IIP-XXX: New Process For Leverage Tokens

Product
1

Date: 2024-08-09
Stage: Proposed
Product: IIP-XXX: New Process For Leverage Tokens
Author: @anthonyb.eth
Reviewer(s): @MrMadila @0x_Dev

Abstract

This proposal would enable the Index Coop core team to launch leverage tokens without needing a new IIP for each future product or suite.

Motivation

Voting on whether or not a product idea is created by the Index Coop has historically been one of the primary types of proposals for INDEX governance. However, drafting these lengthy IIPs can be time-consuming, whereas, streamlining the process would allow Index Coop to rapidly respond to market dynamics and meet users’ needs more quickly.

Leverage tokens which do not require new smart contract development only require several parameters to be determined and minor engineering effort. Instead of having a process where an IIP triggers the development of the token, this proposal would have the token be deployed by the Index Coop engineering team and then a vote would transfer the operator role to the DAO.

Index Coop does not intend to launch more leverage tokens on Ethereum mainnet and therefore it is expected that all future leverage tokens will be launched on low-cost chains such as Arbitrum and Base. For tokenholders, there is little consideration needed to decide whether or not to launch these products because:

  1. They require very little engineering effort since the infrastructure makes it easy to launch new tokens

  2. They require nearly no maintenance required since the products are automated

  3. They have very favorable economics in that they are a large revenue generator and have low fixed costs on low-cost chains

Removing the IIP requirement for these tokens would allow Index Coop to move faster to create more leverage tokens across different asset pairs, chains, and leverage modules (e.g., Morpho). This should allow Index Coop to generate more gross profit across the product suite.

Specification

This proposal only covers the launching of leverage products where both the leverage module and the chain have already passed governance.

Leverage Modules:

  1. [Passed] Aave V2

  2. [Passed] Aave V3

  3. [Not Yet Passed] Morpho Blue (in development)

Chains:

  1. [Passed] Ethereum

  2. [Passed] Arbitrum

  3. [Passed] Base

  4. [Passed] Polygon PoS

  5. [Passed] Optimism

Below are examples of products which would still require a governance vote under this proposal:

  1. AVAX2x on Aave V3 on Avalanche: Because Index Protocol hasn’t been approved for Avalanche, it would still require a vote.

  2. ETH2x on Morpho Blue on Base: Because the Morpho Leverage Module hasn’t been approved yet, it would still require a vote.

Below are examples of products which would not require a governance vote under this proposal:

  1. ETH2x on Aave V3 on Base

  2. BTC2x on Aave V3 on Optimism

Process for Launching New Leverage Products

Provided this proposal passes and the product in question doesn’t require a governance vote due to already being approved for the chain and leverage module, the Index Coop core team would make a short post on the forum. Below is what should be included in the post:

Parameters:

  • Name & Ticker

  • Chain & Leverage Module

  • Target Leverage Ratio, Minimum Leverage Ratio, Maximum Leverage Ratio, Recentering Speed

  • Streaming Fee, Issuance Fee, Redemption Fee

  • Target NAV at Launch

  • Supply Cap at Launch if applicable

  • DEX Pools, Slippage Tolerance, Maximum Trade Size

  • Ripcord Leverage Ratio, Ripcord Maximum Trade Size, Ripcord Slippage Tolerance

  • Product Revenue Tokens (PRTs) if applicable

Then, a vote would be conducted on Snapshot to transfer the role of operator to the DAO’s Engineering Safe.

Voting

FOR: Approve the new governance process for leverage tokens

AGAINST: Maintain the current governance process for leverage tokens

4 Likes