IIP-181: Buyout FLIs from Scalara

[allan.g]

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IIP: 181

Title: Buyout FLIs from Scalara

Status: Proposed

Authors: @allan.g

Reviewers: @MrMadila, @0x_Dev, @jordan.t, @anthonyb.eth

Created: 23 January 2022

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Simple Summary

This proposal intends to update the fee split on ETH2x-FLI and BTC2x-FLI from 60% Index Coop / 40% Scalara to 100% Index Coop / 0% Scalara in preparation for the FLI deprecation and migration. In exchange, Scalara will receive 120,000 USDC from the Index Coop Treasury. Index Coop and Scalara have agreed to these terms in principle pending success of this IIP.

Motivation

ETH2x-FLI and BTC2x-FLI were originally launched in 2021 on Set Protocol and Compound V2. Because Set Protocol cannot be upgraded and Compound V2 is undergoing deprecation, the Index Coop plans to launch new 2x tokens that will replace the legacy FLI products. These new tokens will employ a novel range-bound methodology rather than the historical FLI methodology provided by Scalara and be built on new Aave V3 infrastructure on Index Protocol.

As a part of the deprecation process, after a governance vote legacy FLIs will be de-levered and the remaining capital will be rebalanced into the new Index Coop 2x tokens. Fees on the FLIs will also be disabled at this time. Because the initial TVL in the new Index Coop 2x tokens will be attributed to legacy FLI TVL, Scalara has agreed to a one-time payment of 120,000 USDC based on discounted cash flows instead of a forward-looking fee split on the new 2x tokens.

FLI holders still represent a significant share of Index Coop’s user base and they contribute meaningfully to TVL and recurring revenue. This agreement enables the Index Coop to execute the deprecation plan more seamlessly and to continue serving legacy users with modernized products in a sustainable way. Eliminating the fee share should also improve the profitability of the new 2x tokens moving forward and enable the DAO to recoup its investments in the new Aave V3 infrastructure for Index Protocol.

Specification

1. The revenue accrued for ETH2x-FLI and BTC2x-FLI will be claimed and distributed upon passing of this IIP and dispersed to Scalara and Index Coop in line with the current 60/40 fee split
2. Scalara will call the setMethodologist() function on the ETH2x-FLI Base Manager contract and the BTC2x-FLI Base Manager contract and pass in the address eth:0x6904110f17feD2162a11B5FA66B188d801443Ea4 (Index Coop Eng Multi-sig)
3. Index Coop will transfer 120,000 USDC to Scalara at eth:0x673d140Eed36385cb784e279f8759f495C97cF03 as soon as the Methodologist role is successfully transferred to Index Coop
4. Index Coop will proceed with the deprecation and migration of the FLI products and update all relevant documentation as needed

Voting

FOR: DO buyout Scalara’s interest in the FLI tokens

AGAINST: DO NOT buyout Scalara’s interest in the FLI tokens

[anthonyb.eth]

This is a very exciting proposal and shout out to the Scalara team for helping on this deal. Should be a win for both Scalara and Index Coop as well as product holders since this will help to make the migration to ETH2x and BTC2x easier.

Nice work @allan.g!

[allan.g]

The $INDEX vote for buying out Scalara’s interest in the FLIs and future leverage tokens is live on Snapshot here.

[allan.g]

The $INDEX vote has passed in favor of buying out Scalara’s interest in the FLIs and future leverage tokens!