[DRAFT] IIP 4: Sigma Pilot

Governance
#1

IIP 4: Sigma Pilot

Authors: Dillon Kellar, Lito Coen

In the past weeks, we have received many suggestions from within our community and on social media for new indices and other pool management strategies. Many of these are good candidates for the core index pools, which track well-defined market sectors on Ethereum, while others are more speculative, have less well defined criteria, involve new portfolio structures or methodologies, or track smaller cap tokens which are too risky for the current indexing strategy.

We want to enable new use-cases for the Indexed protocol and experiment with new management strategies, but it is important that we maintain a high degree of objectivity in the management of our core indices and that they be subject to minimal risk.

Rather than wait for further development of the protocol that will enable greater public access to deployment of pools or more modular portfolio structures, we believe a new program should be created to facilitate involvement from other communities and increase the pace of innovation for the Indexed protocol.

Sigma

Sigma is a new program aimed at creating innovative index products on our platform and bringing liquidity to these indices. Sigma will allow investors, financial experts and DeFi communities to collaborate with Indexed to develop new indices and other passive portfolios with custom criteria and methodologies.

A pilot program will run from February to May with an allocation of 600,000 NDX from the Indexed treasury. These tokens will be used to incentivize liquidity on the new pools so that we can accurately gauge their performance and encourage new people to use the platform.

Applications

During the sigma pilot program, a section of the forum will be dedicated to new applications. Anyone will be able to submit a request here for a set of tokens to track, an index with custom methodology, or a different kind of automated portfolio manager altogether.

Applications must include:

  1. The criteria for inclusion if the pool will track a general market sector, or the list of tokens which will be included if not.

  2. The methodology to be used, if it is not an index pool with capitalization-root-weighting.

  3. The portfolio structure to be used, if it will not use the index pool contract.

A 5 member committee will manage the Sigma program, with 2 members appointed by the core team and 3 members appointed through NDX governance. This committee will be responsible for setting application rules, judging applications and deploying approved pools. NDX holders will retain the ability to replace the committee through a governance proposal.

Applications will be judged using several factors, including but not limited to:

  • Quality of the proposal, including clarity of the criteria and methodology.
  • Interest level of the Indexed community.
  • Amount of liquidity that will be committed to initialize the pool.
  • Feasibility of implementing the methodology, if custom.

New Pools

Pools which use a methodology different from the current pools will be supported by new keeper jobs where necessary so that they remain autonomous.

For pools which track market sectors rather than specific tokens, the committee will be responsible for submitting updates to the tokens list.

For pools which use the IndexPool contract or otherwise act as AMMs, if small-cap tokens are allowed by the criteria they will be required to support circuit breakers, which will be detailed in an upcoming proposal.

Pools in the Sigma program will have a 0.5% exit fee, which will be charged whenever the pools’ LP tokens are burned. These fees will go to the Indexed treasury to help offset the costs incurred from liquidity mining and keeper rewards.

For pools with custom methodology or portfolio structures, a code audit must be published prior to deployment.

Rewards

The committee will determine rewards based on criteria such as liquidity committed by the applicants, the interest of the Indexed community in the new pool and the uniqueness of the pool relative to other DeFi projects and existing pools from Indexed. When rewards are assigned, a seven day timelock will begin prior to releasing the NDX. Indexed governance will have the ability to veto the allocation through a standard governance proposal.

Pools will be incentivized through liquidity mining of the pool tokens and LP tokens for their market pairs. All rewards allocated will be distributed over a 90 day period.

2 Likes
Second Sigma Committee: Nominations Thread
#2

As long as the DAO can update the committee then seems to be a good way to not need to handle multiple pool proposals as full on chain votes while still keeping control by the DAO. Looks good.

#3

Great idea. Will definitely help grow the ecosystem.

#4

I wonder if it would be possible to have some sort of tail emission of the liquidity rewards that extends past the 90 day period, and is contigent on continued liquidity providing. In theory this would reduce the amount of people just looking to farm the NDX by providing liquidity and then removing all liquidity once the farming phase is over, by ensuring that liquidity is continued to be provided even after the farming phase is over.

Granted this might be a “hot topic” and not something a lot of people like but I figured I would bring it up anyways.

EDIT:

One question I have actually

with 2 members appointed by the core team and 3 members appointed through NDX governance.

Does this means 2 members from core team will be part of the committee, or that the core team will appoint 2 members that may or may not be part of the core team?

1 Like
#5

That’s an interesting idea. Maybe you could lock the tokens for a set amount of time? I’ll need to think some more about that. I think the rewards distribution should also be edited to support more flexible models than 50/50 pool/uni LP.

The latter, but in practice I suspect it will always be 2 members of the team.

#6

The latter, but in practice I suspect it will always be 2 members of the team.

Makes sense, and I would say its best to have the 2 members
select be core team members.

That’s an interesting idea. Maybe you could lock the tokens for a set amount of time? I’ll need to think some more about that. I think the rewards distribution should also be edited to support more flexible models than 50/50 pool/uni LP.

Token locking could work too, and I agree flexible reward distribution would be a good thing to have.

#7

Talked to Dillon about rewards going to stake pool from a drip contract that pays .01x balance every 1w. So never actually runs out. Though dunno how people would feel about that

#8

can we make a boost for this pools? stake or lock ndx=higher apy at mining

#9

We want people voting with their NDX, not locking it up :slight_smile:

#10

could take the veCRV approach, whereby they effectively become the same thing?

#11

Its not a problem. We can vote with locked tokens. Or boost without locking=)

#12

I’d prefer to just reward people for either voting or delegating tokens to someone who votes on proposals. I think this would be a good way to incentivize participation, but I don’t see much advantage to boosting rewards for locking NDX or staking it, even if you can still vote with them.

Can you explain why that’d be advantageous, or were you just suggesting a way it could be done if we wanted to boost rewards for locking NDX?

#13

It is usecase for token. I think voting only is not enough justification to hold ndx. We need something to do with token.
I think people will like this idea

#15

I like really like the idea of rewarding some NDX to voting or delegating tokens. Regarding locking NDX. For rewards why don’t we give NDX rewards to those who vote, but they also have to lock. That takes the tokens out of circulation and allows participants to demonstrate a commitment to the ecosystem.

Another idea is we lock a certain % of the NDX token in order to create a Uniswap LP. That way tokens not used for voting are taken out of circulation right away and put to good use to improve the liquidity of NDX.

#16