Proposals for $1B TVL

#1

This is a compilation of ideas to hopefully reach parabolic levels of TVL.

  1. Anyone can make an index fund. It will only initiate once a minimum amount is reached within a timeline. It will also de-activate once it falls under this minimum.
    (Credit to Buggy): 1000 NDX required to be held inside wallet create an index fund. (Amount controlled by governance?)
    Tokens on index funds must be on curated lists (i.e. CMC, CoinGecko). Whether it’s taken care of in the frontend or the smart contract level is another discussion.

  2. Create a mechanism to extract dividends from other defi protocols i.e. compound, yfi, etc

  3. 1% of dividends extracted go to treasury to be distributed to NDX holders (or used to buyback NDX) to reward their participation in governance. 0.1% can be given to the creators of index funds. The rest can re-invested in the index fund during rebalances. (All percentages can be changed with governance).

  4. 0.1% of dividends given to fund creator (maybe a yearly 0.1% of fund given to creator as well?)

  5. Fund creators can propose that their fund to be recommended on the NDX front-end. Governance needs to approve. For any fund in the front-page, the rewards are reduced to 10% of the rewards previously.

  6. (Credit to Buggy): 1 or 0 NDX needed to propose changes to current index funds. Governance needed to approve. (Amount controlled by governance?)

  7. Reach out to Alliance block, Akropolis, CEXs once there’s more traction.

The first aspect of this compilation is that the crypto community has some of the most capable and creative people. Giving them the tools and the incentives to attract new users to the protocol will allow this protocol to go parabolic. The idea is that if the creators of the index funds are incentivized to also bring traffic to their index funds, we may see many intelligent researchers and content creators to begin to use this protocol to monetize their content. A content creator’s index fund would be the proof of competency and could be compared to other content creators’ index funds.

The second aspect is the creation of financial tools that never existed before: an index fund of yield farming tokens that actively pay dividends (or re-invests dividends). The mechanism to re-invest dividends of these tokens introduces the concept of “Compound interest” to Yield Farming. Compound interest is infeasible for individuals because of gas fees, so this introduces gains that otherwise would be unrealized.

All of this is slightly complicated to implement because some of these tokens are not very liquid on uniswap. I think there needs to be some mechanism to propose a “configuration” for each yield farming tokens. The configuration would include

  1. tokens and ratios required to participate in this particular yield farm
  2. tokens minted from yield farm
  3. contract to mint yield farming tokens
  4. contract to collect dividends
  5. probably more but too lazy

Once a configuration is approved, Then anyone can include this yield farming token in their index fund. The purpose of this is so that when a fund rebalances it doesn’t necessarily need to purchase the yield farming token itself off of uniswap. Instead, it can purchase the tokens required to mint the yield farming tokens and mint it itself. Later on, projects may require NDX to apply for configurations. Also, this configuration list will likely be used by other defi projects as well.

The third aspect is that NDX as a token does not really have any intrinsic financial value. Though some may say that a token doesn’t need dividends or buybacks, the reality is if NDX token doesn’t correlate to the TVL in any way, the token price will suffer. The token price is a way to create partners of the protocol and a community that is deeply invested in the protocol. The token price is also a way to advertise the protocol on coinmarketcap or coingecko. A project that doesn’t correlate it’s token price to the success of it’s protocol I believe will suffer long-term.

The fourth aspect is creating a financial product to institutions and CEXs. ALBT and AKRO will present NDX funds to institutional investors. CEXs will present these financial products to investors. Why would institutions and CEXs be interested? I think the biggest advantage having these index funds is the fact that all the value is captured in the index fund token. There’s no hanging dividends that CEXs need to deal with because it’s re-invested in the protocol. I believe this is the cleanest way to capture value of yield farming tokens across defi.

6 Likes
[Proposal] Yield-Farming with Index Tokens
#2

Just to clarify, when you say “anyone can make a fund”, do you mean “anyone can propose the underlying assets of a potential fund”?

How would a minimum amount be raised? Like, would NDX hold ETH in escrow until that minimum value is reached?

Just trying to understand the technicals of your idea.

#3

Basically no governance approval required for a fund to be realized end-to-end. I don’t know the specifics though.

Yes eth will be held in escrow and can be removed at anytime as long as it’s beneath the minimum. In the future maybe stable coins and wbtc can be used as well

I can try to give a basic outline:
Anyone can propose the underlying assets of a potential fund. Anyone can contribute to these funds. When the minimum is reached the fund begins to purchase these assets from the market. Maybe these funds cannot be swapped for sometime after the initial purchase to prevent some attack where someone constantly enters and exit the fund to put it above and below the minimum. Funds can be removed at anytime below minimum. These initial funds can be denominated in Eth initially, but later stable coin and wbtc.

#4

I really like all of these ideas! I actually had the same idea last night as #2. This product would be unstoppable if you could include defi indexes that utilized defi for additional yield. Its the perfect storm of financial technologies leveraging each other to compound potential yield possibilities.

I fully believe if the DEFI5 could be connected to yield optimizing/aggregating projects and used to increase stake in the index, that this project will reach $1 billion in no time.

#5

I like this idea a lot however I have two things to chime in.

  1. There needs to be a very strict requirements list to avoid unwanted tokens in the indexes, i.e rugpulls.

  2. To propose an index, I think the user should need a minimum of 1000 NDX Tokens as a way to avoid unwanted indexes from uneducated people. I don’t think there should be a requirement needed to propose changes to indexes because that might prevent governance interest from small-holders.

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#6

Wow great suggestions.

Maybe we have like a blue chip index mode and a degen mode? Degen everything goes. Blue chip requires to be on a curated list.

Agreed to your second point. Much better arrangement. The main thing I was thinking about the cost and governance for proposal changes was that I wanted to prevent people from spamming proposals. Also, I wanted to prevent a legitimate index introducing rugpulls as a way of exit scamming.

#7

If we were to have a “degen mode”, I think it would be too easy to rugpull that. Something like having users create indexes is very high-risk, and even in a degen mode if there are no requirements in place it’s going to fall apart with scams.

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#8

Maybe degen mode is not a list, but you have to search to reach the index directly? I feel like some rugpull potential is unavoidable. Even uniswap can support rugpulls.

Edit: But after thinking it over, I think you’re right. When I’m using Uniswap, everything is on some list. Either coinmarketcap or coingecko. I’ve never had to use its degen features either.

Double Edit: I don’t know where to put this. But I think a big risk in addition to rugpulls is how the protocol reacts to yield farming protocols being hacked when their token is in an index fund.

#9

This needs to be required to be discussed in governance maybe. Probably even set as an Index standard even if there’s option A,B,C, D and you have to choose one of those predefined plans.

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#10

This is part of the motivation for Sigma :slight_smile: later this year we can have a nice set of battle-tested strategies, perhaps with a large token whitelist managed by the dao or a committee to avoid scam tokens.

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#11

Great suggestions. I think it’s also important to get audited by a few more independent security teams ASAP so people can put in their funds with peace in mind.