Hello, YFI community! We publish this post as our community considers YFI as one of the most likely participants of PowerIndex, a decentralized Defi ETF-like product.
Currently, an unaudited MVP version of PowerIndex - Baby PowerIndex is live in mainnet, so everyone can play with it to see how it works. It has a certain liquidity cap ($550k) which is completely filled by our community. It is composed of 8 governance tokens (YFI AAVE SNX COMP MKR UNI WNXM CVP). Initial proportions are 12.5% for each token, but it can be changed by the community in the future (see description below).
For the main PowerIndex (uncapped audited version) token set will be defined by community voting. For the end-user, index share is represented by PIPT (PowerIndex Pool Token), which allows users to operate with a basket of 8 tokens using a single token.
We call this index a “smart” one due to the following features:
- All pooled tokens can be used for governance (voting) in composite protocols.
- All pooled tokens can be used for fund management strategies. All cashflows are distributed to the token holders. Also, index LPs mine CVP (the Concentrated Voting Power tokens, which integrate all pooled voting power of composite protocols) as additional source of income.
- Community can entirely govern the index, changing token set, weights of tokens, and pool fees via proposals.
We see the following value proposition for YFI and its community in case (no doubts about that) YFI will added into the index:
- The end-users of the index (Defi community) will get a stake in YFI simply by buying index token PIPT. So, any index user (PIPT holder) will be an YFI holder at the same time.
- Index stores all governance tokens in a special contract (check out Baby PowerIndex contract). All pooled tokens are used by PowerPool (CVP) token holders for voting on proposals (we call this process meta-governance). We are aware that YFI governance system requires YFI staking for enabling its voting option. We will elaborate further the technical solution for that. As all pooled tokens will vote at every YFI voting, this will contribute to increased participation in YFI governance.
- As PIPT is an interest-collecting token (cashflows will be generated by using pooled tokens in fund management strategies), liquidity providers will receive additional cashflows by providing their governance tokens, for example YFI to the index. In the case of YFI, it will be used for voting collecting rewards which will be distributed to PIPT token holders. In addition to the mentioned cashflows, all LPs will earn CVP tokens for provided liquidity according to the CVP LM program.
- PowerIndex allows swap tokens which are pooled inside the index contract. So, addition of YFI into the index would allow to swap other governance tokens to YFI and vice versa without any intermediary trades, boosting its liquidity.
- As a result of index capitalization growth, a lot of YFI tokens will be pooled inside the contract, which will help to maintain YFI market price acting as a supply sink.
Technical solution for enabling voting rights for pooled YFI
DISCLAIMER: proposed solution is preliminary and we would work with the YFI community and the team to create the best solution possible. We are open for discussions on this topic and will be grateful for your ideas.
We know that YFI itself cannot be used for voting in Yearn.finance governance - it has to be staked in the special contract for this purpose.
According to this feature, All YFI supplied to the index will be wrapped to wpipYFI and transferred to the router contract. The router contract will automatically stake YFI in the governance contract. The PowerPool governance system will vote based on decisions made by CVP holders using the entire balancer of the router contract. This will enable YFI voting rights and still use it as an index composite token.
In case of withdrawal liquidity from the index, wrapped YFI (wpipYFI) will be delivered to the user’s address. Users will have to unwrap the wrapped YFI from the wrapped contract (there will be a special UI for that). The same is applied to trading using PowerIndex (PowerIndex also can be used for swapping any token to any token, for example, MKR to YFI or YFI to AAVE, etc.
We understand that this procedure is inconvenient and also limits arbitrage opportunities for index, so we consider to use reserve ratio and stake certain percentage of pooled YFI in the YFI governance contract (for example, 70% of pooled YFI will be staked and remaining 30% will be used for allowing instant withdrawals and trading).
The PowerIndex participants grant program
Today we are proud to announce the grant program for PowerIndex composite protocols and Protocol Politicians, elected by their communities. Allocation of these grants was approved by the CVP community in Proposal 6.
This program is aimed to establish community partnership. It will engage communities interaction and bring additional value for YFI token holders and its governance system and PowerPool meta-governance protocol.
It is planned to allocate as much as 1% of CVP supply (1m CVP) to each protocol, which will be elected as a PowerIndex member in upcoming community voting.
This grant will be divided into two parts: the main one (900k CVP) will be under control of the YFI community and the rest of it (100k) will be divided into individual grants for two YFI active and trusted community members - we name such persons a Protocol Politicians.
Two grant recipients will be elected by the protocol’s community. PowerPool itself and CVP token holders have nothing to do with that.
The purposes of grants allocation
As it was stated in a recently published article, there is no real democracy without rewards. In common words to achieve a high level of participation in the on-chain governance the community needs to be motivated and engaged enough.
Meta-governance is not only about accumulating governance tokens inside the protocol. It is about the proper people’s organization and motivation.
Since the community is the key for meta-governance (while pooling GT liquidity is a necessary but not sufficient condition for building such a system), we decided to provide leverage in PowerPool votings for every composite protocol.
So, the community of each composite protocol would be able to have its own loud voice and defend their interests in any PowerPool proposal.
From one side, it will engage the community of these protocols into PowerPool governance, and from the other one will provide an opportunity for index participants to create a sort of coalition and influence index management.
To enhance this community engagement effect, we decided to allocate 100k CVP for two protocol politicians from each protocol. These grants will be individual ones.
Rules of individual grants allocation:
- A person should be elected by the protocol community. For example, Protocol Politicians from YFI should be elected by the YFI community
- There are no restrictions: Protocol Politicians can be protocol team members, majority token holder, minority token holder, accidentally PowerPool’s alpha/beta/gamma tester. Only the community decides who will be elected.
- Protocol Politicians from composite protocols aren’t required to have a CVP stake.
- Each protocol can define their own rules of resignation in case of Protocol Politician misbehavior. We will discuss options for that with each protocol team individually (note, granted tokens would be anyway on a vesting contract).
Basic duties of Protocol Politicians:
- To act as a diplomat between his own protocol and PowerPool - helping with communication between communities, including community calls, intro(s) if necessary, establishing collaboration on mutual research, articles, tweets, announcements, etc.
- To inform community members about future and ongoing development, proposals, community activity, etc. People from YFI and PowerPool need to be aware of activity in both protocols.
- To help with community-based technical integration. Here it means to facilitate all stuff related to community-driven tech development.
- Supporting community partnership. We consider protocols, which are exchanged with Protocol Politicians as partnered on the basis of community needs.
- Any other duties, specified by the community of the composite protocol. Each protocol can add their own duties and tasks for Protocol Politicians.
Roadmap for Grants
The roadmap for grants depends on the main PowerIndex launch roadmap. It is presented below:
- Posting on governance forums of protocols, which probably could become PowerIndex composite protocols. We expect it will take ~2-4 days from now. Until voting (the point 2 of this list) passes, all stuff regarding the election and resignation processes will be discussed on community forums.
- Community voting on PowerIndex composition (~7-14 days from now).
- Final election of Protocol Politicians, preparation of protocol’s treasures to use CVP voting rights in PowerPool governance. Integration of new sources of votes into PowerPool modular governance system
- Launch of audited and uncapped PowerIndex
- Distribution grants to the vesting contract, enabling all granted tokens for voting