[Proposal] KPI Option Airdrops

KPI Option Airdrops

Authors: Dr Laurence E. Day, Clayton Roche


UMA have been looking into novel ways of experimenting with incentivisation of late.

One such mechanic (detailed here) involves the notion of option ERC-20s that have their redemption value tied to an underlying Key Performance Indicator (KPI) of their protocol - in their case, TVL.

Clayton (from UMA) mentioned this off-hand in the Discord tonight, and it appears - prima facie - to be a good way to knock out several birds with one stone, viz:

  • How can we further distribute the proceeds of the treasury for maximum impact?,
  • How can we perform the above without triggering an immediate dump?, and
  • How can we incentivise the wider DeFi community to engage with Indexed Finance?

The proposal, in short, is this (all figures/qualifying routes are subject to change, this is simply a hypothetical scenario):

  1. A non-trivial amount of NDX from the treasury is frozen, as redemption collateral against the creation of {N} ‘Indexed KPI Options’. For example, 1,000,000 NDX used to create 100,000 options.

  2. Determine an appropriate KPI (e.g. TVL, number of indices meeting certain volume criteria et al) and expiry date for option tokens (as a joke, I initially suggested Christmas Day 2021, but the more I think about this, the more I like it…).

  3. Airdrop these tokens to selected DeFi users subject to past behaviours or interactions within the DeFi space that act as leading indicators of ‘good governance’. This is the approach that was taken by Badger for their own airdrop), and appears to have worked well.

  4. At expiry, allow options to be redeemed for NDX on a sliding scale dependent on performance of the selected KPI. For example, if TVL was chosen, and it was below some pre-set lower bound at expiry - e.g. US$200 million - the options would be redeemable for 1 NDX a piece. Conversely, if TVL was above some upper bound - perhaps US$2 billion - they would redeem at 10 NDX. Any value in between would lead to redemption determined via linear interpolation.

  5. NDX governance tokens that are not bound for redemption are returned to the treasury.

Now, it’s worth addressing the elephant in the room quite early - this plan would necessarily mean that it is not an airdrop directly to existing NDX holders, unless you met one or more of the criteria marking you as eligible. There’s a discussion to be had about perhaps airdropping some of the options, and selling the rest on the open market to bullish speculators.

It seems obvious enough to not warrant saying, but such a criteria list would have to be kept secret until after a snapshot is taken (else everyone would flood into the path of least resistance in time to qualify).

As it stands, the idea is quite inchoate - it’s been borne from a single conversation on Discord, but - executed properly - has the potential to bring much more of the wider DeFi community’s gaze squarely onto us. To this end, this isn’t something I suggest we execute in haste, but - should the community deem it a good idea - we actually sit down and think about properly.

Note: as this is a treasury-related topic, my position on the Sigma committee (or even as a team advisor) holds no ‘true’ weight here.

So, let’s talk about it.

21 Likes

Conceptually this seems like a very good idea.

We can simply snapshot criteria to a block at some point in the past, or today even, since we’re merely searching out active defi users, and that set is unlikely to change materially in the next few weeks.

another potentially interesting option would be to look at airdropping options to specific projects with active governance’s dao’s? This could be used to encourage integration - conditional bribery almost.

I assume the TVL measurements will be some description of weighted average to prevent any last minute abuse?

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Very interesting idea. It seems like a good way to incentivize new users into the protocol without the negative impact of the token being dumped. I think the idea of using the token to market to new users makes sense.

i do like the idea, but really needs to be planed out, for example what type of engagement are we willing to reward, like time holding indexes, Voting, holding NDX tokens etc. Then add on the TVL on the project to increase or decrease the size of the airdrop. I’m willing to vote for this once a better outline is in place.

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  • Why not using a bonding curve instead ?! Indexed Finance need bonding things ! (lol in relation to the general chat discussion yesterday ^^)

More seriously, it seems to be a great idea !
If I may, just few questions/comments :

  • Maybe not choose Christmas, a religious related date, for option’s expiry date ?
    (I’m agnostic in a Christian country, so no pb for me, but if we want to touch as many people as possible and to not ‘offend’ anyone)
    I propose the 08th of December instead, 8 seems to be a harmonious number for most of people ^^

  • Maybe put in place a progressive redemption for the options, not all at one date, to smooth out NDX release and it’s possible impact on the NDX market ?

  • All the options would be airdropped ? none will go on sale ? (with an attractive price, with a limit per Ethereum adress…etc)
    Options will be related to one KPI or a mix of several KPI ?
    Or create 500k KPI options related to TVL and 500k KPI options related to volume on index for example.
    What would be the best ?

I’m more and more passionate with this project, when I see involved and skilled people in here !
Let’s do something great together !

1 Like

Just speaking in terms of the design of the KPI Options, you have the choice to sell or airdrop or any combination. You can also choose to encourage an AMM liquidity pool so people can trade them (effectively becomes a prediction market on the liklihood to hit your target).

I had posted my own proposal in Discord before seeing this one, I just wanted to copy my post here in case it offers any additional clarity “from the horse’s mouth”:

The basic idea is that you can choose a metric you want to increase, such as TVL, then airdrop token options to people you 1. want to grow into your community and 2. want to incentivize to help you hit that goal.

This requires some willingless to spread out more tokens – So it might only make sense if there’s a foundation / treasury to be distributed.

What’s nice about it is that you really only give them out if you hit your goals – Which basically means you aren’t dumping tokens on a sagging market, you’re only really giving them out if you are growing.

The way we’re doing it is each airdropped KPI Option token (it’s a special expiring token minted on UMA’s platform) will be exchangable for at minimum 1 $UMA token at the end of June. But, for each additional $100m in TVL that UMA has, each will be worth 1 additional $UMA, up to 20. This means each option could be worth from $25 to $500 each depending on growth.

The benefit for NDX might be to grow your community, spread out tokens, get more token holders, and motivate a group to help you hit your goals. You’ll also benefit from the “big brother” community of UMA to some degree too, just by associating together.

Some people from this community were poking around in ours (I’m the community lead) and that’s how I found my way here - I know ya’ll had talked about creating some kind of synth index, so I see some opportunities for collabs in a few ways. Anyway, just wanted to get a temperature check for this idea!

6 Likes

I think one of the keys is figuring out WHO gets the airdrops. Say for example that a majority of the tokens ended up with other protocols/yield aggregators or large whales, the options may not be material to their operations and may not affect their behavior. In the case of a yield aggregator I’m not sure if they would even be able to use them at all?

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I am opposed to air dropping tokens to those not involved with the protocol. Especially when the governance token is not directly economically tied into the performance of the indices.

If you want to complicate things you could reward with tokens on a vesting schedule(like hegic), but I don’t think that is necessary here.

DEV resources should be pumping out new products. This isn’t some niche product where we need to focus on attracting users. If we have the best index platform… the rest will take care of itself.

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If it (a yield aggregator or any other protocol that received the tokens) had a DAO why couldn’t it vote on how to handle the NDX tokens and then act accordingly?

I think Christmas has move of a positive marketing timeline than a negative one, but I do actually really like that you included multiple responses to this post and I agree that it should be discussed more. I think it would be a great way for us to spread the token and community, this seems somewhat self serving but I actually believe it enough to just say it, I also like the idea of rewarding various actions and postings in governance and the discord group, not just for this project but in general and I see this as related in growing the user and community base.

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Hello,

Is it conceivable to allocate for exemple :

  • 20% of the KPI Options to NDX holders (or LP provider on CC10/DEFI5/NDX/ORAC5)
  • 50% airdropped to external people (best target ?)
  • 30% for sale with an attractive price (in ETH or NDX ?)
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Aye @Cosmicfrog - we’ll be able to be as flexible as we want in this regard - any option tokens minted via the UMA platform, we’ll just transfer to the treasury and be able to disburse subject to whatever we decide.

OK thanks :+1:

And maybe don’t unlock all the KPI Options at the same time ?
Maybe 40% on the 01/04 to communicate on the project and option mechanism, then 30% on the 01/05 and 30% on the 01/06 ?

Because if we want to attract a lot of new people, we have to give a chance for all interested people to acquire KPI Option at a preferential price (in addition to the le LP ‘KPI Option - ETH’).

For example if I talk about the project to my friends, or my twitter followers, they will tell me "OK, I find this project very interesting, I want to get involved in, but only if can get some KPI options at their “starting price” "

KPI Options definitely sound like a good way of distribution, especially linked to a metric like TVL. It avoids the risk of dumps and incetivizes growth so in favour here.

In my opinion a larger part should however go to early participants of Indexed, who took the early risk. Something like this was also mentioned early on in a medium post, don’t know why it changed.

I join aatt44zz in that I am not in favour of airdropping tokens to people just for having used another defi protocol at some point in time.

I do think we’re going to see something of a schism here between people who think that because they’ve been early supporters, they should reap the benefits, and those that think that exposure to those that have been demonstrably engaged in prior DAO governance (or good practice in DeFi) is a plus.

It’s not my place to decide who’s ‘right’ here (since I’m simply another voice in this, rather than a driver), but I will put on record my belief that there’s likely a significant overlap between the type of people who would qualify for the airdrop who are already NDX holders, and those that we want to bring to - and keep in - the fold, in contrast to the yield-farming “so long, and thanks for all the fish” contingent.

Personally, I’m against the idea of airdropping anything beyond a fraction (e.g. 10%) to all NDX holders simply for the sake of checking a box that says “we did an airdrop”. Then again, my voting weight is about 20x less than blurred.eth’s, so maybe I’m not the one to appeal to. :wink:

@M4X - to clarify a point here:

Something like this was also mentioned early on in a medium post, don’t know why it changed.

I assume you refer to this post, which previously referenced “20% will be distributed (to DeFi users)” rather than it’s current form. If that’s the case, then this proposal is entirely in the spirit of branching out to non-NDX holders: we aren’t the only ‘DeFi users’ in town.

A more up-to-date take on these figures can be found here - I’m the one that removed “to DeFi users” from this page (per this PR) precisely to nullify the implication of an airdrop to early holders. Of course, now we’re having this discussion again in any case, so… oops.

As I said - this needs discussing, at some length - so I’m grateful people are chipping in with their thoughts.

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I think the KPI options idea is interesting. There are several other ways this airdrop could be executed but I will not debate this here. My point relates more to the importance of a protocol like indexed to stick with what was laid out originally to early adopters ( those that took on most of the risk, most importantly smart contract risk that comes along with any new Defi protocol - audited or not).

The orginal message of the indexed launch was “20% will be distributed to Defi users after January 22nd”. This can obviously b interpreted in several ways, but I think being in DeFi for some time we have become used to interpret this sentence as “20% or at least part of that will go to early adopters of the protocol”. In my opinion, any early adopter who helped to make this protocol gain traction factored that into their decision-making. I think it is important for the longevity of the protocol to communicate clearly and stick to promises that influenced DeFi investors’ decision making. I will personally vote in favor of that 20% airdrop to happen. In which form this airdrop will be executed is another discussion. As a side note, I find it disturbing that these articles get edited instead of making an official announcement over a change of strategy.

Keep in mind that these thoughts are based on my limited awareness of what has been discussed and what is actually going on. So I am very happy to be proven wrong on any of the points I make.

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With regards to execution, my take would be to give 5% of the 20% to early adopters and the remaining 15% to a very broad and large base of Defi users. Large enough so that any of these Defi users would get some value below 500$ at current market price. Given current gas costs, a dump is unlikely for that amount and a long term hodl makes economical sense. At the same time the awareness about indexed would be increasing tremendously probably having a very positive impact on TVL.

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Alright so i am still highly skeptical about rewarding governance rights to people who have had no stake or interest in the protocol with pretty much free money just cause they’re generally active, as these users tend to just be profit focused rather than long term focused as many long term focused people tend not to be trying all the protocols and use cases but are selective with the ones they want to hold and participate through say building not degen defi users. That being said if the airdrop went to the right users (say people that have participated with governance before where there was no reward or monetary reason to do so) then this could help.

My main concerns this. What has more impact, free money to many as a hope to attract users or using that same capital to say launch a new reward pool or sponsor a hackathon.

Am down for an allocation to an airdrop but would prefer to see it capped at say 200k ndx not 1m.

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nice decision, how to vote?