect after the March rebalance (circa 3rd April).
While Set continues to cover gas costs for product rebalancing, we are aware this will not always be the case. In the future, the Index Coop will bear the costs and as methodologists we expect to share the burden proportionally. There are a number of changes we are looking to make to address this, and it makes sense to roll them all into one and future-proof MVI as best we can at the same time.
Moving to a post-gas fee split means we are incentivised to work together and reduce cost (something we have been doing already!) but this solidifies the arrangement. Beyond the change to fee split, we would also propose increasing the base streaming fee to 150bps, keeping all other parameters the same (annualised, realised through inflation per block). This change is justified by market research suggesting holders are fairly insensitive to the streaming fee. Additionally we would welcome the inclusion of mint/redeem fees, but from conversations with EWG understand that it is extremely unlikely to be available short term, and even when built will require a migration. While we see this as some of the highest ROI that the Coop can provide for its products, it seems infeasible based on how the contracts are currently built.
Informed by data compiled by Julien at Cercle DAO, we see that rebalancing quarterly since inception would’ve outperformed the current methodology with monthly rebalancing. Furthermore, bi-monthly rebalancing would’ve yielded even better performance than the quarterly rebalancing.
We propose moving to a somewhat flexible rebalancing frequency, but at least quarterly, at the discretion of the methodologist. Subject to, of course, giving engineering the required heads up on new token inclusions.
Let us briefly touch on why we see flexible rebalancing as the best path forward at this point. Managing a product on the Ethereum mainnet is a constant and delicate balance between the cost of rebalancing and adding new tokens so that the product can continue to effectively capture its theme. Rebalancing quarterly allows for 4 inclusions per year, which we see as inadequate for at least the next 12 months given the growth in the space. It also doesn’t leave much room for exclusions. However, while we might want to include more tokens, sometimes market conditions and the underlying liquidity make it rather challenging. A flexible rebalancing frequency will allow us to strike the right balance between a product that can move with and adequately represent the space, while still responding to market conditions and taking the costs into account.
Similar to ToD’s commitments in their post, MetaPortal would provide the following to Index Coop under this new agreement:
- Maintain product methodology / inclusion criteria.
- Support the creation and upkeep of a product roadmap for MVI.
- Support on-chain liquidity analysis on the index constituents while PWG continue optimising rebalances.
- Provide feedback as to why certain tokens are or are not included within MVI upon request.
- Publish a forum post prior to each rebalancing of MVI on the Index Coop governance forum that details the rebalance weights.
- Utilise our network to support marketing and distribution efforts.
- Keep all documentation related to MVI up to date (MetaPortal has a website and Gitbook which the Coop can pull from), monitor performance and update as appropriate.
MetaPortal is not obliged to lead any business development initiative, integration, or technical implementation effort, nor provide any financial capital beyond what has already been made available. Index Coop is responsible and accountable for growing, integrating and supporting technical aspects of the Metaverse Index.
The current economic construct this IIP aims to replace is based on IIP-86, posted on Sept 13th, 2021. Its key terms:
Streaming Fee: 95 bps
70% Index Coop / 30% MetaPortal
INDEX tokens as part of the methodologist bounty.
Note: Because the requisite infrastructure for mint/redeem fees was not in place, MetaPortal agreed to launch with a standard streaming fee, and simply made reference to mint/redeem.
- Streaming Fee: 150 bps
- Revenue split 60% Index Coop, 40% to MetaPortal post-gas costs
- The MVI baseManager contract will be updated from V1 to include the MetaPortal multi-sig for changes to fee split as per IIP-64. Latest from IC EWG is that good progress is being made on this item.
- MetaPortal will receive INDEX tokens as an active participant in the Methodologist Incentive program.
- Mint and redeem fees are on the wishlist but we understand the technical challenges with implementation. We would consider adding them if/when it becomes feasible in future.
- Index Coop will continue to monitor and where possible augment on-chain liquidity for MVI via the Liquidity Pod.
- Neither party has made any commitment surrounding the implementation of intrinsic productivity. At the time of writing, it is not yet known if intrinsic productivity would be implemented for MVI.
- Any amendments to the economic arrangement mentioned above are to be mutually agreed and implemented via each respective community’s governance processes.
Despite the competing/heavily overlapping proposal for a product elsewhere on the forum, we are still committed to making MVI a success in collaboration with the Coop. We think this IIP helps further cement that commitment while also clarifying how MVI can be profitable and sustainable into the future.
Implement the proposed changes to the MVI economic agreement between MetaPortal and Index Coop.
Do not implement the proposed changes to the MVI economic agreement between MetaPortal and Index Coop.
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