Intrinsic DPI Productivity w/ $INDEX as Risk Backstop

Product Products
21

That makes sense. Part of the streaming fee should be used to provide returns for INDEX holders / stakers. And by mixing the income streams for INDEX stakers / coop treasury we demonstrate multiple income streams for each.

I see three sources of value:

  1. Strategic reserve (INDEX),
  2. Staked $DPI intrinsic income from farming
  3. Streaming fees

And a few worthwhile places to apply it:

  1. $DPI stakers (I would suggest $INDEX and $PDI from intrinsic income)
  2. DPI-ETH liquidity providers (I would suggest $INDEX and $PDI from intrinsic income)
  3. INDEX stakers (I would suggest, $INDEX, $DPI from intrinsic income, and $DPI from steaming fees)
  4. Coop treasury (I would suggest $DPI from intrinsic income, and $DPI from steaming fees)
  5. Coop operational expenses (community rewards, etc) - I would suggest INDEX for community rewards and sale of DPI from treasury for other expenses.

We could also consider INDEX : ETH liquidity providers. This could be done by incentivising a pool via INDEX, or but the coop treasury seeding a pool with INDEX and ETH (using streamed DPI to buy ETH?).

The fun part is deciding on the splits


1 Like
22

As we get into the weeds I think we’re getting what’s good for DPI as a product and good for Index as a platform mixed together. I know it’s hard to differentiate sometimes but I think it has a big impact on what reward structures should be. E.g. $INDEX as a backstop is platform level and should be rewarded with $INDEX where as staking $DPI to earn yields is product level and should probably only be earning more $DPI and not $INDEX.

In general I think we are on the right track. I don’t agree with $INDEX strategic reserve but I’m not opposed to it either. I do think longer lockups are better since we have a longterm product but we can do conviction voting type setup where you can choose length of lockup and get proportionately more rewards.

It would be interesting to layer governance into this backstop mechanism e.g. you stake specifically to $DPI not all indexes at once and receive $dpiINDEX and only $dpiINDEX can vote on $DPI proposals and also any platform level INDEX. This somewhat reduces noise in governance like if we need to vote on DeFi meta-governance votes, somewhat that isn’t staked to $DPI (and therefore probably isn’t invested/knowledgeable in DeFi) can’t vote on what we do.

23

This is exactly what I meant by dpiINDEX

24

I am intrigued by the ideas mentioned in this topic from everyone here. However, I think it would be beneficial if we create two versions of DPI: conservativeDPI (like the DPI of today) and another agressiveDPI (the productive one being discussed). My reasoning behind this idea are two-folds:

  • Alpha-Investors (conservatives) who are prudent about risk and are comfortable about relatively low performance with low volatility would be more comfortable with idle basket of defi tokens. They are the ones who want to minimize the risk and are okay with higher opportunity cost. Because sometimes, you only want some exposure to the front-line of financial revolution, not being in the trenches with the lovely chads and degensquad. :laughing: For this type of investors, a product like DPI (of today) is suitable. Perhaps, we can focus with more decentralization and trust minimization for this conservativeDPI.
  • Beta-Investors (aggressives) who are comfortable with the inherent risks of smart contracts, open source protocols and Ethereum in general, want to maximize their exposure and minimize their opportunity cost. A product like agressiveDPI that seeks to maximize the possible gains of the underlying assets would be suitable for the crypto-natives. For this product, we can always try to incorporate more innovations from the community.

I believe having two types of DPI would be beneficial for everyone and will greatly increase potential users of DPI and consequently, Index community. I understand there will be some problem with liquidity, assuming total AUM does not increase in the short time-frame, but as an Eth-optimist, I would argue that this won’t be the case.

Cheers!

Edit: alpha and beta here refers to the financial terms related to risk and volatility. Not referring to popular internet terms related to pack-leader or follower.

2 Likes
25

I think intrinsic productivity is key to DPI being successful.

One other benefit is that it makes it much more attractive to being used as collateral on MakerDAO.

1 Like
26

A lot this “intrinsic productivity” stuff kicked off with a similar proposal:

1 Like
27

It’s all trying get to the same goal. Getting some income out of the underlying tokens without breaking anything .

My opinion has been changing as we have all discussed different options. I think that the lockup and farm is one of the best methods to approach it. (I don’t know if any better ones yet)

28

There is also the option of re-insuring the DAO exposure to temporary illiquidity due to farming using re-insurance from an insurance capital pool like Nexus Mutual. The Index DAO could have a small safety pool, and lay off the bigger event risk on the re-insurer. This removes the Treasury pool ‘overhang’ pushing down the price of the Index token as it is seen as likely to be dumped if the intrinsic productivity strategies sail too close to the wind.

1 Like