[Proposal] Engage Olympus Pro To Purchase Protocol-Owned Liquidity With NDX

Hi everyone,

I’d like to propose a fairly dramatic change to our liquidity mining framework.

It’s relatively hot off the presses, but Olympus have released Olympus Pro, a mechanism for protocols to purchase the liquidity that they wish to promote for certain tokens rather than rent it through liquidity mining.

I think this is a great idea, and one that we should seriously consider.

I’m going to give one of my famously lengthy chats about the why, and then the how.

Disclaimer: I do not hold any OHM, and have not done for several months now. @Glueeater is a member of the Indexed Sigma Committee, and is heavily involved with Olympus.


The Context

Absolute beginner summary: Protocols often use the power of their treasury (in the form of their native token) to reward third-parties that provide liquidity on DEXes: this is often in the form of giving out token X for providing liquidity for X/ETH. This is known as a ‘pool2’ for historical reasons, and it’s a double-edged sword: it makes the token liquid, but at the cost of downwards selling pressure on token X, as people claim their rewards and trade them for ‘safe havens’, primarily to offset impermanent loss within their LP tokens that is manifested from other people doing the same thing.

More importantly, this can only ever be a temporary solution: once the rewards of token X end, there is no incentive beyond trading fees for people to continue providing that liquidity. So, it disappears. The net result is that liquidity is gone, and you’ve handed out potentially millions in token X with nothing to show for it beyond having turned a profit for some providers, and subjected token X to an absolute beating in the interim.


The Problem

Indexed is no stranger to the idea of liquidity mining: we have an ongoing scheme that will have handed out approximately 600,000 NDX between May and October of this year for providing liquidity to our index tokens. We don’t engage in pool2 rewards (i.e. rewarding NDX for liquidity for NDX/ETH), but we do rent liquidity for DEFI5, DEGEN, CC10 et al.

Separate to this, we handed out 2,500,000 NDX (25% of the total supply) very early on in the lifetime of the protocol in liquidity mining, however the ‘true’ purpose of this was twofold: to wrest control of the protocol from the founders (who had 20% reserved) and to advertise its launch.

The side-effect of this is fairly obvious to see on a price chart, and while it is not my intent to make this post about the price of NDX, I have natural concerns about both securing the DAO (you don’t want to make it too cheap for someone to buy up enough tokens to start making hostile Governor Alpha proposals and be close to quorum by themselves - see Venus), and maximising the spending power of the Treasury for things other than liquidity.

For the most part, Indexed has engaged in this liquidity rental because there was no alternative: liquidity mining, for better or worse, has been the default way of ensuring that tokens - in our case, our index products - can be easily traded by third parties: sure, you can mint them directly from the site, but that incurs a swap fee that’s intentionally quite high because the goal of the indices is to minimise IL rather than to maximise inter-pool trading: if you can establish liquidity that incurs a slippage on a decent-sized trade that’s lower than the 2% swap fee when minting, you’re winning.

I digress: it looks like there’s a different way now.


The Solution

The key idea behind Olympus Pro is that of offering bonds in conjunction with/in lieu of an emissions program. Here’s how this would look:

  • Indexed offers some amount of NDX for sale in exchange for liquidity that they want to acquire such as DEFI5-WETH or FFF-WETH.
  • Olympus advertises these market/s on the Olympus Pro website, and Indexed core integrates the market into the Indexed webpage. All necessary audited contracts and infrastructure has already been built out by Olympus.
  • Interested counterparties can trade the desired LPs in exchange for NDX, receiving a discount that defaults to 5% (i.e. selling $95 of DEFI-WETH ​for $100 of NDX).
  • 3% of the purchased NDX is kept by Olympus as a facilitation fee, and retained by their Treasury in perpetuity.
  • The remaining purchased NDX vests over the course of seven days (as a default) and be claimed over time (i.e. 14.28% can be claimed after one day).
  • The liquidity tokens are sent to the Indexed Treasury.

The net result is that the Indexed Treasury has bought liquidity outright in exchange for NDX, where it can be treated as a revenue-generating asset (from swap fees). Short of a Governor Alpha vote from the DAO to sell, exchange or otherwise dispose of these LP tokens, this can then be considered a permanent liquidity floor for our indices.

In light of the upcoming Balancer V2 upgrade for the Indexed protocol, this liquidity would also be interest-bearing, as one half of the LPs would be earning best-in-lending-market rates due to their integration with the respective underlying Nirn vaults.

It’s worth pointing that the default figures presented here (5% discount and 7 day vest) are configurable by Olympus, but are subject to the amount of NDX being offered to bond: I’m looking for some clarity from Olympus as to what exactly constitutes ‘enough’ to change these numbers (and by how much), but the key idea remains the same.

My take is that as an index protocol, we should be utilising our Treasury to dogfood our own products as much as possible, while simultaneously ensuring that the NDX that we do spend for liquidity isn’t going into the grinder.

Exchanging NDX for index liquidity in this way is good for our users: those who buy our tokens to hold in the long-term (they always have a way to trade our products, even if they’re not familiar with the act of minting and burning Balancer LPs via our site), and it’s also good for the protocol, for two reasons:

  1. Permanent liquidity ensures that there’s always a reason to arbitrage the indices between their NAVs and their AMM values, thus generating exit fees, and
  2. As alluded to above, the swap fees and [soon] Nirn revenue drawn from the purchased liquidity enriches the Treasury.

The Concerns

All of the above is not to say that I don’t have some concerns: some of which we’ve imposed upon ourselves, some of which are more ‘market-forcey’ in nature. They are:

  • We need an answer to the question “why would I sell my blue-chip index/Ether liquidity [i.e. DEFI5/WETH] in exchange for the NDX token?”.

    We’re seeing various generous third-party farming opportunities arise lately for NDX/WETH (such as the Onsen program by Sushi and the upcoming Balancer-sponsored rewards for the 80/20 NDX/WETH pool on Arbitrum) and the protocol-revenue sharing program is imminent: are these opportunities ‘enough’?

    If they’re not, what kind of discount would we need to offer for this to be appealing enough to convince people, given that the Olympus setup is such that the buyer would have to wait seven days for the bond to fully redeem? This isn’t a question that any one person can answer, but it’s something to bear in mind.

  • If we engage in a bond program like this in any meaningful fashion (i.e. offer a bond of 100k NDX for liquidity), we’re effectively releasing that much to potentially be market-sold as soon as the bond period is over, rather than emitted slowly via liquidity mining (that much NDX would take just under five weeks to emit at the current stage of our liquidity mining program).

    Do we consider this risk - that of non-trivial amounts of NDX potentially being dumped in quick fashion - worth the benefit of acquiring permanent liquidity? In an ideal world the NDX would only be purchased by fans of the protocol who want more say in governance (or protocol revenue sharing through dNDX), but we can’t enforce this.

  • How much liquidity would we want to acquire, and do we want to acquire it for all of our index products or just the most popular ones? Achieving 2% slippage with a US$10,000 purchase on a 50/50 AMM needs ~US$997,000 in liquidity at US$3,425 ETH, and 5% slippage needs ~US$400,000.

    It’d be wonderful to have enough liquidity to guarantee as low a slippage as possible for everything, but that would pretty significantly dent the Treasury. What’s best (in the eyes of the protocol) here?


The Proposal

The crux of what I’m getting to here is this:

I propose that the DAO consider routing a significant portion of emissions going forward towards bond markets to purchase liquidity for the protocol, with mind to potentially terminating the current liquidity mining scheme entirely in favour of this.

The currently active liquidity mining scheme is set to emit 1,500,000 NDX over two years on a linearly-decreasing curve. The amount that was initially transferred is set to be fully allocated around mid-October, after which the DAO needs to vote via Governor Alpha to transfer the remaining 900,000 to the Masterchef from the Treasury.

In the interests of having a concrete proposal for people to chew on, here’s the pitch:

Reduce the amount to be transferred via Governor Alpha to the Masterchef in October to 200,000 NDX, keeping the remainder within the Treasury for now.

Of the withheld 700,000 NDX, utilise 100,000 NDX to create a bond market for DEFI5-WETH and FFF-WETH liquidity for the Indexed DAO Treasury via Olympus Pro, bringing forward the end-time of the liquidity mining program appropriately.

Note that due to the way that the curve for our Masterchef works, agreeing to this means that the DAO subsequently needs to vote on-chain to terminate the program at the new end-time: the block at which 1,400,000 NDX has been emitted, assuming that there was a subsequent vote to move the remaining 600,000 NDX into the Masterchef (earlier still if there are later decisions to allocate more of this NDX elsewhere).

This is because token rewards are allocated on a per-block basis, and if we let the scheme run to completion without transferring the full amount, liquidity providers will end up attempting to withdraw more NDX than is available, resulting in later withdrawal attempts failing. It would get ugly.

This proposal might will annoy a large chunk of the current liquidity providers, but I truly believe that everyone that engages in liquidity provision knows that yield-farming in its present form is simply - as I have already said - rented loyalty that results in a slow bleed for the reward token. I don’t think any of us want that to continue for NDX.

We have time to see how the initial wave of partners for Olympus Pro report back on their experiences using the bond program for their own purposes, and use that to gauge whether we want to go forward with this.

If this proposal is accepted and deemed a success, I would be minded to put forward proposals for additional bond markets drawn from the withheld Masterchef allocation, further bringing forward the end of the liquidity-mining scheme.


So, at 1,866 words including this… thoughts?

4 Likes

I would strongly support the use of Olympus Pro to provision Indexed liquidity.
I’ll add an additional benefit of bonding/Protocol Owned Liquidity that I don’t believe is mentioned in this proposal.
If the Indexed Treasury is able to accumulate LP tokens for it’s own Index products, such as ETH-CC10 and ETH-FF, Indexed benefits from diversifying it’s own treasury. Indexed would own an expanding portfolio of it’s own indexed tokens, providing exposure to some of the best investments in DeFi and crypto. Owning these tokens would mean Indexed’s Treasury would be better positioned to sustain itself if the value of NDX dropped, and Indexed’s Treasury would also benefit from price appreciation in the broader DeFi/Crypto market.

2 Likes

This is a good point.

It effectively becomes a crowdsale of NDX for blue-chip assets that the Treasury can then lean on for future funding if needed: the crux of the idea is that this liquidity would never be touched, but if necessary it could be converted into stables.

At this early stage I’d like to request something from anyone reading: some opposition. I’m pretty biased towards this idea (I just wrote three pages on it), so I’m blinkered. The nature of DAO governance is such that if I don’t see anything logged on the forums I’ll default to assuming unanimous support, which may be incorrect.

2 Likes

To provide two counter points. Hopefully they are well enough articulated and valid.

1. Depth of Liquidity

From the proposal, it seems Indexed would not be acquiring a particularly deep amount of liquidity. ‘utilise 100,000 NDX to create a bond market for DEFI5-WETH and FFF-WETH liquidity for the Indexed DAO Treasury via Olympus Pro’. At current NDX prices ~2.85 USD, and assuming 100,000 NDX total for bonding of DEFI5-WETH and FFF-WETH (was not sure from the proposal if it was 100,000 NDX for each market), Indexed would only be acquiring $135,375 in liquidity for each pair. $2.85 per token, 5% discount for bonding and 50,000 tokens allocated for each pair. For the FFF-ETH pair that’s only 6.6% of the current liquidity on Uniswap V2.
Certainly bonding would need to be pursued in conjunction with staking rewards while the bonding program ramps up - but this was also clear from your proposal.

2. Renting vs Buying

In conjunction with the issue around depth of liquidity, I think there’s a question to ask around buying liquidity vs renting when you are paying with a volatile asset. Suppose that over a 1 year period the market price of NDX tokens doubles. If liquidity is provisioned by staking rewards, ie. ‘renting’, we would expect roughly that the value of liquidity staked after the one year period would be twice the value as at the start - in a market where NDX is appreciating, renting benefits over time as more liquidity will be staked for the same NDX rewards. In contrast, if liquidity is purchased outright through bonding at the start of the 1 year period, at the end of the 1 year period Indexed has not received any more liquidity and, it has effectively paid for liquidity that it could now buy for 1/2 the number of NDX tokens. So in a market where NDX is appreciating in value, I would argue that the benefits of buying liquidity vs renting it become less clear. However, buying liquidity does seem like a good idea in an environment where NDX is depreciating in value.
I don’t think anyone wants to get into detailed price discussion of NDX, but it’s worth considering whether renting or buying is an optimal decision if we anticipate NDX to be valued significantly higher in the near future.

1 Like
  1. Depth of Liquidity

I’m not sure of the exact parameters that I’m suggesting here for a 100k NDX bond: probably a 50/50 split if you put a gun to my head. Yeah, it’s not much to start, but in order to acquire ‘enough’ we’d need to be releasing a LOT more NDX. I’d rather drip-feed this to see how it goes: this leads nicely into the second point as well…

  1. Renting vs Buying

I suppose that one ‘problem’ with the idea that NDX doubling in price would lead to a doubling in liquidity is that of awareness: we’ve asked Zapper etc to add our farms for lord knows how long now, to no avail, and I see it as pretty unlikely at this point that any additional liquidity is going to flood in to take advantage of higher APRs in the event of NDX shooting up in value. As a case in point, consider the current APRs:

Looking specifically at the FFF, 16% APR on an LP that’s 60% ETH and 10% BTC is ludicrous. To ‘fix’ this we’d need to see wider integration on farm aggregators, and for more people to be aware of what the FFF is: that’s both the job of the Indexed Growth Committee, and one that I consider separate to this.

To briefly dive into NDX price, I’m personally expecting that the farming rewards on Arbitrum launching tomorrow in conjunction with the dNDX framework (which requires you to lock up NDX in exchange for a claim on protocol revenue) will draw a fair chunk of NDX out of the liquid market to be turned into liquidity or entered into locks, with the concomitant impact on price.

I would be willing to bet that we won’t see significant increases in index liquidity as a result, but I will be monitoring this just in case. If the needle isn’t significantly moved, then it’s a safe assumption that we’re just dealing with sticky liquidity (drawn from those that are in the know) and should really look at terminating the program entirely in favour of bonding for protocol owned liquidity over time.

I’d also point out that we already ‘have’ a maximum slippage, regardless of the liquidity that’s available on DEXes: it’s 2% to mint and 2.5% to exit, based on swap fees and exit fees on our own site. The provision of liquidity is great if you can get below that for a X sized trade, but even if we provided this liquidity and no end-user made use of it, it’s still good for the protocol in that it incentivises arbitrage (and hence exit fees for the protocol).

There is, of course, a causality in that terminating the program will reduce dumping, and there’ll be an impact on NDX price as a result of that, but that’s getting a bit into the weeds.

1 Like

One concern I have is that of the LP tokens being held by the Indexed treasury, some might see this as having too much control over the trading pairs and might lead to people seeing it as a potential rugpull. I’m disregarding the fact users can burn the indexes since it’s not that common.

However, if it were possible to say silo the purchased LP tokens with a third party like OlympusDAO it would greatly nullify the rugpull narrative. In this case, the earnings from the LP tokens would still be forwarded to the Indexed treasury to be used for funding and dNDX rewards while the LP tokens sit behind an extra layer of security.

What do yall think?

I view this as another distraction away from what should be the primary focus of the team: creating, marketing, and selling crypto index funds that appeal to investors. This proposal seems to try to solve the “problem” of anemic price performance of NDX’s underlying token. But that should be addressed through changes to the core business, not financial engineering at the edges.

Convex (CVX) has a highly inflationary token, and yet they’ve seen a 400% price increase over the past few months. Why? Because they are seeing massive growth in their core business. Fewer people want to dump the underlying token when they believe in the long term prospects of the core business…

Let’s take a look at what has happened within NDX’s core business over the past year (note I’ve chosen ETH as the currency):

Huge decline, and now stagnation. Let’s compare that to our primary competitor, Index Coop:

How does this proposal address the issue of zero growth in the core business? I believe it doesn’t, at least not in any long term, fundamental way. It may juice the token price briefly, but without growth in the core business, those gains will be short lived.

Instead of the team focusing on this, why not address the lack of growth in AUM (TVL), something that is fundamental to the success of a protocol selling index funds to investors? And lack of growth is a factor of a lackluster market offering, in spite of the amazing potential within this community and protocol (addressable market should explode, excellent dev team, theoretical flexibility vis-a-vis competitors, etc.).

Where should we be focusing?

1 - No clear primary fund, equivalent to DPI . We have 2 funds that kinda sorta address DeFi (DeFi5 and CC10). Why do we need 2 funds? It’s confusing.

2 - Worse, DeFi5 has too few tokens! Why would a serious index fund investor invest in a fund with only 5 tokens? You have the worst of both worlds, you are not diversifying away risk, and you cannot select the tokens. An index fund needs 10 tokens at a minimum, and ideally many more (DPI has around 25, I believe). I’m aware there are technical limitations here (10 tokens max at NDX), but that can be overcome in creative ways. We could have an Oracle fund, a DEX fund, etc., etc., and then combine all of those funds into one mega “DeFi Index” fund. Or whatever. But while fewer than 10 tokens can perhaps work on niche funds (e.g. Oracles), a fund supposedly representing all of “DeFi” with only 5 tokens is just wrong. And this seems to be our flagship fund, at least when you look at TVL!

3 - When I go to Indexed Finance, “Vaults” are at the top of our site. Why? What do they have to do with index investing? I suppose there could be some interesting ways to tie this into index investing, but there is no real clarity on this at our site. It just seems to be both front and center and out of place. It almost seems as if we are creating cool products, then looking for markets. I grant you Nirn is super interesting, but how does this benefit the typical index investor who goes to your site? Not so obvious!

4 - Is having business strategy driven by a committee really the best way to manage NDX in its early years? I look to Synthetix as standard, and in my opinion you need a benevolent dictator to drive NDX for some time. By all means consult with the community, get feedback from committee, etc. Committee management tends to be passive, and perhaps allows developers to de facto drive business strategy, instead of starting with customer needs (index investors, right?!) and working backwards. Nirn seems to be a super cool technical achievement in search of a reason to exist at Indexed Finance. I think there are interesting links, but again, not obvious at all now to the typical index investor.

I’m not saying the proposal to engage with Olympus Pro is good or bad. I’m saying it’s a distraction. And if we are looking to help the token price, the focus should be on AUM (TVL), which truly reflects the long term health of Indexed Finance. I don’t see how this proposal addresses that.

4 Likes

I am not afraid to agree with you that DEFI5 and CC10 are way too similar in composition and that eventually something will need to change with those two, however, I think making changes to our largest TVL index right now would be a mistake while the project is still so young.

For a protocol that naturally promotes longer-term investments, we need to either find a way to secure liquidity forever or lean in heavily on the burn mechanic. Either way I see it, NDX emissions are not helping the protocol in the slightest and need to be rethought.

Users holding LP tokens also seems to go against the vision of holding indexes for the long term since there is always the risk of IL and the knowledge that your position is changing each day. This is preventing the set-and-forget aspect of the indexes.

I believe switching incentivization from holding LP’s to holding NDX/dNDX is the correct move for indexed and it should help with NDX price as well. dNDX should naturally incentivize better and faster management of the indexes since TVL in the index equates to more dividends to dNDX holders. The creation of new indexes adds additional revenue streams to dNDX holders so we should see a bump in voter participation as well and i’d like to find a way to further incentivize voter turnout with things like POAP’s, NFT’s, or dNDX rewards.

As you said, I agree Indexed has great fundamentals but seriously lacks the “fun factor”.

You are building on a poor foundation. Adding more floors, painting the deck, and installing a new video doorbell isn’t going to fix the foundation. And in fact, what you are describing is only going to make it even more confusing for the average index investor who goes to your site. Just adding more funds or vaults or NFTs on top of what already exists is not the way, in my opinion!

I posted a graph of TVL over the past year. There is zero growth, while successful DeFi protocols have seen their TVL skyrocket. Why have we seen zero growth? Our main competitor has seen significant growth and we have not. Why? How does this proposal fundamentally address that critical fact? If it does not in any significant way, isn’t it a distraction? Continuing to kick the can down the road, afraid to make difficult but in my opinion necessary changes, is not the way forward.

We are an index fund provider that doesn’t seem to address the real needs of index fund investors. If we did, wouldn’t our TVL be growing over the past year along with the overall DeFi market? Alarm bells should be going off all over the place now… But apparently the answer is “buy versus rent” liquidity??

How does this proposal fundamentally address that critical fact? If it does not in any significant way, isn’t it a distraction? Continuing to kick the can down the road, afraid to make difficult but in my opinion necessary changes, is not the way forward.

Indexed hosting its own liquidity does work to solve the problems for 99% of Index investors which is getting the best slippage on the trade. Most of our users do not mint or burn the indexes they swap for them, making sure there is good and growing liquidity for the indexes is the best thing we can offer to end users.

The reason INDEX is doing so well is because they are everywhere, this is an issue that the Indexed Growth Committee needs to address but I will argue that marketing is secondary to making sure users can always get in and out of the indexes. We will have plenty of discussions with the IGC on how to get Indexed into the eye’s of the investors but that is not what this proposal is about.

Am I right that the cost of switching from renter to buyer is 5% per every 7 day deal?

5% a week is not a low cost of capital… its more like a payday loan.

Did I misunderstand?

1 Like

I just created an account to upvote this. It is very well written and researched and offers way forward. We are focusing too much on tokenomics when we should be increasing the sales of our products by finding more people to create index tokens. I know we are doing that but more energy should be focused on that. I’d still be providing liquidity even if there was no incentive to do so and I’m hodling NDX, most people farming are not.
I agree with all 4 points written in the post.

1 Like

I strongly reject the premise that ‘we are focusing too much on tokenomics’. This is the first standalone proposal related to the NDX token and the power of the Treasury created since April (prior to which was dNDX and its implementation parameters). The claim that we’re too busy navel-gazing into the governance token given that I explicitly said “it is not my intent to make this post about the price of NDX” - isn’t accurate.

This proposal is about the liquidity for our products and where we source it from.

Nothing more, nothing less. It is not a ‘distraction’ to address a critical component of how users engage with our products and if/how we pay for it.


I’m going to preface the rest of this by saying that if there’s subsequent discussion to be had, it would be best to continue it in a new thread, rather than crossing the streams.

@DeFi_Whiskey - many thanks again for a well thought-out post. My responses follow:

I view this as another distraction away from what should be the primary focus of the team: creating, marketing, and selling crypto index funds that appeal to investors.

The amount of effort that goes into actually implementing what’s being discussed here is surprisingly minimal: a vote has to happen anyway, I’m simply suggesting a change to the parameters and subsequently engaging existing infrastructure through a potential partner.

I have one major objection here: index creation, marketing and selling should be the primary focus of the DAO, not the Core team: I believe that our specific role is that of enabling product functionality and ease-of-use. I will keep coming back to this point, somewhat relentlessly.

How does this proposal address the issue of zero growth in the core business? I believe it doesn’t, at least not in any long term, fundamental way. It may juice the token price briefly, but without growth in the core business, those gains will be short lived.

It does not, and it is not intended to. It’s also not intended to ‘juice the token price’: in fact the opposite may well happen, and I explicitly spelled this out in my concerns. Part of what I consider to be my job (which I’ve been defining as I go) is examining issues such as liquidity and Treasury management. This falls very much in scope.

Instead of the team focusing on this, why not address the lack of growth in AUM (TVL), something that is fundamental to the success of a protocol selling index funds to investors?

I’m going to work on the assumption that you periodically pop your head in and see what’s going on with Indexed rather than track every update we put out. And that’s entirely fair - there are only three of us who work on this full-time, but the information is available.

There are three reasons I ascribe to why I believe that a certain competitor is accruing steady additional TVL relative to us:

  • The underlying technology is already fully established (Set Protocol),
  • Network effects par excellence (in that they are heavily backed by several major DeFi institutions), and
  • Hundreds of members of their DAO advertising their product/s.

The Indexed Core team is still in the process of building out the fundamentals of the protocol (seen most recently in this roadmap and this thread). This work is critical to our ability to create novel products with USPs, and is taking up all of Core’s time.

It isn’t unfair to say that we’re an upstart within the same field as an established entity with a horde of fans online - when everyone is talking about X, you tend to disregard Y and Z, especially within a field as staid as index investing. Core is currently working on changing that narrative (“they’re all the same”) through a protocol upgrade that we are currently working on and will be proposing to the DAO.

Most of the most vocal online proponents of our major competitor are members of their DAO. There appears to be an assumption that this does not or should not apply to us, and that all outreach efforts should be shouldered by Core (who are, again, a Solidity engineer, a React developer, and a researcher/protocol maintainer).

A few point-by-points now:

1 - No clear primary fund, equivalent to DPI . We have 2 funds that kinda sorta address DeFi (DeFi5 and CC10). Why do we need 2 funds? It’s confusing.

These were the two pools that were selected at Indexed’s creation, when it was still something of an experiment. We don’t ‘need’ two funds like this, but they exist and cannot be retired or renamed at this point. It is what it is at this point!

2 - Worse, DeFi5 has too few tokens! Why would a serious index fund investor invest in a fund with only 5 tokens? …

You have raised this point (and the rest of it) multiple times now in various fora. The fact that the DEFI5 has consistently been our highest product by TVL does somewhat neuter the “who would invest in it” and “it’s just wrong” points: it clearly has product market fit: even when unincentivised it’s been top of our pile. I’m not going to engage with the ‘serious’ part of ‘serious index investor’: we are all currently engaging with DeFi natives.

The FFF exists as a metaindex in the form you suggest (albeit a slightly narrow version due to overlap between some members), and I recall you being a major supporter of it when it was proposed and subsequently created. It has 22 tokens, and US$1.3 million in TVL. A competitors variant metaindex which holds 14 distinct tokens has US$1.8 million in TVL. Whatever the magic attractor is within crypto, it clearly isn’t purely linked to “number of tokens underpinning the index”.

If there’s a competitor-killer, clearly you don’t believe it exists yet.

So, what would it look like?

3 - When I go to Indexed Finance, “Vaults” are at the top of our site. Why? What do they have to do with index investing? …

This is admittedly something that I’ve been asking Connor to fix: the vaults are up at the top of the page simply because they were/are the newest component of Indexed. That’ll hopefully be shifted soon: this kind of thing happens when your UI designer and your UI developer are the same person (although I believe it may have been me that suggested that it goes where it currently is).

I would counter “it almost seems as if we are creating cool products, then looking for markets” by saying that yes, it may appear that way on our site, but this misrepresents things significantly. To quote the Nirn whitepaper:

Nirn was conceived - and built - for integration into the Indexed Finance platform ... enabling yield-bearing ETF tokens with a single wrapped proxy representing a given index constituent across multiple lending protocols simultaneously

The entire reason that the vaults were built is to convert our index products into yield-bearing variants of themselves: functionality that will be put in place once our Balancer V2 upgrade is complete. Nirn makes Indexed the only provider of index products that has the ability to earn yield on index pool liquidity without binding ourselves to a particular lending market for each asset, and is a key part of Core’s development of the protocol.

But again, that’s not clear on the site, and if you’re not following along with things closely, it’s an understandable view to take, so I’m actually on your side for this one.

4 - Is having business strategy driven by a committee really the best way to manage NDX in its early years?

Perhaps not, but we have no person to fill the role of Benevolent Growth/Business Strategy Dictator on a full-time basis right now. This was a role filled by Lito up until recently, however he has recently stepped down in favour of Hop Protocol, although he remains an advisor. The rest of the members of the IGC (whose mandate is to come up with ideas for growth and are given signing rights over a Treasury allocation to make happen) are all enthusiastic members of the DAO, but this is not their full-time job.

If you (or anyone else reading this) believe you know someone who would be willing and able to step into this role for the DAO on a full-time, paid basis: please introduce them to us all - we (Core) have been searching for additional manpower for purposes such as this for months. We can and do reward people that choose to step into these roles with NDX and a salary!


In the roadmap I actually went ahead and proposed two indices that I’d like to see us create (a stablecoin index weighted by vault interest and a hedging index weighted by the Crypto Fear & Greed Index), but our underlying protocol isn’t quite there yet in terms of capability. On Monday (tomorrow) I have a conversation with a fairly major presence in the DeFi space with mind to creating an index for them. We’re not doing nothing, but - and this must be the fifth time I’ve said this now - Core is currently engaged on the fundamentals.

A DAO is its community, and I would again ask that if you are unhappy with the current offerings, to propose one of your own that you believe would plug the gap. All we ask for is candidate membership and weighting strategy: then we can all talk about whether it’s something we can actually put into place immediately, or need to complete the protocol upgrade before we make happen. Similarly, if you have a good idea for how we should market things, suggest it!

You are as much a member of Indexed as the members of Core, regardless of NDX token allocations/holdings. The protocol (and the DAO) benefits if the responsibility for our offerings and their marketing is widely shouldered amongst its members. A DAO with everyone asking a handful of people to do everything themselves isn’t a DAO, it’s a startup in a glass office surrounded by shareholders.


I would now like this thread to return to the actual topic at hand: protocol owned liquidity via Olympus Pro bonds.

2 Likes

The deal here is that if we put up 100 NDX of bond collateral and someone bought 10 NDX, they’d have to provide 9.5 NDX worth of LP tokens. It’s a one-off.

The bond redemption ends 7 days after purchase, at which point the seller of liquidity can claim all of the NDX they exchanged for and it’s done. There’s no subsequent 7 day period, no second trade, no roll-over into additional weeks etc.

1 Like

OK, makes sense.

Any risk that “have to put up 9.5 NDX worth of LP tokens” will limit the involvement of newer, perhaps more casual investors?

1 Like

This is just another option to acquire NDX, casual users will still be able to buy NDX on Sushiswap or other DEX’s.

TY.

I thought I understood the cost to Indexed, then, but it seems maybe I don’t.

Putting up collateral isn’t a cost.

Is the cost just that 1-time 5% ding?

Who collects that? Olympus?

1 Like

The goal here is for Indexed Finance to obtain the index/wETH LP tokens from users. To do that we are saying we’ll trade you $100 in NDX for $95 of LP token. So Indexed gets the LP tokens and the user gets a slight discount on NDX as an incentive to make the trade.

It’s a little more complicated than that since the discount % can vary based on demand for the LP tokens, but that’s the general idea.

*Edit: For the Olympus part of your question, each time someone trades LP tokens for NDX, Olympus get’s 3% of NDX to be traded. This 3% does not come out of the users pocket but out of Indexed’s. For example: I trade LP tokens for $100 in NDX, I’ll receive all $100 in NDX tokens and Olympus will receive $3 in NDX tokens for facilitating the trade.

1 Like

Thanks for your thoughtful reply. I do not want to be a distraction from the topic at hand. My concern was this proposal itself is a distraction to what I believe needs to happen at NDX. As apparently the proposal above can be implemented with minimal effort, I’m neutral on the proposal. I will refrain from posting further in this thread.

I will only add that yes, I do “pop my head in” on occasion to see what is happening, I am no longer following things closely at Indexed Finance, simply because I became frustrated at what I thought was a lack of a clear business strategy consistent with creating, marketing, and selling index funds. But I still follow NDX as I want the protocol to succeed for a number of reasons. I like scrappy upstarts, underdogs, etc., you clearly have amazing developers, the space is going to grow, unlimited potential, etc.

I suppose my biggest issue now is with this sentiment, included in your last Roadmap update:

I think our biggest weakness is much more fundamental, and it goes to the composition and marketing of our funds themselves. And while more eyeballs can grow TVL, we should fix the structure of our offering asap to lay a solid foundation on which to build and grow. Otherwise, the impact of increased awareness will be muted.

But this is a topic for another thread entirely, and my apologies for the distraction. I will find some time and post a separate thread on how I think we should modify our offering. If the community finds it interesting, I will be happy to provide more details or continue the conversation, get more involved within the DAO, etc. If not, I completely understand, and will try my best to refrain from popping into future threads to derail them… :slight_smile:

2 Likes

I am in support of this proposal & believe that “liquidity mining” does not truly find the stickiness of capital.

“Growing TVL” is a fair meme in this space in my honest opinion. Total Value “Attracted Momentarily for this second in time” just isn’t as catchy.

I think Olympus Pro is a great signal to actually “lock liquidity.” As laurence mentioned, the lift is fairly low for this team so it would simply require some votes & OlympusDAO can handle the actual engineering effort!

4 Likes