Start INDEX bonding on expedited schedule

kiba

Title: Prioritize INDEX tokens for bond approval for widespread DeFi bluechip meta-governance power

DEPARTMENT or DAO: Growth

Draft Proposal Link: https://near-diploma-a92.notion.site/LOBI-Bonds-f94591801e514378afebd8ec09db5ea1

AUTHOR(S): @kiba

PROPOSAL: Prioritize Index Coop's governance token INDEX for bonding to use for meta-governance in various DeFi protocols through their DPI holdings

PURPOSE AND VISION: Acquire 110k INDEX tokens with the goal to reach quorum on Index Coop meta-gov proposals to control $150m of Defi bluechip governance power. This will make LOBI the biggest voter on top DeFi platforms like UNI, AAVE, and COMP (details below).

IMPACT: $150m of governance power purchased for 1/100th (110,000 INDEX) of market price. Acquisition of heavily undervalued asset into treasury.

ABSTRACT:

Index Coop (IC) makes crypto ETFs, including DeFi Pulse Index (DPI) the biggest in the market with ~$150m in TVL. IC indexes are fully backed and redeemable meaning IC is responsible for custody of all assets for their index investors. This has led to them controlling nearly 1% of circulating supply for major DeFi DAOs. In order to streamline the process for voting on proposals with DPI they created a MetaGovernance Committee (MGC) that’s responsible for deciding votes if quorum isn’t met and executing votes once a decision has been made by INDEX voters or the MGC itself. If LobisHQ is able to seize a medium-large position, quorum’s would be met, further enabling & proving the ability of LobisHQ to fairly decentralize a larger protocol’s governance, while gaining massive strategic value, at great price/leverage. If passed, Lobis will also as a by-product start to be backed by AAVE, UNI, Compound, Maker, Sushi, Yearn, Synthetic and Rari tokens, by extension of the IC and DPI synergy. Additionally IC has significant governance power across DeFi to bootstrap LOBI’s power & value during this initial phase.

DESCRIPTION:

Index Coop (IC) makes crypto ETFs, including DeFi Pulse Index (DPI) the biggest in the market with ~$150m in TVL. Their indexes are fully backed and redeemable meaning IC is responsible for custodying all assets for their index investors. This has led to them controlling nearly 1% of circulating supply for major DeFi DAOs. The great thing about buying INDEX is they accumulate governance power for us by growing their products. E.g. they are adding ENS to the Data Economy Index (my product with them) so LOBI automatically gets exposure to ENS governance without having to issue more bonds.

$1 of INDEX buys $4 of bluechip DeFi governance power (DPI mcap / INDEX mcap) making efficiency of buying INDEX better than any other token (including CVX, currently at $1.1 / $1).
We call this leveraged meta-governance. Since quorum is rarely met for Index Coop meta-gov votes, LOBI should seek to acquire 110,000 INDEX tokens (5% of circulating supply, worth $1.8m currently) in order to ensure all meta-gov votes pass. This means LOBI can control $150m of governance power with only $1.8m of investment. 100x leverage! IC is one of the biggest voters for UNI, AAVE, COMP, and YFI so acquiring INDEX expands LOBIs reach and power base. They are in the process of passing a new product with Bankless that will include CVX, gOHM, TOKE, SPELL, etc. so we will be purchasing those tokens at a discount, more efficient than any other protocol with similar intentions to LOBI.

IC also controls enough AAVE and UNI (and COMP?) to create their own proposals on these protocols which is critical to help integrate LOBI and OHM tokens into the DeFi ecosystem. FEI already bought 100k INDEX for meta-gov purposes. They used this to get FEI listed on AAVE using Index Coop meta-governance .

In order to streamline the process for voting on proposals with DPI they created a MetaGovernance Committee (MGC) that’s responsible for deciding votes if quorum isn’t met and executing votes once a decision has been made by INDEX voters or the MGC itself. If LobisHQ is able to seize a medium-large position, quorum’s would be met, further enabling & proving the ability of LobisHQ to fairly decentralize a larger protocol’s governance, while gaining strategic value. If passed, Lobis will in effect start to be backed by AAVE, UNI, Compound, Maker, Sushi, Yearn, Synthetix, Rari, ENS, and many more tokens, by extension of the IC and DPI synergy

I was the original proposer of the MGC and have sat on the committee since it began, I love meta-governance and am very excited to be contributing at LOBI. There is clear alignment between LOBI’s goals and the MGC’s functional role. LOBI would actually be alleviating some of the disagreements about MGC in the first place that it “disenfranchises” INDEX holders by delegating to a team when quorum fails. Since LOBI would be helping quorum be met they would be giving more power to other INDEX holders in meta-gov decision making (inline with our mission to give power to small holders.) Additionally IC has significant governance power across DeFi to bootstrap LOBI’s power during this initial phase.

On INDEX Liquidity

There is very low liquidity for the INDEX token and is susceptible to large price movements. INDEX is quite literally a valueless governance token with no staking or value accrual to token holders which explains the low liquidity. Its only use case is governance in IC directly and metagovernance in other protocols, a perfect candidate for LOB I. so we should take a staged approach to acquiring the full 110,000 INDEX we need. I suggest we start with bonding INDEX immediately and see how that goes. @kiba can bond a significant portion of index from personal funds he already has. The Index Coop treasury is going to provide liquidity for INDEX/ETH so we can increase bond size once that happens (ETA unknown but it’s recently approved by governance). Also worth noting that Index Coop might approve an INDEX buyback program when their token is undervalued so this opportunity might not last long.

Alternatively we could bond INDEX/ETH LP tokens but that cuts our $/vote in half, still >$1 but less efficient, which will help us bond more INDEX in the future.

SPECIFICATION:

I’m new to OHM world so still learning about bonding process so sorry for lacking/false details here.

Lobis Finance dashboard would need the INDEX RFV added, even the underlying tokens it represents (1 aave, 1 comp, 1 rgt per index, x index per 1 lobis)

Bonding:

Acquire 20,000 INDEX tokens via bonding
Start bonding process ASAP

Voting process:

Since INDEX votes happen on Snapshot LOBI would have to delegate to an EOA to execute whatever LOBI voters vote on in INDEX Snapshot.
LOBIers would vote on LOBI Snapshot. The MGC would use INDEX Snapshot results (assuming quorum is met) to execute onchain or snapshot vote.
LOBI ops can either pull votes from individual DAOs or track INDEX Snapshot for meta-gov proposals and copy them over to LOBI Snapshot. Index Coop meta-gov votes end 24hrs before the actual DAO vote ends so LOBI should end 48hrs before the DAO vote ends to allow time for vote to be submitted to Index Coop.
im thinking here ^, as a metagov proposal is duplicated into IC, the IC snapshot is duplicated into Lobis snapshot, maybe ending 1 hour before the IC snapshot ends, and pass the leading decision up into IC. If Lobis is proposing upwards, they create initial proposal with some sort of [IC-AAVE] tag for example within lobis gov, if quorem/consenus is hit it advances to creating proposal on IC snapshot?
IC will still be responsible for actually executing votes that INDEX holders want. So LOBI just has to vote on INDEX Snapshot and the MGC takes care of everything else for us.

ROADMAP AND TIMELINE:

WHEN: Expedited Proposal Timeline (worth noting that Index Coop might approve an INDEX buyback program when their token is undervalued ((now)) so to leverage this opportunity we must act accordingly)

12.18.2021: INDEX bond discussion finalized

12.20.2021: LIP-6 passes on Snapshot

12.14.2021: First INDEX bonding round starts

01.08.2022: Second INDEX bonding round starts

Ideally done accooomulating by end of January 2022

KPIs:

$ voting power per $1 of INDEX
% of INDEX needed for meta-gov quorum

plutusIIIIII

The proposal makes a compelling case, but I’m not (yet) familiar enough with INDEX to form an opinion. I’ll need to do more research on my part and consider comments from those more knowledgeable before making a decision as to how to vote on this.

Mr_E

Great proposal. It does seem to make sense in theory. I do question whether there needs to be urgency behind the approach. We are scheduling to start up additional approved bonding assets as stated in LIP-2. With the recent downward price action, adding too much too soon will destroy price further in an already threatening market environment.

It would definitely need some input from the policy team on if it makes sense in the short-term….in the long-term, I do think it would be something to explore.

[deleted]

I agree that Index makes a compelling case for the next bonded asset. Imo we should aim for at least 510k INDEX in the medium-long term (6 months).

Given the size of the ask think this should go through normal 3,3,2 voting.

IceCubeIIIIII

Great proposal, thanks a lot @kiba !
Think it makes a lot of sense.
A few questions:

Does index coop generate revenues?
Can you vote with INDEX/ETH LP tokens? (in which case we might want to bond SLP as there would be interest in farming INDEX and Sushi while still being able to vote)

I believe it shouldn’t go through expedited governance though. Anything related to issuing new bonds, should go through a fair and deep debate.

kiba

IceCubeIIIIII

Index Coop is making about $10-20k a day, you can check their Dune Dashboard. There is no staking of INDEX so this doesnt get passed to token holders though 111-altrektcrew .
yes you can vote with uni or sushi LP tokens and even SLPs staked in onsen (source: INDEXPOWAH contract)

Having contributed at Index Coop for over a year now, I know their governance process is a nightmare to deal with. If someone wants to lead a D2D swap effort you can go for it but I’m not going to waste my time. The months it would take to get a deal through governance the INDEX price might go back up to a reasonable value and we lose our extreme discount on buying governance power. Can take both approaches, bond now and use the INDEX we already own to vote for our D2D swap.

IceCubeIIIIII

Also, before bonding, we should condition it to a DAO to DAO token swap. I doubt they would refuse given the buying pressure that we would represent.

961919169

I am against the date format.

DD/MM/YYYY rules

111-altrektcrew

how much are the ic tokens and besides aquiring governing rights how does that translate into yeild?

IceCubeIIIIII

111-altrektcrew I think no yield yet, but would be great to understand their roadmap towards revenue and yield for the token

nicholasnokiaspoilerspoiler

This proposal is good.

961919169

Can somebody share a link to see how much votes per protocol per $INDEX at the present moment?

So whats the difference between DPI MVI and INDEX?

btt

kiba Given the numbers pointed out in this proposal, it is really compelling!

I was a little stuck on the “Voting process”. I thought the MGC would only kick in if the quorum for DAO voting wasn’t hit. But the 2nd point seems to suggest otherwise. Also, the timeline mentioned in the 3rd point is a little fuzzy to me too.

Another thing is what you mentioned here about the “nightmare” in their governance, which feels rather lengthy. Does that also apply to their voting process? We don’t wanna govern a DAO that is innately slow and inflexible.

IceCubeIIIIII @[deleted] Maybe a hangout event can be created to discuss this as soon as possible?

maegner

Sounds good just don’t know how acquiring such a large amount of tokens with the treasury’s funds will impact the overall survivability of the project.

But i do think that having such a large voting power will bring a lot of value to LOBIS long term, just need to make sure that this doesn’t hurt us too much on the short term to a point that there is no turning back.

IceCubeIIIIII

kiba
Thanks a lot for your answer.
Any reason they don’t pass their revenue to users? Is there a plan to do so? (I saw in tokenomics that INDEX holders would benefit from DAO revenues in the future)
Also, if we can vote with SLP, why don’t we rather bond SLPs which generate yield, rather than just INDEX?

Fugazi

This is a great oportunity yes! Good call!

Call me to vote when needed

plutusIIIIII

btt I second the motion for a hangout!

kiba

btt
If quorum isn’t met on their meta-gov votes then decision making is delegated to the MGC. No matter if INDEX voters or MGC decides on a vote the MGC is still responsible for executing votes. The MGC proposal I linked should explain everything https://gov.indexcoop.com/t/updated-proposal-to-form-a-metagovernance-committee/1601

By “governance nightmare” i mean actually politicking your way to getting an IIP passed. Since meta-gov is already approved by governance its not an obstacle to LOBI’s objective but trying to get a D2D swap for INDEX from treasury will be a lot of work, especially considering more established DAOs like FEI have already bought sizable positions from the market.

On timeline I’m happy going with normal 3,3,2 process. @GregS mentioned expedited process in my draft proposal so I changed it to that but doesn’t make a difference to me. I do think there is a unique opportunity given current market conditions that could slip away if we take too much time adding the bonds though.

btt

kiba
Aha, all good! I was mixing up some definitions previously. Thanks for the explanation!

kiba

Happy to do a hangout/AMA in the discord. I’m in UTC+9 so something my early morning should work for everyone @IceCubeIIIIII @[deleted]

kiba

IceCubeIIIIII
I was actually one of the early advocates to not have INDEX staking and pass on revenues haha. I’m not sure what their current reasoning is for that stance is but my argument was that 1) too early to provide dividends instead of reinvesting in growth 2) having a useless governance token instead of one with financial incentives creates stronger community. As far as I know there are no plans to pass on revenues, there is an INDEX staking proposal but thats not finalized and is only for contributors who earn INDEX to receive more INDEX over time which wouldn’t apply to us.

We can definitely bond SLP and because of low liquidity of INDEX that would shine a lot of favor on LOBI when/if we ask for a D2D swap. It does reduce the efficiency of bonding INDEX from $4 of votes per $1 of LOBI expenditure to $2 because we get half ETH but it also makes it easier to bond in pure INDEX later too. We also have to take into account LP rebalancing and that we will lose governance power as the token price increases so if we are operating under the assumption that INDEX is undervalued then holding INDEX/ETH LP instead of INDEX hurts us in the long term.