what if we implement a streaming fee or a withdrawal fee, but also create fee reductions based on certain thresholds of NDX staked or you can pay the withdrawal fee with NDX (similar to how BNB is used at binance)?
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Uniswap charges a fee to purchase CC10 and DEFI5, Index should charge the same fee to mint it.
This would generate revenue for NDX and actually improve the arbitrage equilibrium since it’s now the same cost to mint or swap. With no fee on minting, presumably minting would always run a small premium over trading, this premium being equivalent to the Uniswap fee.
I think charging a fee for minting CC10, DEFI5 or any indice is hugely counterproductive. The only thing this would do (imo) is prevent people from participating. Perhaps charging a very small exit fee would make sense, but charging a fee for minting seems like a bad idea.
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The idea of the fee is that it would be the same as Uni/Sushi charge to buy the token and as we know, people pay that fee 1000s of times a day.
What’s the thought process behind thinking people wouldn’t pay that same fee to mint as they already pay to swap? If the idea is to drive more people to mint than buy on Uniswap, maybe the mint fee could be 1/2 Uniswap’s fee.
Edit:
I would add that I believe it’s better to leave the indices fee-less for now to grow the ecosystem and later start adding fees to support the economic security, rather than suffocate the protocol early with fees. I hadn’t mentioned the timing aspect previously.
The fee you speak of for Uni/Sushi is the swap fee for trades on the platform, something which Indexed already does.
If I understand you correctly you’re talking about adding an additional fee ontop of the swap fee, which is a fee specifically for minting. Gas costs are already very expensive for minting, and adding an extra cost ontop of that raises the barrier to entry, as now users have to determine whether the gas cost + mint fee + swap fee is worth it, as opposed to gas cost + swap fee.
A minting fee also makes DCA (Dollar Cost Averaging) much more expensive, as each time you wish to average in, you must pay an extra fee. This would disincentivize frequent smaller purchases in favour of infrequent larger purchases.
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Why dont we create our NDX based AMM like Uniswap, but exclusively for indices listed on indexed.finance. The swap fee could be given to NDX staker, it will be counted as dividend for NDX staker.
Just wanted to add my thoughts that while I think longer term adding value to NDX would be great, I would rather prioritize a handful more index options and TVL growth prior to this being a priority.
I think the exit fee is not a great solution and think a yearly fee or streaming fee would be better (although Dillon mentioned there are some technical feasibility challenges with that at the moment) Maybe this is something that is acknowledged would be good down the road but not something that is a focus area until we see more growth.
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The single asset swap fee rate 2.5% is a magic number, so can we send the industry standard 0.3% to NDX stakers? In that case, the other 2.2% is sent to the index pool, and I think the magic number 2.5 and 2.2 is not so much difference for the index pool, but the 0.3% for NDX stakers is very sensitive to $NDX value, that is the cash flow for the protocol.
BTW, as NDX rewards approach to 0, index token liquidity (say DEFI5-ETH) will probably decrease, so more ppl will enter and exit through minting & burning, which will lead to a lot swap fee for the pool to cancel the potential IL and even more than that.
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Agree minting fee is hurting adoption. Small exit fee isn’t a bad idea, but these are index products that people buy to hold for on a long time frame. So not much potential revenue anyway?
Just putting this out there, but I see a lot of people on here talking about various ways to game the economics around the NDX token for it to accrue value. I think what we and the team the should on is what will make NDX’s products the best products in this space. The token won’t accrue value over the long-run just because it has the best tokeneconomics. We need to figure out ways to get more AUM in the door. I don’t know if that’s through marketing, offering better products, lower fees so that they are competitive with competitors, etc. Once we have NDX products as the go to index products in this space, as long as we don’t have a terrible token model, the value of the token will sort itself out. Just my 2 cents.
While I agree that focusing on making the best products is paramount, I also feel it’s important to provide NDX holders with some type of monetary compensation related to the success of indexes. I’d argue that the stronger we can link the success of the indexes to NDX, the better off we’ll be.
As it stands, NDX holders are only loosely incentivized to improve indexes through the promise of “success of indexes means NDX goes up long term”, but that feels far from guaranteed.
As for potential solutions: Taking a small percentage of the swap fee, as long as we feel that swap fees scale with index TVL, makes sense to more closely link NDX with index success.
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I like this one… Perhaps swap fees for the indices go to buyback NDX and then burn it?
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Was talking about this actually earlier today in the telegram. I think this is a great idea. Even somewhere between what Sushi is doing with their fee structure and Uni where they have the switch to be able to migrate to a profit sharing model.
That being said I think that it certainly does make sense to prioritize the rewards going into the LP’s however I would like of course see the NDX token scale somewhat tied to the overall platform’s success.
What if we require each index to be minted in the future, include 5% worth of $NDX in it.
I can’t imagine nobody proposed this before.
It’ll be so much fun!
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I think 5% is reasonable and it would drive a ton of value for sure.
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Where are we on this and what needs to be done to get this moving? Are we at a point where we can take a vote to snapshot?
I get that it’s more important to drive TVL into the indices than value into NDX but IMO those goals are one in the same. Can’t incentivize people with NDX if NDX has no value…
Until NDX has some reason to hold it, the economic equilibrium will be off and the value of the incentives will continue to drop, along with TVL.
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I totally agree on this, I think the NDX token needs to be backed by revenue. Vanguard charges very little, but on a large amount. Why wouldn’t each index charge .25 basis points or a 1/4 of 1% annually. That is really fair and as indexed.finance grows and TVL grows we could drive that fee down under .10 basis points like Vanguard.
This stuff is incredibly complex and powerful for new user adoption, we need indexes as there are so many coins. Backing NDX with revenue and governance power creates tremendous value for the platform.
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I understand the idea, but I think 5% would be very high and prohibitive. I think the better mechanism is a smaller annual fee charge on total assets like .25 basis points. Indexes you want pure exposure and requiring 5% of NDX in it, clouds the index.
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I think another thing that would be compelling is being able to borrow against our positions in the index. Borrowing against 1 coin that is a non-stablecoin has a lot more risk. An index coin should in theory provide a smoother ride for someone wanting to stay long a basket of holdings.
We should push as users to getting listed on AAVE, Celsius, Nexo, Blockfi, etc.
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Maybe create a new thread for this? Great idea. I use Nexo myself.