Implement Governance Mining


This idea is being put forward to address concerns around the voting power held by a small number of addresses, specifically how to reduce the skew of power without affecting the value proposition of holding $INDEX tokens. Thanks to @verto0912 @overanalyser and @Dylan for input, and look for a future Verto post pulling together why the Smart Treasury and Governance Mining will be so powerful in combination.


This post recommending the Coop implement quadratic voting was met with fairly negative reception from a number of stakeholders, yet made an important point:

  1. Index Coop contributors are the lifeblood of the organization, ensuring the evolving maintenance and growth needs of the Coop are met.
  2. Index methodologists & third parties bring industry expertise and DeFi integration. A key component of DeFi has been integrations and composability. It is hard to imagine Index Coop succeeding without the help of ecosystem partners.
  3. INDEX speculators (driven by whales) collectively assess the work and promise of the Index Coop. Over the long term they determine if the Index Coop is headed in a valuable and promising direction.

Q: What are the desired characteristics of Index Coop governance?

Each of the above stakeholders should be meaningfully represented in Index Coop decision making. That is, in principle, any two stakeholder collectives above should be able to move the Index Coop in opposition to, or ambivalence of the third stakeholder.

Quadratic voting was put forward as a way to achieve a balance between the three stakeholder groups, but the reaction was net negative. If that is not the path we choose then we need to look elsewhere to bring the three groups inline, otherwise contributors and smaller community wallets will continue to remain underrepresented.

Given quadratic voting is designed to scale down the weight of the largest token holders, but this can reduce the value proposition of holding the $INDEX token, the alternative approach is to lift the weight of the community vote instead. One way to achieve this is by electing advocates, members of the community who can accrue votes from $INDEX holders via a governance portal. But before we expand on a potential governance model, let’s explore what traits it needs to have and why.

What are our goals?

  • Informed and engaged voters
  • Aligned incentives, voting not just for the sake of it but to make the Coop a success
  • Avoiding voter apathy/exhaustion. Accentuated risk due to metagovernance
  • Avoiding governance capture and maintaining credible neutrality. Stakeholders can depend on us to stick to our values and roadmap. Particularly important to Index Coop as a group that brings together potentially overlapping interests in the form of sector indices.
  • Governance that enables rather than stifles innovation

What are the risks?

  • Voter apathy through misaligned incentives or simply having to keep up with so many votes
  • Governance capture in the short term through smart contract control attacks. This is achieved when a party buys or borrows enough tokens for the period of time necessary to influence a vote, and dumps them straight after.
  • Governance capture in the long term, where one party uses an initial advantage to grow control over time, bolstered by liquidity mining incentives
  • The process of governance becomes cumbersome or prevents progress entirely
  • Uninformed or deliberately malicious votes

Options to mitigate the risks

  • Tokenomics design to reward protocol-positive actions
    • Step 1, incentivising tokens into the governance ecosystem
    • Step 2, ensuring the number of votes is sufficient to meet quorum
    • Step 3, aligning vote outcomes with long term success
  • Governance structure including committee/council/delegates to have the most motivated and closest to the project accrue voting power
  • Flash loan mitigation
  • Make voting simple and engaging by design
  • Measure governance data e.g. IIP analysis post and making changes based on results
  • Quadratic voting to taper whale voting power


I’m proposing we take the options above and combine them into one solution - “Governance Mining”. Governance mining will reward $INDEX holders who stake their $INDEX tokens in the governance portal and participate in governance or meta-governance votes. The new setup will also make use of the delegate system employed by Compound and others to try and empower community members through increased voting power. This is what it would look like:

By designing our governance portal with a two stage approach, we achieve the following:

  • Tokenomics design to reward protocol-positive actions
    • Step 1, incentivising tokens into the governance ecosystem :white_check_mark:
    • Step 2, ensuring the number of votes is sufficient to meet quorum :white_check_mark:
    • Step 3, aligning vote outcomes with long term success :white_check_mark:
  • Governance structure including committee/council/delegates to have the most motivated and closest to the project accrue voting power :white_check_mark:
  • Flash loan mitigation :white_check_mark: (via taking idle tokens off the market and into the outer ring for staking)
  • Measure governance data and make changes based on results :white_check_mark:(reward incentives can be tuned depending on desired outcome)
  • Make voting simple and engaging by design (more to come on this)
  • Quadratic voting to taper whale voting power :x: (no longer required!)

So while this proposed solution is likely not perfect, hopefully it goes some way to continuing the work Dylan started with his voting analysis and overcomes the limitations of quadratic voting.

Next Steps

  • Understand any concerns, incorporate feedback and look for flaws in this approach
  • Determine reasonable numbers for staking and governance APY, prior to putting it to community poll
  • Flesh out how the community advocate and delegation would work, including election, limitations and expectations.
  • Get buy-in and understand scope of work from development team
  • Combine the above into a formal proposal and subsequent IIP



+1 I think this is a great start to building out compelling INDEX tokenomics + gives us more levers to play with in tuning governance dynamics.

Looking forward to seeing what @verto0912 is cooking up and seeing some concrete numbers on the APY via the Smart Treasury


I like it, It gives an incentive for people to stake and a further one to vote or delegate.

I wonder if placing a cap on delegation makes sens (i.e. if a address has more than x% of circulating / staked tokens delegated they can not accept more delegates). Then whales can vote their entire stack, but they can not add further delegated votes (so, Set can DeFI pulse could vote with full [unvested] tokens, but not get further delegates - Obviously individuals linked to either organisation can be proposed as delegates, but they would be seen as separate to their employer and so attract delegates on their personal reputation.


Some more thoughts on this after sleeping on it.

If we:

  1. set a cap of: “when an address has more then 5% of the staked INDEX delegated, no further delegation is allowed”.
  2. allow large addresses (> 5% of staked INDEX) to vote their full stack, but unable to accept delegates
  3. allow the founding partners (Set and Defi Pulse) to stake and vote their full unvested stack

We encourage community delegates and encourage smaller holders to delegate to other community members (and not just delegate to the brand name organisations / VC’s without thinking).

While allowing the INDEX whales to stake and participate with no incentive to split their holdings.

It also gives the whales an excuse not to pitch as delegates :smiley:

I like it, might have to see how it pans out and play with the cap number a little once it’s all up and running but it’s a fairly benevolent solution and allows the community to band together as intended.

Do you see delegates as being anyone with $INDEX and leaving people to campaign for themselves individually, or should we be electing a group akin to the Spartan Council? I think becoming a delegate is quite an involved position with a decent amount of responsibility, the idea being that it involves staying informed on everything Index Coop + anything meta governance, which is almost a full time occupation!

These ideas are well thought out and a solid foundation. I like the idea of a Council with more payout as a reward incentive for productive governance contribution work. Perhaps renewal for Council membership should come up every six to twelve months when there will be more of a track record demonstrating contribution work performed. By this metric, I would propose you and @overanalyser as initial Council members!


Thanks for the support and sharing your thoughts @HowardMarin. I like the idea of keeping any elected council accountable through the use of regular renewal votes.

In terms of pay we will have to see how the system takes shape and how much responsibility advocates end up having. Perhaps community advocates can also take on a multi-sig role that executes the meta-governance votes as an added responsibility, which also helps justifying a paid position. For reference the Spartan Council are paid 1000SNX per month.


I also think this is a well thought out start and would like to see this thinking and work continued. Would love to see more feedback then a more formal voting expression of interest. Would also love to hear any negative critiques if there are any pending…

I just found this post after reading this other one: $INDEX tokenomics - #7 by verto0912 by @verto0912, so apologies I’m a little slow to pick it up.

I also like @overanalyser ’s thoughts and methodology bullets, and would support you two as ‘council’ members on one condition - you don’t wear powdered wigs!

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Great post @DarkForestCapital, really like the direction this is going :slight_smile:

I would like to propose we build out the narrative of aligning incentives with community involvement a bit more. Ideas for discussion include time, attracting new community members and promoting Index / products.

I think it is to the benefit of Index Coop that people remain active in the community for longer. Curve incentives by time locks, increasing benefits with time commitments. We also know people like flexibility. We could tweak what CRV &CREAM does with time locking, making that aspect voluntary. APY would increases with time, not compounding, but native APY. This can be likened to how company reward employees with benefits that act like golden handcuffs. The longer the voter remains active, the more incentivised they are to remain so.

Index can attract new community members by incentivising new active addresses depositing into the staking contract. The thinking with this idea for discussion, is investors who already hold a good percentage on INDEX are incentivised by sheer capital allocated to the protocol. Less so is the new comer, attracting new comes bring ideas, fresh outlooks, energy, we always want the community to grow and keep how inclusive it is. Index Coop has a very welcoming vibe and this is important culture/brand building qualities. Attracting the best people, some fringe benefits perhaps. How could this be incentivised? Perhaps new smaller user accounts depositing receive a higher yield at the start.

Another interesting concept, could be strait to the round filing cabinet, but it might trigger an idea and start a conversation that is really interesting. This might not be possible, but what if Sybil from UniSwap could be used in a way that links a user address with the number of Twitter post counts promoting Index Coop or its products. Essentially, passive, prolonged, promotion rewards via governance APY. For example, post once (insert number here) per two week period (insert time duration here) and receive additional APY. A metric to measure active community involvement. This is likely a controversial concept and i’m not sure if I am a fan to be honest. But if there was a large number of twitter posts from a vast array of people, then the network affect could be accelerated by increasing exposure rates which would increase brand/product awareness and act as a funnel to Index Coop’s products .This is essentially a peer referral based marketing concept, incentivised through governance APY, it could really put Index Coop in the news feed of a completely new type of prospective client. Naturally, people have the choice to participate and larger holders receive a larger nominal sum of funds, which if you own a bag of Index promoting it only helps.

The logic behind this kind of thinking, is to throw ideas around to get people thinking. A fresh new governance model can be a real plus, it is really innovative to be on the frontier. The ideas stem from the question, how do we incentivise the actions/values/behaviours to the benefit of the community.

Join the community >> Stake >> Vote >> Hang Around by choice (not time lock) >> Promote the community/products

If one was to do all that, then they are pretty engaged and to sustain that over any period of time requires continual effort which is to the benefit of all holders. It is also optional, so people can choose what suits them.


@gregdocter this is similar to the “new user journey” we discussed.

@DarkForestCapital maybe you can opine on using SourceCred for rewards for forum and Discord participation.

One of the issues with not having lock-ins is that people will just stake, get APY and not care to vote. This does achieve the benefit of removing $INDEX from the market but does nothing to improve governance. I feel that lock-ins/timelocks 1) ensure long-term alignment of stakers with the direction of the project and 2) justify the APY to some degree (i.e. at least you are locking your capital). Because the current proposal would reward people for just staking their $INDEX into the governance module.

So the variation that I see make the most sense is this:

  1. Stake $INDEX in the governance module

  2. Pick the duration of the lock-in. Based on that, get either 1x APY, or a multiplier.

  3. Vote yourself (get additional the multiplier) or delegate (if delegate votes you still get the multiplier)


Planning on snapshot votes or an on-chain voting system?

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100% - keeping other thoughts to myself for now as to not distract from this specific topic :slight_smile: glad you pointed this out

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I understand this concept and I don’t disagree with what it achieves. It is like entering a contract, or a relationship, where the benefits are pre defined and there is a binary decision gate. The staker gives a time commitment & in reward receives APY. This rewards loyalty and makes it a bit transactional.

If the time lock was removed, but the payment profile modified to be like a Bond with fix date maturity. User can choose to leave whenever they want, but they loose all the benefits of the time multiplier they accrued because they didn’t get to the milestone. Withdraw a fix date maturity Bond early, loose the benefits accrued (just the loyalty rewards). Stay the journey enjoy the fruits of the yield multiplier. Ways to implement this narrative:

  1. Hold a pre-defined duration and the yield multiplier is paid out in 1 transaction at maturity (end of pre-defined period), pull out early and that 1 transaction doesn’t land in the user account.

  2. User holds for first pre-defined period, earns the right to the multiplier which is then applied to the next time period. This is a bit like a time investment upfront, payment tomorrow.

I think option 2 really attracts those longer term investors/contributors because this wont influence their decision. But it will disincentives short term yield lockup users and on top, the continual appeal of alternatives will draw some users away. This is most aligned with golden hand cuffs concept mentioned above, as the promise of rewards for time already spent hangs there in front of the staker but they have all the choice in the world, choosing to stay committed to the cause. I don’t know of any other project doing it this way, but it is an interesting concept.

Be great to see more ideas and explore the topic. :slight_smile:


I’m a big fan of this proposal, as it introduces a simple solution to many ongoing discussions:

  • Option for passive holders to make Index productive
  • Option for engaged Index holders to earn more, by participating in governance voting (aka mining)
  • Increased certainty that votes will lead to the best outcome, due to highly qualified participants (i.e. delegates)

On top of reinforcing the governance and meta governance process for the coop, staking can have a positive effect on Index price as well.

I’m also in favour of @Matthew_Graham suggestion to increase rewards for longterm participants.

The only concern I have at this point is that at current gas prices, staking might not be an option for many small Index hodlers, as the cost vs. reward is most likely net negative.
If this is the case, maybe we should think of a one time reward to attract smaller wallets. For instance, 5 Index reward when staking, but only for wallets with less than 50 Index, paid out after 60 days. I haven’t done a thorough analysis, but a quick look on etherscan shows that ~820 wallets have more than 50 Index, that means that the other ~1500 wallets (roughly 2/3) have less.

And I don’t yet fully get the role of the council yet. I understand that stakers delegate their votes to community advocates separately (as displayed in the graphic). The function of a council on the other hand is to debate, decide and then execute (act as one voice). But in this case, stakers already decide by giving their vote to a specific community advocate (who votes on their behalf), not to the council it self, right?
Please correct if my understanding is wrong or my view of a council is too narrow.


we can consider reimbursing gas cost for staking in the governance module.

there are two different options here, the delegate option and the council option. delegate model is similar to Compound, anyone can delegate their INDEX and receive a multiplier if their delegate votes consistently. At the same time, those who don’t delegate can still vote themselves. What Synthetix are doing with the council is basically allowing the community to pick the council and, from then on, the council decides on all the matters (so no further voting for SNX holders).

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Big fan of this proposal by @DarkForestCapital.

Personally, I really enjoy on-chain voting as an activity in general. It’s fun. But many people seem to not see the value in it, which I think is due to the misaligning of incentives. The interface for most on-chain voting nowadays is very luckluster as well. Right now, the popularity of Index as a token is based on its stellar products. However, real value will come from aligning incentives with governance (plus further value-capture in the future).

Because Index meta-governs unlike other governance tokens, I think this governance mining proposal is especially fitting. The staking aspect ensures that voting is not a one-time thing, but that governance activities require the holder to enter the ecosystem to reap the rewards. And it can be built out further from there. It would boost the value-proposition of index and streamline the coop in a very innovative way.

Also, if gas for governance is reimbursed like @verto0912 said, that’d be awesome. I sort of like the Compound-like delegate option more, but I would love to hear pros and cons of each.

I’m a bit new here, but I would suggest moving forward with whatever the next steps are and making this a priority, now that DPI has reached a benchmark and there’s new indexes currently in production.


Aave just put out AIP-9 adding incentives (550 AAVE/Day) for staking there 80/20 AAVE/ETH LP token stkABPT into the Safety Module. Perhaps IC can incentivise the liquidity pool on BAL in a similar fashion. Having the liquidity is great for all the aggregators. We could set up the pool on BAL and still continue the discussion around the distribution structure…

Details of the original plan are outline by this December 2020 ARC.

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To revisit this, I feel like this should really take priority now considering that Index Cooperative now has 2 products with FLI coming and MetaVerse currently under discussion. I really feel like the value proposition of INDEX itself is not getting enough love these days, but then again, things change fast.


I think this would be a lot more appealing if we returned the fees in $DPI.

Given the idea w/ Smart treasury + gov mining is to sell DPI > buy INDEX > and then return INDEX for gov/metagov participation, I struggle with the necessity for the first two steps…at least with the amount allocated to metagov.

If we allocated a proportion of the streaming fees to voters / total streaming fees that was ~proportional to the amount of tokens circulating / amount emitted, it seems like we could continue using a large portion of our income for cont’d expenses and growth via a smart treasury buyback.

The narrative around value capture becomes much more clear and potent at that point:
Buyback + voting dividend v. Buyback + self-referential voting dividend.

So we’d kill a few birds:

-Low metagov participation
-weak INDEX value accrual narrative