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

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.

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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??

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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?

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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.

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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.

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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.

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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?

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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?

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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.

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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:

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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!

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In a few days, I will move this proposal to a Snapshot vote for NDX holders under these specific terms:

Adjust amount of NDX to be transferred from the Treasury to the liquidity mining Masterchef via Governor Alpha from 900,000 to 200,000 for now, and reserve 100,000 NDX of the withheld amount to purchase equal amounts of DEFI5-WETH and FFF-WETH liquidity through Olympus Pro.

It’ll be a straight up or down vote.

This leaves to the side entirely the matter of ‘when do we actually engage’ and ‘what do we do with the remaining 600,000 that hasn’t been allocated’, but rather is a statement of intent.

I’ll post the link to the Snapshot when it’s up.

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Thought it’d be useful - for context - to see the dates at which point we’re expecting to hit various ‘tokens emitted’ milestones. This should help visualise where we ‘are’ in terms of considering early termination and/or potential reallocation of tokens.

This is sourced from here.

‘Removing’ 100,000 NDX from the liquidity mining scheme would involve pulling back the end of the scheme by five months (the curve fairly rapidly degrades towards the end).

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I had to read this proposal and the posts a few times to fully understand, and i think @Glueeater summed up best.

I certainly have been enjoying the current LP token rewards, but I can see that an alternative is needed. Shifting 100,000 NDX for the test case seems relatively low risk and will inform whether a more significant shift of the NDX emissions to this approach is warranted.

Following on from a fairly active thread, a Snapshot is now live that proposes that the DAO engage with the above on slightly modified terms:

https://gov.indexed.finance/#/proposal/QmVXeD5uobhDNPUEdkyep4q9K2LN1FGBxMmXG1BQWjosQ5

Specifically, the decision about what liquidity to acquire (in terms of what index products), as well as discount, vesting period etc. are all to be dealt with at a later stage.

Since dNDX isn’t proxied to snapshot I’m recording my YES vote with 1156 NDX here instead.

https://gov.indexed.finance/#/proposal/QmVXeD5uobhDNPUEdkyep4q9K2LN1FGBxMmXG1BQWjosQ5