Proposed: IIP-95: Beta Finance - DPI, MVI, BED & ETH2x-FLI Incentivized Lending & Borrowing

I’ve just got off a call with Allen at Beta Finance. Unfortunately we won’t be able to simply send the INDEX to them, since they have no capability to distribute those INDEX rewards alongside their own. Distributing INDEX to Beta Finance users would be an engineering lift on our side, probably a decent one too since we’d have to do all the tracking of rewards. I can get more precise around level of effort but my hunch is it would be more involved than our previous staking contracts.

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Hi @edwardk,

Thanks for sharing the details here. I shall amend the forum post with some language to reflect what was discussed yesterday. I think we can then move the IIP forward to Snapshot and if passed, proceed to schedule in the work.

Hi @mel.eth, @sixtykeys,

The proposal has been reworked to highlight the engineering lift that needs to be performed in order to follow through with this initiative.

Can we schedule a snapshot vote for Monday 25th October 2021.

Hi @Matthew_Graham -

Pending no further edits this proposal will be scheduled for a snapshot vote commencing on Monday, 25 October 2021.

cc: @sixtykeys

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It remains very unclear how much ENG work is required for this? The engineering lift hasn’t actually been highlighted - it has just been called out that there is lift required. How is the snapshot vote supposed to determine if we should proceed taking on ENG lift that we don’t even know what it is? It is even more difficult to determine if this should be a priority without more confirmation from EWG, in my opinion.

For example, a couple open questions would be: are there specific timelines we would have to meet in order to launch with Beta - will we meet those? And will this take ENG time away from getting PAY out of the door? What other efforts will it have to replace?

Not sure if you have had an opportunity to scope this out, yet @edwardk ?

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PAY is on HOLD as far as I know.
With YHI failing to pas DG2, it is possible some engineering workload that could have been planned in for YHI is no longer needed. Furthermore, PAY is not yet an Index Coop product so investing resources there is a risk Index Coop needs to consider.

It is not fully clear the extent and who shall perform the developer lift. This is true and the guidance offered is as highlighted below:

Note with IIP-96: MVI Liquidity Migration to Uniswap v3 with Staking - Passing then a decent chunk of the associated cost with IIP-95 is already now a committed spend by Index Coop.

I have submitted a request to EWG to continue to scope out the developer lift and I am still exploring ways with Beta Finance to see what can be done to minimise the lift. Note: Beta Finance is working on a Uniswap V3 staking contract, perhaps that doesn’t have the fuzzy finish like the contract we used on DPI:ETH migration. That could be a real positive collaboration and sharing of knowledge if Beta Finance solved that issue.

There is no specific timeline, this is down to the relationship and is flexible.

I think we are overlooking a lot of the benefits here and overly focusing on the financial and developer lift aspect. It is really good that our governance process enables discussion like this and that all INDEX holders have the ability to express their view via Snapshot.

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Hi @Matthew_Graham, regarding ETH2x-FLI being used as collateral - Are we sure BETA finance would let users use that as collateral? FLI being an already leveraged product, I think even RARI has kept the LTV at 0%. This might be the reason for the meagre TVL of $5K on RARI.
But if BETA lets us borrow against the FLI, we might be able to break our existing 2x parameter constrains, maybe also do a 3x. @afromac @allan.g @overanalyser may agree.
If not, I think there’s not much of an upside to incentivize FLI on lending platforms, as this is an aggressively traded product. (or at least meant to be).
Screen Shot 2021-10-23 at 4.25.50 PM

Hi @sidhemraj,

Please note, I believe it is Index Coop that controls the parameters on the Rari Fuse Pool 19.

BED is a great asset to be used as collateral. It is less volatile than DPI and DPI is collateral on Aave V2. The limitations here are around liquidity and oracle price feed. As BED grows, liquidity will improve which then enables liquidators to efficiently perform their role on the lending platforms. The oracle price feed can be upgraded to Chainlink in time which is the ideal scenario. Until then a Uniswap V3 price feed will suffice and the greater the depth on Uniswap V3, the safer the price feed is.

With ETH2x-FLI, Beta Finance is particularly excited about this listing. Shorting ETH2x-FLI is 2x leverage to the downside, this is something we don’t offer atm. To get the liquidity to borrow, first lenders must deposit. The incentives may offset some of all of the price decay characteristic in ETH2x-FLI product design. So depositing on Beta Finance would be better than simply holding passively. Do note 1/4 of the spend is on ETH2x-FLI, and yes, this is somewhat an experiment. Relative to some of our other spends, the ask here is small.

Screenshot 2021-10-23 at 12.14.37

The newly added requirement of engineering work feels like a significant enough change to warrant more discussion before taking this to a vote.

I for one would like to explore alternatives that are simpler to execute while still achieving our goals. Could we simply pay Beta Finance to add more BETA rewards to the pools and then call attention to the bonus rewards provided by Index Coop? This would cut the engineering effort on our side to zero and probably speed up the launch by a few weeks or a month.

I think @Matthew_Graham will acknowledge that the above description means we’ll figure out the “How” after the vote is held. This is not the precedent I want for how we vote on new engineering work. It opens the door to significant execution risk and unhappy stakeholders.

Not yet. It might take a week to scope because the solution is still open-ended and we’ll need input from Beta Finance.

Let me try to walk through what I mean by open-ended. My current understanding is that we’d have to track individual users’ INDEX rewards based on event logs that Beta Finance’s contracts emit whenever a user deposits into (or borrows from) their smart contracts. This is more like how airdrops are calculated vs. a typical staking contract. In a staking contract the rewards accumulate in real-time and can be claimed on demand. In an airdrop, there’s usually only one chance to claim. Are we okay with only letting users claim their INDEX once, at the end of the reward period?

This is a pretty fair representation of where we are with product-driven workload. We’ve been doing some Intrinsic Productivity smart contract development in advance of YHI and PAY with the thinking that it very likely will be used in a future product. We’re also doing deep dives into the protocols used by PAY to gain more confidence in technical feasibility, which I think is prudent before we go to DG2 with it. There’s also work to be done to support FLI products on Polygon, as well as tools for liquidity analytics.

Whether these things are a better use of engineering time than taking on the work in this proposal is certainly debatable! Before we attempt to settle that debate with a token-weighted vote, I’d like us to consider the alternative I mentioned above and allow more time to define the implementation.

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I think that the Eng lift is a significant issue, we would be sending time writing a custom contract that has a 1-time use for use (but possibly aids Beta Finance in integrating other projects).

We could ask Beta Finance to do the Eng lift, however, that may not be a high priority (We are still waiting for Sushiswap to roll out the INDEX +SUSHI farm on DPI on polygon 2 months after IIP-62 passed)

A simpler implementation would be to sell the INDEX for the BETA token and then let BETA finance implement a standard rewards contract.

  • Simpler to implement.
  • Effectively a market sale (/partial sale) of $100,000 INDEX as opposed to a slow release of INDEX as users claim.

As one of the major justifications for IIP-96 was to maintain liquidity in the face of MVI demanded from the Beta finance vault, then we have justification to delay the LM / adjust the rewards once we have a clearer picture on this proposal.


One additional comment.

At 1% INDEX rewards, the vault becomes good for locking up INDEX over time, however, it’s not a great deal for smaller holders.

A $20,000 DPI position in the vault for 12 weeks @ 1% would yield $46 of INDEX (and $460 $BETA)- barely enough INDEX to cover the gas to sell the INDEX (unless you already have INDEX in that wallet). If you leverage up, you take more risk, and pay more gas.

Basically, on L1, it’s going to be a Whale / Dolphin game (like most things).

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We also have Cream Finance and Rari Capital that can list MVI with a good Uniswap price feed. True to your point, Beta Finance is the more immediate need as Beta is offering an incentivised liquidity program to attract TVL.

This is definitely a valid point and there are a number of ways of going about this. IC can bounty this work out, so could Beta. I have a few friends outside of IC that could offer the dev lift. We could transfer Beta Finance INDEX tokens and think of it as like a payment for BETA incentives across our products. Then there is either IC or Beta doing it in-house as well. So, there are a few options we can pursue and there are a few conversations going on around this.

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Noting that @Matthew_Graham has cancelled the call for a vote. The IIP number (IIP-95) remains assigned; please re-request a vote when appropriate.

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Acknowledging that this isn’t going to vote soon but just wanted to put this out there so it is for everyone to evaluate.

There has been some community outrage this week around BETA finance due to their recent airdrop/rewards structure, and their mis-use of the word ‘sizable’.

An example of a dissatisfied user -

BETA finances Twitter Apology

It seems the project wasn’t 100% transparent in their distribution of rewards, but it is possible that it might just be a result of a widespread misunderstanding.

Would it be possible for us to get a commitment on the NUMBER of BETA tokens they would distribute to our depositors, at least a minimum supply? Instead of a just putting out an expected APY? It only seems fair because we will be committing an INDEX token amount from DAY 1.

Thoughts? @Matthew_Graham @overanalyser @jdcook @anthonyb.eth

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Hi @sidhemraj,

We are working on something and will share it here soon. It intends to address the point mentioned below.

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Hi All,

I am resurfacing this proposal which has been reworked to eliminate the Index Coop developer lift.

The key changes are summarised below:

  • INDEX & BETA incentives are replaced with only BETA incentives
  • Index Coop will transfer $105,770 in BETA to Beta Finance from the Operations Account
  • Operations Account will acquire $105,770 of BETA on market by swapping ETH for BETA
  • Initial launch TVL figure has been revised from $10M to $5M TVL, detail here.
  • Target $20M TVL figure over a 3 month duration remains un-changed
  • $105,770 spend remains un-changed

We do intend to launch these lending / borrowing pools with incentives the week commencing 22nd November 2021. With this target date in mind, we would like to proceed to snapshot on the 15th November 2021. Apologies for the short discussion timeline, I hope it is sufficient given the prior discussion’s feedback being included in the proposal.

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Hi everyone,

Apologies for the delay, I have been out sick recently. My name is Allen and I’m part of the team at Beta Finance. Thank you @Matthew_Graham for initiating this partnership proposal between Index Coop and Beta Finance to list DPI, MVI, BED & ETH2x-FLI.

We’re eager to move forward with this partnership, and I’m here to confirm and provide more clarification on the process and timelines based on the specifications mentioned previously:

  1. Why Beta Finance?
  2. Joint liquidity mining incentives + timeline
  3. Listing process for DPI, MVI, BED & ETH2x-FLI tokens
  4. Timeline

Why Beta Finance?

Beta Finance is focused on bringing greater capital efficiency to the long tail of assets that exist on Ethereum right now, and giving traders the ability to hedge their positions by short selling. Many tokens are unable to be listed on money market protocols due to their riskiness and volatility, while Beta Finance enables anyone to list a token immediately and automatically through its permissionless listing feature.

We are excited that Index Coop is interested in listing their index tokens, DPI, MVI, BED & ETH2x-FLI, on Beta Finance. These index tokens will not be whitelisted as collateral as a risk precaution, but will be re-evaluated when we look towards listing new collateral. This is an opportunity for Beta Finance to help enable holders of these tokens to find greater capital efficiency by enabling them to earn additional yield on their holdings, but also to give investors the ability to hedge their holdings.

Through this partnership, we will fast track DPI and the permissionlessly created markets to be shown directly on the main “Markets” page of our DApp.

Our protocol has been audited by OpenZeppelin, PeckShield, and Trail of Bits, and the protocol is not susceptible to the recent exploits that have affected other lending protocols.

Joint liquidity mining incentives

We both aim to achieve a $20MM TVL across the four tokens onto Beta Finance, and our team is excited to distribute joint liquidity mining incentives with Index Coop, and we see the $105,770 proposed from Index’s side as a reasonable amount to contribute.

As mentioned by @edkim earlier, to streamline the process of distributing rewards we agree that the best way would be for Index to convert the principal amount offered, $105,770, to BETA tokens and send those tokens over to our wallet for distribution. There is currently a BETA/ETH pool available on Uniswap V3 where Index is able to convert to the BETA tokens, or tokens are purchasable through Binance.

From previous pool growth, we can see that pools initially start at a target amount and scale over time. So, we would like to set an initial target pool size of $5M for the first 2 weeks, and adjust from there based on the capital with the ideal of having $20M in TVL across the pools.

For the starting reward distribution, instead of hypothetical numbers for the expected TVL for lending and borrowing of Index tokens, we examined existing data for the pools on Beta Finance and compare that with the Index tokens to be listed.

We base the framework off of:

  1. Examining the proportion of deposits in Beta as a fraction of Uniswap TVL
  2. Examining the proportion of deposits in Beta as a fraction of the token’s circulating MCAP
  3. Examining the proportional borrowing activity on Beta Finance right now

Spreadsheet: https://docs.google.com/spreadsheets/d/1QMe6WxOaq7On4Rxe9wRiO2WRSFcrQd5ud5UEpxk0AAA/edit?usp=sharing

From the above spreadsheet, we estimate that the total TVL on Beta Finance will be ~$5MM USD initially, broken down as roughly:

  • DPI - $3.25MM deposits and $1.28MM borrowed
  • MVI - $425K deposits and $167K borrowed
  • BED - $230K deposits and $90K borrowed
  • ETH2x-FLI - $1MM deposits and $425K borrowed

We make 3 main assumptions to arrive at these numbers for the starting expected deposit TVL of ~$5MM:

  1. Deposits in Beta Finance will be roughly ~10% of the TVL number on Uniswap (from examining NFD)
  2. To account for marketing and existing token LP incentives, we apply a 1.5X multiplier to the lending deposits across all pools, followed by a 0.25X multiplier for just ETH2x-FLI due to high APR, >30%, from Uniswap V3 LP.
  3. We assume markets will borrow at ~34%, based on the median borrow on Beta across altcoin pools.

Thus, we’ll start with the above targets mentioned and distribute $BETA tokens at targets of 10% APR and 20% APR. This will be a total of 18,000 $BETA distributed across the Index pools for the first two weeks, with adjustments to the reward distribution made every two weeks based off of capital inflow.

With Index’s contribution for targeting the $20M valuation, it’s expected the incentives contributed by Index are 1-4% to the joint program, since we target $5M initially with growth to $20M, and Index markets will be eligible for the BETA incentivizes we use for our verified markets, where we currently target 10% for lenders and 20% for borrowers on altcoins.

Listing process for DPI, MVI, BED & ETH2x-FLI tokens

Since Chainlink and Band Protocol oracles exist for DPI, Beta Finance will directly list DPI using these oracles. For MVI, BED, and ETH2x-FLI since Chainlink and Band Protocol oracles do not exist for these tokens, they will be listed permissionlessly.

We request that Index Coop initialize the MVI, BED, and ETH2x-FLI markets by following the steps in the DApp. A pre-requisite for listing is that a WETH pair for the token must exist, which all three assets satisfy. There will then be 3 steps to list the token permissionlessly:

  1. Enter the address of the token into the “Search” bar on Beta Finance and click “Create Asset”
  2. Initialize the cardinality of the token’s pool to 150, representing a ~30 minute TWAT for the token.
  3. Wait ~30 minutes for the slots to initialize for the TWAT, and initialize the market.

Once this is completed, the Beta Finance team will onboard these assets onto our main page.

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Hi @mel.eth, @sixtykeys, @Mringz,

Can we please schedule a Snapshot vote for Monday 15th November 2021.

Also, as for the time of day the voting starts, can we get something 8am BST time. That way voting should finished Thursday morning and we can start executing the BETA purchase during business hours UK time.

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Hi @Matthew_Graham,

Confirming that IIP No. 95 will remain assigned and will be queued on snapshot for vote, starting on 15 November 2021 at 7:00 AM UTC and concluding on 18 November 2021 at 7:00 AM UTC.

cc @sixtykeys

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IIP-95 is queued on snapshot. Voting will go live on 15 November, 2021 at 07:00 UTC and remain open for 72 hours until 18 November 2021 at 07:00 UTC.

Please vote HERE.

cc: @Matthew_Graham @sixtykeys

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The result of voting on IIP-95 is: PASS with 311.49k INDEX voting FOR and 20.3k INDEX voting AGAINST. Snapshot record can be found here.

image

For tracking purposes, please update this space with an execution timeline and status updates as execution progresses and is completed. Thank you for your cooperation.

Author: @Matthew_Graham
GovOps cc: @sixtykeys @Lavi @Mringz

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