Just to add my two sats.
I’m still all for the $DPI staking, seems like a no brainer. I don’t agree with staking $index if it’s only going to be used as a backstop and stakers are rewarded with more index tokens.
If you look at what Yearn have gone through recently and their proposed changes for V2 vaults, they are working to align incentives across contributors, strategists/devs and token holders/governance. One way they are doing this is by changing the whole fee/reward system to use YFI rather than yUSD. It aligns all participants toward making sure the protocol is successful without taking excessive risk, as all rewards will be based on YFI’s price. The added bonus is a small but constant buy pressure on the token.
If you compare that to a token like mStable’s MTA, where it acts as a backstop for stablecoins de-pegging and stakers are rewarded with more of the token, there is not a great deal of incentive to do anything other than farm and dump, this has destroyed the price and thus incentive creating a doom loop for the token.
This relates to Index in that, we can have a massive treasury of Index which become useless if the price of the token drops drastically. So while we haven’t been focused on the price until now, it needs to be propped up to make our index tokens useful, to encourage market buyers, to support token holders who want to govern and to make contributors rewards worthwhile.
So I’d suggest if we do $Index staking, there is a three pronged approach to where the value generated by Index Coop goes:
- A portion of streaming fees from DPI (and future products) paid to stakers, perhaps in the product token to begin with (so DPI) which should keep it in the ecosystem and provides small but steady yield
- The remainder of streaming fees sent to the treasury which increases the value of the protocol as a whole (used for contributor rewards, future incentives, other overheads)
- Yield in the form of $index rewarded to stakers for taking on risk as a backstop
Just proposing $index become a risk backstop and rewarding stakers with more $index is a recipe for destroying token price and totally changes the dynamic of the protocol. This has a knock on effect of reducing the value of any treasury we do build up, and could stunt index coop’s growth. I will take a look at how AAVE have approached it as they seem to be fairly successful, just think we should think carefully before changing a fundamental tenet of the governance token.