IIP-86 MVI Fee Split Proposal

I’m strongly in FAVOUR of this fee split and think some of the comments here don’t appreciate two things and some of the DAOs history (that’s ok, not everyone has been around since before MVI was proposed:

  1. When @DarkForestCapital and @verto0912 were proposing this index there was, in my mind, a lot of penny wise but not smart thinking in the DAO about methodologists - and a real logjam. I privately modeled out some scenarios at the time, thinking we should offer long-term, uncapped incentives to the proposers of MVI. As such, to cut through the confusion and goop the methodologists opted to launch the product as internal methodologists - via which they have directed quite a bit of INDEX back to the Treasury. In my mind they exhibited long-term thinking, and did us all a solid, to get our second sector index to market. I’m glad they did - it’s not just brought INDEX back to the treasury but notably added value to our brand and platform value. Simply put, they made a lot of compromises and trade offs which showed goodwill towards the DAO - instead of not doing the product or taking it elsewhere.

  2. DFC and Verto, as much as any contributor to the DAO, have over the months contributed unbelievable value. This often involved going WAY beyond what people would think reasonable for their $/INDEX at the time. And way beyond their FT job descriptions too. They have put so much time and skin into this game - and I respect their wish to move to this new role.

Given these points - and seeing the same fee split offered to DATA (whose methodologists I respect (and who’s product I’m excited to buy) but I don’t believe have contributed as much to the DAO, who are launching later (when the Coop has more of a platform and less risk) and who also don’t yet have a major distribution capability) - I believe we should deal on this fee split for MVI. I also believe the LM investment in this product by the DAO is offset by the early stage they launched the product with us (more risk and recent failure at the time of CGI. Having another failed product at this time would have been really bad - MVI’s success really helped our momentum and perception).

I’m open to a longer-term conversation on the role of methodologists and how we engage and align, but that’s a theoretical forward facing issue - this has a lot of past issues to consider within it. I’m also open to lower fee splits for methodologists of sector basket index products in time too - as our platform scales, the fly wheel effect increases, and their success is more assured by launching with us.

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I am in favor of the proposed fee split.

The Metaverse Index is still in the early innings, and the money spent to launch the product and build a strong foundation can be recouped by reaching a critical mass of units / market cap. Without that growth, the money is still spent plus we won’t recoup what we’ve spent. In my opinion, setting DFC and Verto free to focus their attention on this product increases the odds of success. In other words, 70% of a very large pie is better than >70% of a small pie. I don’t think they would do this, but an alternative scenario is that they do just enough to earn out the rest of their unvested INDEX while MVI languishes creating a worse outcome for all.

Reviewing pay for prior months work I think is a distraction. DFC and Verto have proven to be SMEs on multiple fronts for the Coop during the rapid growth phase and provided enormous value while also creating and launching a successful product. I am sure they have earned their keep, and I respect their decision to pursue MVI while forgoing the remainder of their unvested INDEX. If anything we should be saddened by the loss of their expertise and institutional knowledge.

The fact that they are willing to pursue MVI full-time gives me confidence in the long-term prospects of the product and I think it’s rational to believe that they and the Coop can do very well with it or they wouldn’t make this trade.

I’m celebrating their decision, and hope they reach a $1B+ product (maybe even spin-off products) and enormous personal success. If not, I hope they come back to the Coop. I’m reminded of Felix Dennis (h/t to another Owl who recommended it) on paradoxically celebrating his employees leaving to start their own companies:

Three reasons. Firstly, I’m proud of them. Proud that those who work for me are brave enough, motivated enough and trained sufficiently well to go for it on their own. […]

Secondly, it’s win-win. If they fail, they may well return to our company, especially if they remember that my senior colleagues and I sincerely wished them success in their new venture. Thus, if they fail, the company will be enhanced by their return. While if they should succeed - then we will be all richer for having an old alumnus as a friendly rival in the industry, rather than having created a enemy who wishes us anything but well.

Lastly, it’s because I fear them. I fear they may have spotted something we have missed, some gap in the market. I fear we may have failed to listen to them. I fear that their new venture will grow at our expense while it poaches our personnel and our market share. And the only way to deal with fear is to cosy up to it. To look it in the eye and pump its hand. […]

What the hell. Go for it!

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I am also strongly in favor of this proposal.

@DarkForestCapital & @verto0912 have contributed massively to the success of the Coop today. Their leadership, thoughtfulness and creativity is immeasurable in INDEX terms, and a simple account of LM and marketing expenses is not an adequate metric to compare this to.

While points can be made about the wooly nature of the methodologist role, that responsibility that falls on the Coop to fix and better communicate to prospective methodologists in future. In the here and now, this fee split should be bought in line with DATA.

Also, it is in the best interest of the Coop to incentivize the MVI team to focus on making their product a success. A 70% return on what is clearly a multi-billion AUM product in the future is a good enough deal for me, and will vastly outweigh any expenses to date over time.

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Circling back as I realized that the previous emoji of support would likely go unnoticed by all but the most forum-savvy Owls. I will be voting FOR on this. My reasoning is effectively that I believe the incremental spend above what would have been the MVI fee split to date was well spent and deserved by these contributors. It’s bittersweet in that I wish the contributor incentive structure was more enticing for top-talent, but growing MVI AUM is about as aligned with IC goals as things come, so fully in support of providing an incentive structure that is reflective of that. I would like to see the vesting arrangement and claw-back (keep 7/24, return rest) made explicit in the proposal, so flagging @BigSky7 as the author should all parties be amenable. @DarkForestCapital and @verto0912 - thank you for your contributions, happy I got to work with you in this capacity (once an Owl always an Owl in my opinion), and I look forward to having more actively engaged methodologists with an incredible amount of relevant context!

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  1. Yes - this was considered. From my perspective there is a certain baseline level of support that partners who launch products with IC receive. All of our products require a significant investment to grow. IC prefers that all this investment comes from the external partner, while the external partner wants all this investment to come from IC. The level of support that MVI has received is in line with our other sector products. Alongside this significant funds have been recycled back into our treasury through the current set-up.

  2. I view the timing of the vesting as immaterial. That is capital they have more than earned from almost a year of constant work on this protocol. Both took on a tremendous amount of risk to join this protocol in the EARLY-days when the success of this project was FAR more uncertain.

  3. From a precedent standpoint - we need to eventually move towards an incubator process for some of our products. I see the process followed by DFC and AG to be the first rough approach to this process. I expect us to continually refine that over the next few years.

  4. In my eyes MVI has been a massive success. This time last year no-one on this forum had ever heard of the Metaverse. Today, everyone thinks of it as one sector. MVI is a big reason for that. We are in the early early growth stage - the core economics we should be worried about is whether or not one of our product completely captures a sector and dominates that sector. With MVI it isn’t even close. MVI is larger than the flagship products of all our competitors - in a sector that is far more nascent than DeFi. This is a HUGE accomplishment.

DFC and AG have worked insanely hard on Index Coop over the past year. I trust both of them deeply and have seen their integrity in action countless times. I strongly support this fee split and am excited to work with them closely as trusted partners and external methodologies.

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I will be voting FOR this proposal, assuming the specified revision below.

We can quibble about whether the proposed fee split for MVI fair or not, but I don’t think this is productive.

We should do the following:

  1. Bring MVI in-line with the current fee split for simple index products (DPI, DATA)
  2. Eliminate the distinction between community and external methodologists
  3. Revise the misaligned incentives for all existing and future Index Coop methodologists.

We should assume significant changes to methodologist incentives as they are being redesigned as part of the Index 2.0 efforts. That big, thorny problem will not be solved on this particular forum post discussion.

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@sixtykeys @Pepperoni_Joe @mel.eth formally requesting an iip number and a snapshot vote Wednesday.

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Can I please get clarity on the proposal. Am
I voting for something that has @Thomas_Hepner comments included or something that does not?

I just want to be sure I know what I’m voting for here.

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Yes - the comments from @mel.eth @Thomas_Hepner have been included in the proposal.

DFC and Verto will forfeit the remainder of their unvested tokens on the date of the switch, the tokens will be returned to the Coop treasury.

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Hey @BigSky7, IIP-86 assigned. Given that the proposed IIP is just finalized now, the 48-hour waiting period would put us at snapshot on Sep 23 at the soonest. Please let me know if you would like this queued for Thursday Sep 23 and and have it run into the weekend or queued for Monday Sep 27 and have it run during the week. Otherwise good to go.

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Thanks @mel.eth - can we please send it to snapshot on Monday Sep 27

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IIP-86 is set to go live on snapshot today at 1800 UTC and ends on September 30, 2021 at 1800 UTC. Please vote here.

cc: @sixtykeys, @BigSky7, @Mringz

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Noting that this IIP has PASSED with 342.54k INDEX (98.2%) voting FOR and 6.29k (1.8%) voting AGAINST. :white_check_mark:
snapshot here

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Great work everyone :rocket: :rocket: :rocket: :rocket:

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@dylan – Does @BigSky7 or @Mringz need to submit this to Coop Engineering Resource Request in order for this IIP to be effectuated?

Trying to get this moving/executed upon.

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Yes @BigSky7 @Mringz Please submit a EWG work request via the form above. EWG can’t keep track of all requests on the forum/discord etc… so if something needs to be done you guys need to bring it to us (via the form above)

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We’ve raised a request through Cavalier and @ncitron is working on it I believe.

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Just making a note here that as part of the switch over, I’ve asked that the Coop claims all tokens from my vesting contract (both vested and unvested), making a note of how many vested tokens were outstanding to be paid back at a later date. This helps me to avoid a large tax liability and further price risk due to no current process for the treasury to buy back tokens as set out in IIP-36 (tax in UK is due at price of claim). The contracts are not built to enable clawback without outstanding tokens being claimed, so this is a simple solution to avoid a forced claim.

The treasury have been notified and will pick it up as part of normal reporting. The responsibility for requesting the transfer at a future date falls to me and this note will act as record that this was agreed with the Funding Council (Dylan, Joe and Greg). This only applies to my contract.

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hmm… this could be changed for the future. Thanks for that

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Hi @DarkForestCapital @BigSky7 @dylan

With regards to the fee split: Can we confirm if 70/30 is before or after on-chain costs ?

It would be great to know what was discussed with regard to on-chain costs. I believe it is a significant cost relative to the AUM and thus is significant in terms of the product’s profitability.

Perhaps there is a commitment somewhere to socialise these costs into the product and this is a mute point?

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