**Index Coop Multichain Strategy [OLD]

Title: Index Coop Multichain Strategy
Authors: @oneski22 @Mringz [Discord: Mringz | Index, TrotNixonLine]

TL;DR:

  • Enable Index Coop products to go on other chains (Polygon, BSC, Fantom, xDAI).

  • Incentivize ETH2x-FLI/ETH pools on MATIC, BSC, FTM in partnership with Popsicle

  • Research updating Snapshot and updating analytics dashboards to include other chains.

  • Use data from these experiments to plan long-term strategy.

  • Mint/Redeem stays on L1 Ethereum. DPI, MVI, BTC2x-FLI, INDEX liquidity stays on L1.

Context:

Following on from posts from @Mringz DeFi Partnerships & Integrations Strategy, from @Mringz and @oneski22 DeFi Partnerships and Integrations Q2 and beyond and A vision for Q2-2021 all business development activities should be centered around reaching the following goals:

  1. $500M AUM
  2. 400,000+ DPI supply units
  3. $9M FLI suite 7-day moving average volume for 2 consecutive weeks
  4. 4 new products launched with $200M+ combined TVL. They are category leaders in terms of the most relevant measure (i.e. uTVL, volume, liquidity)
    As mentioned in the DeFi Partnerships and Integrations Q2 and beyond:

We believe DeFi partnerships and integrations activities will assist in reaching these goals in the following ways:

  • Increase the number of extrinsic productivity opportunities available in the ecosystem for Index Coop products
  • Communicate the value proposition of existing extrinsic productivity opportunities for Index Coop products
  • Build relationships with DeFi projects that will enable us to collaborate in creating new products and new extrinsic productivity opportunities

One of the key activities identified was listing on Layer 2 (L2) scaling solutions, which allow for low-fee trading, increasing volume and low-fee acquisition of products, increasing unit supply, and TVL.

Given the increase in capital, efficiency ETH2x-FLI has seen due to the Uniswap pool migrating to V3, we believe that ETH2x-FLI is the right product to begin our multichain expansion. We hope to use ETH2x-FLI as a case study to gather data and inform a long-term strategy for how the Coop should handle L2s and other chains going forward.

Present State:

This is the present state of the Index Coop products on chains outside of L1 Ethereum:

  • DPI has a bridge to MATIC, xDAI, and BSC, and a very small Sushi Pool (DPI/ETH) on MATIC.
  • INDEX has a bridge to MATIC and xDAI
  • ETH2x-FLI, BTC2x-FLI, and MVI have bridges to MATIC.
  • Mint/Redeem functionality is exclusively on Ethereum

Proposed Actions:

We see an opportunity to launch several small incentivized pools on leading DEX’s on Polygon (MATIC), Binance Smart Chain, and Fantom Opera Chain.

We are proposing the following actions:

  • The following new bridges established:
    • DPI → Fantom
    • INDEX → BSC, INDEX → Fantom
    • MVI → BSC, MVI → xDAI, MVI → Fantom
    • ETH2x-FLI → BSC, ETH2x-FLI → xDAI, ETH2x-FLI → Fantom
    • BTC2x-FLI → BSC, BTC2x-FLI → xDAI, BTC2x-FLI → Fantom
  • Incentivized ETH2x-FLI / ETH Pool on MATIC
    • $1M target liquidity, TBD APY
  • Incentivized ETH2x-FLI / ETH Pool on BSC
    • $0.5M target liquidity TBD APY
  • Incentivized ETH2x-FLI / ETH Pool on Fantom
    • $0.25M target liquidity TBD APY
  • Partnership with Popsicle Finance to manage cross-chain rewards for these pools, and integrate with their automatic cross-chain LP management.
  • Partnership with multichain.xyz to establish bridges to BSC, xDAI and Fantom for all existing and future Index Coop Products.
  • Partnership with Polygon (MATIC) to establish bridges to Polygon (MATIC) for all future Index Coop Products.
  • Research into enabling snapshot voting with Index on MATIC, BSC, Fantom and xDAI.
  • Updating our analytics dashboards to include Index products on other chains to gather data and better inform our strategy going forward.
  • Keep Mint/Redeem functionality exclusively on L1 Ethereum

We are requesting a loan of $175,000 from the BD Multisig to seed 10% of each of the pool targets, which we will remove once liquidity goals are met, and return to the BD Multisig with the trading fees going back to the BD Multisig and/or Treasury.

We are requesting a small group to be created with representatives from the Treasury, Product, and BD Groups to determine the ideal INDEX rewards for these pools, as well as the duration of the liquidity mining program.

Conclusion:

This is all to build the underlying infrastructure to allow the Coop to be nimble as L2s and side chains continue to grow, as well as set up small experiments to allow us to gather data for a more long-term multi-chain strategy.

Is there anything we might be missing? Are there other chains we should consider?

Let us know in the comments.

15 Likes

I have just started using Polygon and it would be great to have these products on that network. Would it be a problem for people to move their current positions on the mainnet or might that cause liquidity problems? Obviously the ideal would be to establish additional stakes but that might mean extending the benefits to multiple locations. I understand we are maintaining the benefits on mainnet for a while anyway but would we have to more heavily incentivise the new pools?

1 Like

Regarding other chains, are there any proposals to develop these or similar products for Polkadot/Kusama or Cardano? Polkadot/Kusama is really hitting up right now with the upcoming parachain auctions and Cardano has just had some amazing success in Ethiopia with adoption within the education sector. Ren May well be about to integrate Solana into their ecosystem as well (Just to broaden the sphere further).

Hey @oneski22, thanks for the post. Some ambitious goals here.

While it’s good to outline a big picture strategy, I think it would be much more helpful to break it down into smaller actions that we can execute on. I, personally, find some parts of this proposal reasonable, while others make little sense to me. If this is not just me, it might be hard to get consensus.

Let me try to sum up some questions and concerns that I have.

  1. Why do you think that having our products on these other chains will increase AUM and supply units? The only data we have, so far, is our experiment with Loopring. And while we reached decent liquidity on there, it didn’t seem to have much impact on AUM and supply units. Why would these integrations be any different?

  2. What is the competitive landscape on L2s? I believe Indexed has their products on Polygon/Quickswap. How are they doing? Any insights we can pick up from this?

  3. I struggle to see the need to establish pools on Polygon, BSC and Fantom simultaneously. It seem like a massive effort, that will drain both monetary and mental resources. What are the KPIs? Is there any data supporting this effort?

  4. You say that L2s “allow for low-fee trading, increasing volume and low-fee acquisition of products”. What happens when Uni launches on Optimism? Wouldn’t that do all of the things you mention?

  5. How do you see us capturing value from a potential increase in volume on L2s? Even with FLI, arbitrating cross-chain differences in prices through mint/redeem seems like a complicated process.

These are some thoughts from me. I think we have a lot to work through.

What I would support, which perhaps can be proposed separately, is establishing an ETH2x-FLI / ETH pool on Quickswap and incentivising it for 30 days at a similar level as we did with Loopring. I would love to see trading volumes and if there’s any value capture occurring. We would absolutely have to build analytics for this before launching the experiment.

Again, thanks for kicking off this conversation. Long overdue.

5 Likes

Great post @Mringz and @oneski22 (you need the same discord and forum name!) I’m glad we are starting to talk this through and move forward on this area. Dominating Layer 2 needs to be central to our Protocol Strategy.

I agree with AG here - this is hugely ambitious (as it should be!) but we need to break this into smaller action steps and tie those steps to measurable goals. We need to be strategic here. There are simply too many platform and projects - it will be very easy for us to get overwhelmed and lose tactical direction if we try and pursue everything simultaneously.

As we continue this conversation here are some open questions

  1. It would be very helpful for Index Coop to have a clearer picture around the Layer 2 Strategy / Plan is for Set (@gregdocter @puniaviision ) and DeFi Pulse (@snasps @Jo_K ). This is too big and too complex for any of us to pursue in a vacuum. If we don’t know that’s totally ok - we just need to be synced up around this.

  2. @ansteadm could put together some thoughts / guidance to help us think through prioritizing / building our Protocol Strategy for Layer 2.

  1. How do we think about multi-chain liquidity and to what level do we see ourselves supporting it. We heavily incentivized Loopring (which is fine it was an experiment) but how much can we support liquidity on different layer 2 protocols if we still dont have clear winners. I can easily see us losing a ton of money by supporting non-core liquidity that generates minimal revenue.

Great post - very excited for this conversation to evolve.

3 Likes

Layer 2 is exciting and absolutely where the action is going, so a strategy is needed.

What @verto0912 and @BigSky7 write makes a lot of sense and I look forward to the conversation expanding to address the important points they raise.

My points may be little less concerning and a little more nebulous. Better to say than not, and, as always I encourage all to get involved.

Over time, I see that interchain and interlayer communication will resolve voting , liquidity, and arbitrage issues - standards are already under development. Right now, I see a need to get ready and keep up to date but not to commit funds just yet - for the reasons in comments above and a few points that play on my mind:

Expanding onto a layer 2, sidechain, or other platform may do little to increase units held because retail is not really there yet. (Arbitrum has an upcoming integration with OKex, I think.) So, active people on layer 2 and side chains are most likely already active on Ethereum L1 and unlikely to hold more tokens in another place. Especially because…

Until the Coops products have a use-case away from layer 1, such as collateral, then only day traders would really benefit - and Loopring was already tried for this and centralised exchanges are the main places for it. This could change quickly as the Coop continues work regarding AAVE or if chain/solution integrates tightly with exchanges. Aave are on Polygon and could change the argument in the that regard.

Lastly, perhaps the Coop should seek voting rights or treasury-buys in return for any significant investment in a platform - an act that is essentially helping bootstrap that environment (are we in the business of sponsoring platforms?)

There’s a lot to consider and I am very glad to @Mringz and @oneski22 for getting the conversation up and running.

2 Likes

Have been using matic a few weeks and can confirm it’s the place to be although i am just now starting to branch out to some of these other chains like fantom. I think bsc would be of the lowest priority for us. Would also love to see an incentivized index/eth or index/matic pool available on polygon.

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I think BSC and Polygon will be much more of a “success story” than Loopring. I have exclusively been using Polygon for the past month, and absolutely love it! I’ve previously used mainnet, xdai, and BSC.

The only issue on L2s/sidechains I’ve seen is lower liquidity, leading to high slippage between market price and chain price, mostly on new tokens/projects. Additionally, trying to arbitrage such an opportunity is not possible, b/c the gas fees to move funds & make swaps on mainnet completely eat the difference. Hence, why just being able to bridge Index Coop funds isn’t enough. Projects should “commit” to the sidechain success by helping drive liquidity there or helping initially provide it. Aave & Sushi have successfully done this. Aave - billions TVL on Polygon, Sushi over $600M now on Polygon. They’ve done this with great social media and Medium/community marketing, and incentivizing TVL deposits, and of course name brand recognition.

The full suite of Defi is now available on Polygon, BSC, and others. For example on Polygon, you can lend/borrow (Aave), manage stablecoins (Curve), provide liquidity and yield farm (Sushiswap, Quickswap), yield aggregate/compound (Polywhale), all w/o heading back to mainnet. Plenty of CEXs are working now to allow funds direct deposited into Polygon in $ MATIC. Same for Binance with $BNB.

I’m excited to have Index Coop’s innovation expanding to others who can’t use it at the moment. And it opens up more product lines at the same time (think MATIC2xFLI and LP, BNB2xFLI and LP…)!

1 Like

Could you share which CEXs allow this?

Sorry, I edited that sentence since I misspoke. Plenty are working on integration. As for ones already allowing, I know AscendEx (formerly Bitmax) does.

Very happy to see this in the works! I think we can all agree that the volumne currently being bridged to other blockchains (L2 or not) is too significant to ignore. I can’t tell u how badly i wish polygon’s quickswap DEX offered DPI or Eth2X-FLI :slight_smile:

While it’s only one example, the success that Aave has had during its short time on polygon indicates that DeFi users are there.

I don’t know how this would effect current LPs so i think thay type of research is necessary. The current state of ethereum makes it costly to remove liquidity from a pool, and then once removed, users would then have to pay a fee for bridging each asset, so I’m curious as to how much this one detract LPs from removing massive amounts of liquidity. Let’s say that someone with a large LP position decides that the migration is worth the cost, is it safe to assume that this void in liquidity will be replenished by another person eager to cash in on a high % of transaction fees?

My point in saying all this is that i believe these scenarios are only going to lead to more adoption of index coop products. In addition to the products being significantly more accessible, this multi chain strategy would greatly increase the number incentives for LPs and so on.

2 Likes

Also @oneski22 @Mringz I didn’t see the secret blockchain mentioned so just wanted to bring that up. It’s on Cosmos so not an L2, however the Cosmos ecosystem is doing a lot of great work in the field of cross-chain communication but will save that for another time :slight_smile:

Just wanted to make aware of it as it does seem to have some liquidity. Every time I’ve checked tho I’ve failed to find a trade that doesn’t have a significant impact on DPI price.

Link for the url shown above right here.
[https://bridge.secret.network/tokens](https://bridge.secret.network/

Most importantly, i want to say thanks again for getting this in the works!!! Think i failed to include that in my last post :grimacing::slightly_smiling_face:

Happy to share some thoughts around this context, and aid in how we approach L2, and other EVM compatible chains (or just L1s in general).

The big questions is whether these chains & communities we are looking to market to- is there any inbound demand to have this supported on those chains? I think mapping DPI (and the index suite of products) to live on those chains is a great first step, just because it is quite straight forward and simple.

I think that with how our project is positioned, we should definitely aim to comarket with a lot of these AMMs to have them support liquidity farming with their native asset (similar to what Quickswap & Matic are doing), rather than have us need to use INDEX incentives. If we could get agreements with those respective teams (I can intro you all to the Polygon team if need be) and comarket, that is great.

There are a few sidechains to look into, like Polygon (mentioned), xDAI (mentioned), Fantom (mentioned), and BSC (mentioned).

With regards to L2s, We’re already on Loopring. The others out there currently that can have DPI be supported are Deversifi (Starkware), DyDx (Starkware), zkSwap, Perpetual Network, & Gluon.
There are going to be a handful of EVM compatible L2 solutions launching this summer. Arbitrum launches on mainnet on the 28th, Optimism is launching right around that same time frame (where Uniswap mentioned they are first launching v3), zkSync (August), Hermez (not sure about their timeframe for EVM compatibility or trading), and OMG Network is launching an optimistic rollup. The latter I don’t believe has shared a timeframe yet- they’re launching their ORu on testnet this month according to their last blog post.

From that list, the ones I would say would be most attractive for the suite of products would be DyDx. This has two components which I see being valuable.

  1. Ability to leverage trade DPI (not currently possible).
  2. Ability to deposit DPI in Pool1 and gain interest (will create more AuM and more staked/unincentivized DPI).
5 Likes

Great proposal, definitely think its a good. time to start discuss this topic. @verto0912 asked some great questions I would be interested in knowing the answers to.

Launching on 3 L2s at once does seem like a bit much. I think it would be better to reframe this as a “Index Coop L2 RFP” and make all the different L2s commit resources to liquidity mining, marketing, etc. beforehand to secure our integration. Then we definitely dominate in that market and can make similar deals with other L2s if we want.

|[quote=“ansteadm, post:13, topic:1512”]
I think that with how our project is positioned, we should definitely aim to comarket with a lot of these AMMs to have them support liquidity farming with their native asset (similar to what Quickswap & Matic are doing), rather than have us need to use INDEX incentives. If we could get agreements with those respective teams (I can intro you all to the Polygon team if need be) and comarket, that is great.
[/quote]

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I could not agree more with other Coop members. We need to focus on one L2 that has the potential for success.

However, choosing an L2 chain that is a good fit for IndexCoop products would be hard. I have not noticed any IndexCoop competitor moved on L2 to gauge their demand. Also, querying data is limited as Dune Analytics only has xDai for L2 chains (let us know if you are aware of other analytics tools for L2).

Just wild guessing, on the top of my head, Polygon would be a better option for the 1st L2 chain as it is getting a lot of attention due to price action, and well-known Ethereum ( such as AAVE and SUSHI) projects are moving some of the liquidity.

2 Likes

Polygon’s PoS chain wouldn’t necessarily be technically considered an L2 since it’s an L1 blockchain (sidechain), but I definitely would recommend working with the Quickswap team on creating an incentivized pool on their AMM to support DPI or similar coop products. I think that would do quite well, and would be good for co-marketing.

EVM compatible Ethereum L2s aren’t launched just yet, but will be in the coming weeks/months.

3 Likes

Exciting discussion! Forming a strategy for moving to other chains/L2s it definitely needed. I’m also convinced that our products should be made available on other platforms. Thanks @oneski22 and @Mringz for pushing this forward!

I agree with was has been said above. I think more data to prioritize our move to L2s or sidechains will help making the best decision. So that we can enhance this great plan you already establish, with quality reasoning/arguments for why we believe this the way to go.
There are already some good inputs in this thread. Looking for high activity, what other leading protocols are doing (Polygon seems to be gaining traction) and which protocol/DEX would support co-LP incentives, should help us to establish sort of a roadmap and priority for the Coop’s move to new territory.
I’m also looking at Popsicle, looks very interesting. If you can add some more info around why we think they are the right partner, would be interesting to know as well.

2 Likes

Tuesday 5/25/2021 at 2:00 PM ET (6:00 PM UTC, 11:00 AM PT) there will be a community call to discuss the best way for the Index Coop to approach other EVM chains and L2 solutions.

Members of the Index Coop Business Development Group will present a few slides to provide context and brief the community on some of the conversations we have been having with other DeFi protocols, as well as potential options and partners prior to an open conversation.

The call will be recorded for community members who are unable to make it.

The event will be added to the community calendar and the link will be posted in the Discord in the #business-development channel prior to the start of the meeting.

3 Likes

Just wanted to mention I’ve used Loopring to buy all my FLI, Index, and DPI tokens. FLI liquidity is shrinking so there’s high slippage but I think that’s everywhere right now until the proposal passes to increase it. There is strong DPI liquidity there though at about 1.5 million! Index at $100,000 and FLI at about $50,000 liquidity.

Matic is definitely BDI turf since they are heavily partnered with sushiswap so I would love to see major liquidity on the platform. I made the mistake of bridging to Matic only to find sushi on matic didn’t have FLI or Index tokens. I think the limited liquidity on Sushi Matic makes it the perfect time to move fast and get LPS there so people looking to make cheap swaps for new tokens will be introduced to Index offerings on a short list of tokens.

Not sure if this is relevant to L2s but more to indexed tokens… but I’ve been in BasketDAO discord and they are constantly being arbitraged by a bot. The bot is taking mass BDI tokens and redeeming the underlying assets to arbitrage, thus burning their product and reducing AUM/LP. Just something to be aware of if L2 can increase being arbitraged since lower gas costs

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Thanks, @SilkWallace! Very relevant to L2s, we have seen that happening to BasketDAO. As of now, the Set infrastructure is only on L1, so we most likely are keeping mint/redeem exclusively on L1 for the short to medium term, especially with the lack of sufficient liquidity of the underlying tokens on L2.

1 Like