Revival Strategy

On-chain indices in the current iteration of the market, fall short of capital efficiency and dampening volatility. Arguably because of poor economic auditing and reliance on the instrument’s secondary market liquidity. The vacancy for passively managed indices is still open, and it outshines the plain actively-managed models that are prone to human bias.

With an outstanding debt of ≈ $17,500,000, revenue is the only means of revival. This document specifies an in-depth strategy to capitalise and accelerate passively managed indices to accommodate every user and organisational demographic.

Sigma program termination

The internal and bi-communal effort to accelerate research and develop more abstract methodologies for indices did not go unfounded. It was without a doubt, a success, even amidst the chaos of the exploit. The committee formed acted faithfully and proactively on their obligations to see the success of the program. Regardless, the situation the organisation finds itself currently is in a state of disarray.

Conflicts

Given the recent token migrations of Reserve’s (RSR) and Rari Capital’s (RGT) tokens, it is clear that there are no mechanisms to migrate index constituent assets if necessary. The only possible course of action to resolve such circumstances is phasing out assets over time through the unbound token seller (which could take months depending on market factors) or reconfiguring the proxy implementations of the assoicated index pools.

In the case of RSR, whom’s engineers disabled the old token’s ability to transact on migration. This has essentially bricked any smart contract that holds a native balance and thus, the index pool model itself from functioning adequately. The DEGEN index, since one of its constituent assets is RSR the migration has resulted in the pool unable to execute multiple asset actions because it requires RSR to be transferred. Meaning the only way to enter and exit the index pool is through singular denominated asset actions, additionally, the pool cannot rebalance as it requires RSR to be transacted.

Learnings

  • Increase portfolio set size to compliment economic performance
  • Indexed was not created to make actively-managed products
  • Communal participation should not be underestimated in its capacity
  • Further experimentation of weighting strategies should be researched and prioritised
  • The index pool design is not adaptable to suit the migration of constituent assets
  • Focus categorisation on more in demand and capitalised market sectors

Disolution

All Sigma pools are configured through proxy implementations, while this isn’t ideal in terms of decentralisation - it certainly is a benefit in the case of the technical difficulties the organisation finds itself in. Each index pool has an equivelent unbound token seller contract to handle unbound tokens, it is a proxy owned by the index pool.

Given the unassessed anatomy of the index pool model after the exploits, each index pool model should be reconfigured to a simple implementation that is minimalised to only:

  • Reconfigure the unbound token seller proxy implementation allowing withdrawal of all assets back to the parent pool
  • Redemption of the pool’s Assets Under Management (AUM) proportional to token ownership

This essentially redacts the logic of the index pool model so all of the assets can be redeemed safely and without further risk of exploitation given the complexity of oracle dependencies and low liquidity markets.

DEGEN

RSR’s token migration was executed by airdropping the new token to the previous addresses, meaning by default it is unbound. Calling the bind function in an index pool will transfer unbound tokens to the unbound token seller, which was done. The AUM in the DEGEN unbound token seller is currently valued at approximately $250,000 denominated in THOR, CRV, and predominately RSR.

Bond mechanism

This implementation can essentially be framed as a redemption-only vault, where revenue is funneled from protocol cashflows until reaching the vault’s target goal. It will be abstracted from the EIPS-4626 vault standard, which is peer-reviewed and authored by some of the prolific engineers in the industry.

Distribution

The bond is to be issued proportionally to ownership of the cumulative Net Asset Value (NAV) at the time of the exploit, which is approximately equal to $17,500,000.

Please note that the snapshot implementation is still a work in progress and liquidity positions been to be indepedently calculated, view the implementation here.

image
NAV snapshot of DEFI5 and CC10 from the Oct 2021 exploit [source]

Among the victim demographic, the treasury is included at approximately 0.03% - as it has collected the exit fees in the denomination of effected assets.

Economics

Treasury’s bonds can be provisioned with NDX at inception, to give the possibility of victims to sell their debt positions if they believe it will default. Avoiding the need for outsourcing liquidity and providing an additional revenue stream for the treasury, given that all leading revenue will be pledged towards settlement.

KPI metrics compliments the design, conditioned by select economic factors defined via Time-Weighted Average Price (TWAP) and moving average queries before the target debt is fulfilled:

  • If the price of NDX sustains greater than $30 over one month; an additional $1,500,000 will be added as surplus to the outstanding target [2]
  • If the Total Value Locked (TVL) of the protocol is greater than $250,000,000 over a period of 3 months; an additional $1,000,000 will be added as surplus to the outstanding target

If both of factors are met, the settlement of the bond will equal ≈ $20,000,000, complimenting network effects of external markets, TVL, bond speculation and fufillment.

Indexed [v3]

Capital-management

With the realisation that portfolio size arguably dampened the performance and extended the volatility of past products, extending diversification is crucial in new deployments of index pools. While the organisation’s first materialisation of capital architecture will be a flagship or placeholder index to attract the general demographic. Architecting more niche but dominant market sector-specific categories that accommodate demand and areas of growth are forward-reaching goals.

Capital-efficiency

To address the prevalent liquidity issues seen in v1 of the index pool model and the Sigma program. A new fundamental scoring strategy will be modelled that assigns a fix weighting of the native network asset (eg. ETH) and allow the remaining weights to passively follow a dynamic strategy [1], such as capitalisation-root weighting. Ultimately capitalising on the basis that the index pool model, itself, is an automated market maker (AMM) and saturates the dependency of secondary markets to complement rebalancing.

Permissionless

While official deployments of the index pool model were pushed at the discretion of internal developments throughout the lifecycle of the protocol. There has been a clear demand for open, permissionless, and immutable deployment of index pools. This is a forward-facing milestone for the direction of the protocol as of today, allowing anyone to deploy passively managed portfolios with economic versatility and configuration.

With such empowerment, it is clear to ensure censorship-resistant access to the protocol. Fufilled through deployments on IPFS to negate centralised hosting.

Modularity

Index pools are architected to accommodate modular weighting strategies, defined through external contracts defined as a scoring controller. Index pools should have multiple options to suit arbitrary financial strategies, research and development of weighting mechanisms are a core focus going forward.

User expierence

Diversification is a long-winded process to execute independently, many factors can affect the outcome of capitalisation. Individuals want to easy exposure to select assets without complication or complexity, organisations want economic performance to restrategise and negate risk.

This is why the decision has been taken to accelerate the development of interface and product design to suit both basic and advanced demographics. It will be achieved through two independent interfaces, one providing a seamless and simple experience for diversification. The other, is a trading terminal for economic performance and conditioning. Designs for both are in their early drafts.

Roadmap

The course of development planned including the elements described in this specification are as followed below, the timeline of completion is expected to completion is approximately 8 months. This is subject to change if additional actors engage as contributors.

  1. Sigma termination
  2. Exploit compensation
    • Snapshot
    • Bond mechanisim
  3. Indexed [v3]
    • Index pool model
    • Frontend designs
  4. Auditing
  5. Frontend development [v3]
  6. Capital management
  7. Deployment

Organisational reform

Alignment

Bi-weekly community calls will be held every 2 weeks every Wednesday @ 2:00pm GMT / 10:00am EST. Located in “community-calls” channel in the Discord, these conversations will facilitate governance digests, operations debriefing and community representation. Participation is open and encouraged, join the Discord.

Research

Proper economic and quantitative research to shape the design of passively-managed financial instruments is key to providing high-performance instrumentation, and reinforcing the thesis that actively managed is subject to bias and unproductive. Advancing internal and aligning external research of passive management and economics is a forward-facing goal to ensure product viability.

Security

In the aftermath of the exploit, it is clear single spear-headed development of the smart contract infrastructure is not a viable option. The autonomy of the organisation should reflect its development practices, attracting talent to contribute and build out the protocol is a priority.

Additionally accelerating peer-reviewing and auditing of architecture, is detrimental to success. Through milestones of orchestrating an audit council consisting of independent auditors and organisations, to constructively produce security reports and review peer submissions.

Since the state-of-the-art testing suite for smart contract development is Foundry, it will be a priority to migrate all unit tests and contracts to this tooling going forward. Additionally using it to simulate all mainnet deployments and configurations will be mandatory.

Contribution and renumeration

While current resources to materialise developments are all originating from personal expenditures, it is not sustainable long-term for the organisation at scale. Indexed throughout its life has not aligned external actors to contribute to the protocol, identifying key contributors and providing remuneration for their efforts will be advocated to maintain coordination.

Renumeration

To align long-term commitments and accomdate available the resources of the organisation, core contributors will be assigned compensation of a fixed USD quote on enrolement. Compensations are fragmented, priced and vested over a quarterly basis, and priced in NDX dictated through TWAP queries.

Governance or the individual, holds the ability to cancel the renumeration at any time. If consensus deems the commitments are infeasible or the individual feels the inability to achieve the needs of the organisation.

Positions

The vacant positions of the organisation are as followed, note that proposed compensations and positions are not final and all fall under the discretion of governance.

Lead
Salary: $200,000

Maintains lead development and management of therein, which includes identifying priorities and assignments. Additionally critiqing and providing feedback on other peers’ contributions. This also extends to any of the pending needs of the organisation, so an agile actor with multiple skillsets is of importance.

Smart Contract Engineer (Senior)
Salary: $150,000

Develops core infrastructure; smart contract testing, security and associated integration libraries.

Frontend Developer (Senior)
Salary: $100,000

Develops middleware infrastructure; frontend development and design implementation.

Progress

Credits

2 Likes

I Samuel JJ Gosling, am proposing myself as a candidate for lead and if elected, will seek to fulfilling this strategy at all costs. There has been oppositions of my ability to reignite the protocol, so I feel it is necessary to state my relative expierence and acheivements to advocate my fit for a such a crucial position that dictates the future of the organisation.

Github: @samgos
LinkedIn: samuel-jj-gosling
Twitter @xGozzy

  • Experience in community management (since 2017)
  • Original frontend developer and designer of the Indexed v1 interface
  • Active contributor in Tornado Cash governance for the past 1 year and 2 months
    • Was an active signer on the Tornado Cash community multisig, where I critiqued other peers and provided technical support and assesement on any pending tasks for the subsidiary body
    • Providing consistent technical outreach in education of how the zero-knowledge circuits and smart contracts work
    • Helped authored the bounty program, which will continue with upcoming tasks are about to be proposed
    • Provided reoccuring assesments and feedback on community developed proposal and ideas, such as reviewing the submission for the bounty program’s analytical tool tutela.xyz
    • Aligned countless contributors
    • After the OFAC sanctions, the arrest and the open source censorship - all of my peers abandonded their posts. I stood my ground and did the following:
  • Ethereum Foundation grantee for contribution on MACI
  • Intuitive and experimental UI designer, been acclaimed to outshine design firms
  • Active researcher in economics, governance and game theory
  • Proficient software development experience in:
    • Solidity
    • React
    • Javascript / Typescript
    • CSS
4 Likes

Lot to think about.

Glad to see plans for professional paid positions in black & white. Obviously those come with all the benefits and concerns every builder has.

Under this plan, would new indexes be possible in 6 months? 12?

1 Like

I read somewhere in the proposal it was estimated to be 8 months to get all sorted.

Regarding remuneration, I also think is great to have it on paper, however I do think that compensation might be too high, I understand that in crypto ecosystem compensation tend to be higher than usual but I’d argue it might not be sustainable to star with such high compensations, we could set some bonuses for when certain milestones are hit to offset compensation.

Also, how would we proceed with the hiring of the front-end and smart contract developer? Are there any candidates for the roles?

And finally, I have no doubts @gozzy is capable of taking the lead role, however it does seem you are still quite involved with tornado cash, so 2 questions come up to mind: how would you plan splitting your time between projects? Also, aren’t you concerned about OFAC sanctions? I mean already another developer got arrested, if you aren’t backing down on supporting tornado cash, shouldn’t we be concerned about our lead being arrested or the projected being targeted in some way?

Generally I really like the propositions for the roadmap :clap:

2 Likes

TLDR:

  • Compensation needs to be linked to specific goals or a % in NDX tokens instead of USD
  • Establish a council of advisors that discuss the roadmap and that combines different functional expertise (an actually working version of the Sigma/Growth committee without multisig obv).

given the protocols’ history, I also think remuneration should be a bit more specific.
having a “lead” can be good to accelerate things but I’d assume the main motivation should be the accrual of token value and thus ownership of tokens. Since @gozzy owns tokens, it obviously make less sense for him to propose rewards in token as this entails higher risk. In addition, the market is not very positive atm. Nonetheless, I think that 200k USD, and also the other positions are insufficiently justified. Hence, I propose to have more specific objectives or divide the 200k into tokens etc. as it can be good to boostrap.

Finally, I’d like to see more user/retail-friendly terms. This also implies having more retail-centric people either as advisors or permanent members. I think that permanent members now are not needed but I strongly advocate for a circle of advisors that are highly involved and committed and can contribute to the strategic roadmap.

1 Like

I personally think these roles are inapplicable right now, given small monetary power the treasury has. I only mention them as forward vacancies once resources are more available, and that is at the hand of the free market.

I want to make it clear that the lead needs to undertake the initial milestones independently, before it is realistic to onboard any key contributors in those specialities at fair market rates.

Tornado is still indeed a responsibility of mine but it is not a situation that is feasible in terms of financial upside. In the worst case scenario (CFTC approach on Ooki DAO), I need resources to legally defend myself.

I am not entirely alone at tornado so I am mainly there to co-ordinate initatives and governance, with some maintainence of community resources. It is not a full time position in any capacity, at least how I plan to withold it. It can be very time consuming but it is something that can be done simultaneously with more hands on work.

In regards to concerns about potential inability to proceed the needs of the organisation, in the worst case scenerio because of my relevancy to tornado. Governance can always cancel renumeration, additionally the less said the better but I have taken precautionary measures is all I shall say.

I feel some people are slightly confused about how renumeration is priced, as stated positions are assigned a fixed USD quota like the salaries stated. These salaries are then split into four independent vesting schedules - each for a quarter of the fiscal year - then at the start of every quarter that proportion is priced to the equivalent amount of NDX at the time.

For example, if the current quota was to be decided on, it would result in approximately 3% of the total supply.

Q1 compensation: 200k/4 = 50k 
Treasury assets: 635k
Q1 compensation of Treasury: 50k/635k = 7%
Q1 compensation of Treasury (NDX): 7% of 4,652,138 NDX = 325,649
Q1 compensation % of total supply 325,649/10,000,000 = 3.25%

I personally think is pricing of individuals contribution in this method, is far more superior than fixed denomations of the native governance token. As I think it commits long terms alignment if the vested allocations grow but at the same time is balancing to market changes to not skew it unfairly, which also is apprioriate in the case of market downturn.

Although, seeing how much supply the lead position would accure in the first quarter does realise that this approach is not ideal in the current evaluation of the treasury.

Solidity engineer salaries (look to org’s like OpenSea)

Frontend engineer salaries

Agreed. So we would only carry forward with a lead role. Makes sense to me

So remuneration would be done through a governance vote on Governor contract?

This is an interesting idea, however I am not sure who those advisors would be. I guess for the first year or so would make sense to have only the lead calling the shots (with feedback from the community through Discord + Snapshot)

Regarding compensation, I think USD denominated payed in NDX is fine, though I still think 200k is too much, even though other companies might pay this kind of money, we are still barely getting our sh*t together, 200k for the lead role would give us a 3 years runaway at current market conditions, for a single person behind the business, that definitely is not ideal. I’d be in favor of having a smaller base salary (something around 70-90k) and set some milestones to be reached, in which case could result in a 200k annually if those milestones are indeed reached.

1 Like

I was thinking we could use 0xSplits for handling renumeration, if you look to their Mutable Split you can configure a flow to be permissioned by a controller address - in this case governance - which allows the recipent of the split to be modified. If governance deems the renumeration unjustified, the split outflows can be assigned back to the treasury. This would be used in unison with their vesting module to stream each quarterly payment into the split.

In regards to the compensation, I will kindly remind you the state of which the organisation is in and the outstanding debt that is on the table. I will have to go undergo tedious efforts across multiple specialities to bring forth this strategy, from design, to frontend development, community management and smart contract development. I do not know anyone of whom can tally all of these skillsets independently.

I do notice the clear skew in power accrual if we were to go ahead with the current salary, so that I agree is not the way forward. Milestones do sound like the best proposition but also taking an undercut for efforts initially should be matched with a bonus if let’s say; the bond is settled.

I would be willing to settle at 120k starting salary, with an upper limit of 200k dependent on fufilling the roadmap. Then a bonus allocation if the bond settles, which ideally should be a predefined amount of NDX to exert long term commitment and alignment.

Compensation should be capped at 400k for 1y and only deliverable if set KPIs are met with a base salary at 20k tokens (about $3k/m which is more than reasonable for reasonable living costs). With a budget at 250k tokens for operational costs only. The salary base should be updated every 3m to match at max $50k per 3m in NDX

KPIs should be TVL based, which itself will interact with token price/users anyway.

60k Bonus at 10m TVL
60k Bonus at 100m TVL
60k Bonus at 1bn TVL

The amounts are the same as a 10x in TVL would be a 10x in NDX price and as such a 10x in the bonus to match the performance.

This makes sure lead can live reasonably without paying too much if they do fuckall or arent effective.

Note at even a $10m mcap which was our base bottom, the 20k base salary would be $200k as requested.

I like the KPI being measured in TVL, the milestones also seem reasonable (though maybe the 1bn could be lowered a bit, since I don’t think the whole web3 funds sector ever got such a high TVL - I might be wrong).

For compensation, $3k USD/month seems too little tbh, I was thinking something around 5-6k (after tax) should be fair, anything more than that I do think could affect the DAO given that the treasury wouldn’t be able to sustain it for too long.

1 Like