Polls on Staking, intrinsic productivity and rewards

[overanalyser]

OK,

We have been having some fantastic discussions in a few different threads on capturing intrinsic yield and a few related area, so I thought I would open some polls and we can try and assess interest in different options. This may let deselect some options from further consideration

Intrinsic DPI Productivity w/ $INDEX as Risk Backstop

I think that it’s a great idea and this is definitely something that should be implement at some point when the Index Coop is more mature - But: I’m not sure if this is the right time to do it. Holding $INDEX is already a big bet on the future, and adding another cost of carry without any upside boost could harm Index Coop early supporters even more. To be used as collateral, a token must be valuable and liquid first, Following our last community call, I had the feeling that, finally, we were …

The 2% cash grab

The 2% Cash Grab I believe that an index provider should try to build a reputation for being a dependable custodian of our users assets. They should feel safe knowing that we will not take risks, charge excessive fees nor make frequent changes. We care for a users interests as though they are are own. This includes consideration holders, Liquidity providers, arbitrators and other protocols within DeFi. However, I want to do an experiment. @Richard made an excellent proposal a…

[Ongoing Draft] Current state of discussions around DPI product upgrades

Thanks to the quality of discussion by the community in @overanalyser’s 2% Cash Grab and my earlier DPI as a productive asset post, we now have a clearer picture on the tradeoffs between various upgrades proposed by the community. This post will summarize the current state of discussions and get some further signaling prior to tomorrow’s governance call. [EDITED 10/27 to remove implementing governance as an option and move to a separate post. Meta-governance is not within scope of making DPI pr…

I’m thinking that we are doing an experiment as proof of concept with risk control (not profitability) the primary aim. This would run after the current liquidity mining is complete (ends 6th Dec)

Most votes allow multiple selections. Feel free to add more polls for things I’ve forgotten…

Length and lock ins

Type of experiment

• Fixed duration
• Rolling with time lock on withdraws

Length of fixed period

• No fixed period
• 2 weeks
• 28 days
• 3 months
• 6 months
• 12 months

Length of withdraw lock (for continual implementation)

• 2 days
• 7 days
• 2 weeks
• 4 weeks
• Just do a fixed start and end date

What staking should be allowed

• $DPI
• DPI-ETH PL
• INDEX
• INDEX-ETH LP
• CreamDPI

Level of activity

• Governance (Comp, UNI)
• Non principle risk staking (Kyber / YFI)
• Lending with liquidity risk (using AAVE and Compound vaults)
• Staking with principle risk (stkAAVE)
• Lerveraged farming (deposit governance toke, borrow stable coin and farm, risk of liquidation)

Slashing penalties

Use coop treasury as backstop once staked INDEX has reached maximum

• Yes (use coop treasury)
• No (force losses onto stake DPI income)
• No (force losses onto staked DPI income and possibly collateral)

Slashing to restore lost assets

• INDEX stakers only - upto 100%
• INDEX stakers only - upto 50%
• INDEX stakers only - upto 30%
• INDEX LP providers in addition to INDEX stakers

Slash INDEX in the event of liquidity crunch on DPI treasury

• INDEX stakers only - fixed 100%
• INDEX stakers only - fixed 50%
• INDEX stakers only - fixed 30%
• INDEX LP providers to be slashed in addition to INDEX stakers

Rewards
We have three potential reward streams:

1. INDEX reserves (~6,000,000) - The liquidity mining used 15,000 per day focused on the DPI:ETH LP
2. DPI streaming fees ~$12,000 in October based on ~$15 M AUV
3. Staked DPI intrinsic income (likely to be ~ 2% pa based on quantity staked)

Streaming fees (possibly as DPI?)

• 100% to coop treasury
• 75% coop, 25 Staked INDEX
• 50% coop, 50% Staked INDEX
• 25% coop, 75% Staked INDEX
• 100% Staked INDEX
• Part should goto INDEX:ETH LP
• Part should goto Staked DPI
• Exactly 0.95% pa should goto staked DPI to fully offset the streaming fee

Staked DPI income destination

• 100% DPI stakers
• 75% DPI stakers 25% coop treasury
• 75% DPI stakers 25% INDEX stakers
• 60% DPI stakers, 20% coop treasury, 20% INDEX stakers
• 50% DPI stakers, 25% coop treasury, 25% INDEX stakers
• 40% DPI stakers, 30% coop treasury, 30% INDEX stakers
• 25% DPI stakers, 50% coop, 25% INDEX stakers
• 100% Coop treasury
• 50% coop treasury, 50% INDEX Stakers
• DPI:ETH LP should be included (as part of DPI stakers)
• Other

INDEX rewards for DPI stakers

• Pool of 10,000 per day
• Pool of 5,000 per day
• Pool of 1,000 per day
• Fixed number per DPI / day (0.1 INDEX per DPI day [5k if we have 50K DPI staked ~ 100% APY based on $2 and $75)
• Fixed number per DPI per day (other)
• None

INDEX rewards for DPI:ETH Staked

• Pool of 10,000 per day
• Pool of 5,000 per day
• Pool of 1,000 per day
• Fixed number per DPI / day (0.1 INDEX per DPI day [5k if we have 50K DPI staked ~ 100% APY based on $2 and $75)
• Fixed number per DPI per day (other)
• None

INDEX rewards for DPI:ETH LP (not staked)

• Pool of 10,000 per day
• Pool of 5,000 per day
• Pool of 1,000 per day
• Fixed number per DPI / day (0.1 INDEX per DPI day [5k if we have 50K DPI staked ~ 100% APY based on $2 and $75)
• Fixed number per DPI per day (other)
• None

DPI and DPI:ETH LP stakers should share rewards

• No - separate reward pools
• Yes 1:1 based on DPI involved as this is what will be farmed
• Yes LP’s should get double the DPI stakers (based on DPI) as they are staking twice the collateral and have divergence risk.
• DPI:ETH LP providers should not be included in rewards

INDEX rewards for INDEX staked

• Pool of 1,000 per day
• Pool of 500 per day
• Pool of 100 per day
• Fixed number per DPI / day (0.01 INDEX per INDEX day [365 % pa))
• Fixed number per DPI per day (other) None

INDEX rewards for INDEX:ETH LP (Staked)

• Yes
• Yes, but no need to stake
• No

@DarkForestCapital @richard @Etienne @neozaru @setoshi @Kiba @ everyone

Feel free to post your thoughts before / after voting.

[DarkForestCapital]

Can you explain a little more about the ‘DPI and DPI:ETH LP stakers should share rewards’ question.

It comes after two polls asking how to split rewards for these participants, so I think it’s already covered?

Also great job pulling it all together!

[overanalyser]

Good question, and I’m not sure of the answer…

I think that there is an argument to to incentivise both locking DPI, and the DPI:ETH pool.

If we get DPI:ETH locked for the same duration, then we can farm the corresponding DPI (at something like 1:1 although divergence may mean that the LP token corresponds to less DPI…???).

So, do we treat them separate, and set rewards for each? OF group them together and share the rewards prorate.

Say we get 50 K DPI locked at $80 = $4 M, and 4 M of DPI:ETH LP tokens. We could

1. Have two sets of incentives (2K INDEX for $DPI, and 5K INDEX for the LP + other rewards).
2. Have a single pool with the number of DPI considered equivalent (So 66% of the rewards goto the DPI stakers and 33% to the LP stakers)
3. Have a single pool of rewards, but give LP tokens double weight compared to DPI stakers. They are adding twice the collateral (even if we can’t farm the ETH). So for every $1 of DPI token, you would get the same rewards as $1 of LP.

I’m probably over complicating things.

[Kiba]

There are a lot of moving parts here, once we’ve converged on some scenarios I’m happy to do some systems analysis and loose modeling to see how this would all work out. Even just getting visuals on this instead of words and discrete options would change the conversation a lot.

There are some implicit assumptions in these questions e.g. that we will stake INDEX as a reserve, that paying dividends to INDEX holders is an options vs devoting funds growth, etc. that haven’t been decided yet. Only half these questions are directly related to DPI as a productive asset (term length and rewards to staked DPI) the rest are about a secondary system backing up these operations which we don’t necessarily need. Lets remember that we are relying on Set team to write all these contracts and fund the security audits (unless we want to use INDEX to pay for that but that’s not mentioned here) so let’s be conscientious of the resources we are consuming and not bite off too much when we don’t need to.

[overanalyser]

Hi Kiba,

You make some excellent points.

We can do this without INDEX staking, I see a few benefits:
Its a mechanism to distribute INDEX to the community and rewards long term commitment.
The back stop sends a message that we have skin in the game and are being very careful.
It demonstrates that INDEX has a purpose (which should drive the price a little).

We do need to consider the coding workload. So there would need to be discussions with Set. We can allocate part of the streaming fees / DPI yield to cover costs of development.

[Etienne]

Thanks a lot OA. Really usefull poll. We need to create new incentives asap.

[Kiba]

I agree backstop is a good signal and that should be rewarded with some INDEX since you are putting INDEX at risk.

Locking DPI for 3 months is not a long term commitment, especially when indexes are generally held for multiple years, so shouldn’t receive any INDEX. Paying users to use our product is going to get us nowhere fast and deplete all our resources. I see the LP rewards we have now as an initial distribution mechanism with an easy entry but obviously just as unsustainable and mercurial as all other mining programs.

By the time that program ends it will have been only 2 months and 40% of INDEX total supply will be distributed. Spending tokens for the sake of spending them is worse than being slow and giving them to the right people to reward things such as sales, development, and strategy. I don’t see the race to spend when almost half is already in the hands of community. If you look at industry leaders like ChainLink or Ethereum Foundation they spend their treasuries on R&D, product development, branding, etc. (ok technically ChainLink subsidizes fees but that’s paying oracles not the data consumers who also subsidize fees). This is literally zero-sum if not negative EV to pay users to hold DPI because we lose as much in INDEX as we gain in streaming fees.

We’ve already earmarked 1% of INDEX for the affiliate program, theres another ~0.15% of all INDEX in the Treasury Committee ready to hand out this month to anyone that wants it. These all go to high value activities that we can’t incentivize in other way and anyone is free to claim if they help build Index Coop. But buying/staking DPI you are earning extra yield for doing nothing and get an amazing service from DeFi Pulse who is picking tokens for you. If that’s not enough reason to get people to do use our products then we are doing something wrong.

[s7rukk]

1. LPs should be rewarded
2. No need for $index or $DPI staking
3. Distribute $Index as wide as possible to build a community

[overanalyser]

OK, I’ve had another look at the poll and modified a few of my votes.

I would recommend that everyone has another look and checks that they are happy with their votes.

@DarkForestCapital @Kiba @Etienne @s7rukk @Sebastien @mojo @abons @jiecut @downtown @neozaru

Oh, and I apologise for screwing up a couple of the questions, but I think we can see some consensus.

[neozaru]

I updated some of my votes, so they reflect more what I’d like to see short-medium term, mainly on a fixed duration window because it sounds easier to implement and thus better as a first experimentation.
For votes about amounts or percentages, I often vote for multiple values to try to show where my preference is heading too, but most of the time without conviction about a specific given value.

[setoshi]

To add a little color to the intrinsic productivity conversation, @bweick did a quick analysis of the yields from the underlying. As of now, it looks like SNX makes up 75%+ of the yield generated and is the one that moves the needle the most (as of now). Obviously, SNX is the most complex as it requires sUSD to be drawn and staking rewards are delivered after 1 year.

That said, when we don’t know the $INDEX price and the amount of DPI staked, I think a more dynamic rewards system that is updated more frequently based on target parameters. There’ll be some thoughts that comes out soon about this.

[overanalyser]

Thanks @setoshi and @bweick

I must admit that I’ve never got my head around SNX staking. What little I’ve had was just parked in AAVE until recently (I’ve since put it into xSNXa, but I don’t think xToken have the volume or track history to consider using them for moment]

If we put SNX on AAVE it looks like a drop from 6.6% to 0.5% so a total yield of ~2.3% pa. We cover the streaming fee and a little extra for DPI /INDEX stakers / coop treasury (TBC )

Are the interest number spot or averaged over time (I’ve not found a good way to average them…)?

[Kiba]

A really funny thing we can do with SNX staking is we have to mint sUSD but instead of keeping it as sUSD and more than likely increasing our debt in relation to the total synth pool, we can put it into sDEFI so DPI will in part also contain sDEFI

[neozaru]

Interesting idea. This way, we are double-exposed on DeFi though, no ? And if DeFi indexes go up with SNX lagging behind, there could be some undercollateralization problems.

I’d be curious to know what collateral policy could $DPI collateral have on MakerDAO.
If 4% stability fee and 175% liq ratio (same parameters as for YFI), it is still more interesting to put underlying tokens on lending platforms instead.
If 2% stability fee and 175% liq ratio, that becomes interesting as we’d fall below the stability fee average, hence borrowing DAI and lending them would be profitable maybe (1-3%), hence a $DPI borrowable on Aave would produce proportional lending rates (as people would borrow DPI from Aave and do the hard work of maintaining the collateralization). I wonder what this final lending rate would be. Greater than 1.22% or lower ?

[Kiba]

if sDEFI goes up and SNX goes down we can sell sDEFI back to sUSD and burn it to bring our c-ratio back up, the issue is if both fall in terms of USD.

In my opinion any yield bearing strategies that aren’t dead simple like YFI staking should all be delegated to yearn to handle, they have the systems and talent setup to do these things 10x better than we ever could. That goes with any Maker strategies as well

[downtown]

I think an interesting idea if we implement more productivity in DPI and one that could possibly save DPI in a worst-case scenario (for example a formal prosecution of tether) is a lockup for DPI. This way the COOP knows how much capital they can safely use in other platforms like Maker or SNX.

[reganbozman]

yep there are discussions on incentivizing locking/staking DPI. agreed it is better for us to have users committed for longer durations