Launch sINV as a 1:1,000 split of INV

Inverse Finance DAO
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1

Background

INV is viewed by many as an undervalued DeFi asset that trades at multiples below industry revenue-to-market capitalization comps. Explanations for this vary but as other well-known DeFi tokens pursue a path of splitting their tokens to benefit from a lower unit bias, the launch of sINV, outlined in the DAO’s product roadmap, provides an opportunity to do the same and enable greater value for INV token holders.

As a formal governance proposal to launch sINV is approaching, the splitting of sINV needs a sentiment check.

Hypothesis

Similar to the practice of splitting shares in equities, splitting the sINV token at a ratio of 1:1,000 will result in increased retail and other demand for sINV than if sINV were issued at a 1:1 ratio to INV.

About sINV

Offering INV staking on a cross-chain basis with our current approach to INV staking is technically difficult and replete with risk. For example, the current approach does not address the “hassle” of manually claiming rewards. A better way to bring INV across chains and introduce INV to wallets of all sizes is to offer a wrapped version of INV called sINV using an ERC-4626 vault (as we do today with sDOLA) that automatically captures DBR rewards (and xINV staking rewards) and autocompounds them into a single token users can take with them anywhere use as lending collateral etc. sINV has significant potential to add continuous buy pressure for INV as DBR designated for the sINV vault is continually swapped for INV, tightening the coupling between FiRM and INV.

How it Works

  • sINV vault tokens are minted at a ratio of 1:1000 for each underlying unit of INV being staked.
  • Rewards are distributed and auto compounded across the total number of minted sINV tokens

Other Notable Announced Token Splits

  • MKR 1:24,000 token split. Since May 2023 Endgame plan release MKR has risen approximately 270%.
  • Redacted BTRFLY: 1:2,000 token split. Since proposal last month BTRFLY is up ~10%.
  • Other notable splits > than 5 years ago: ADA, TRON, VET

Benefits of splitting sINV

  • Greater accessibility to INV for retail and other “odd lot” buyers. New users on emerging L2’s are only beginning to gain visibility into DOLA yet have limited or no awareness today of the INV token. Bringing siNV to those users at a lower price point provides a fresh opportunity to market INV to them via an (optically) more affordable sINV version of the INV token, resulting in increased demand for INV.
  • Marketing event. The launch of sINV not only as a wrapped version of INV that can be taken across chains and used as collateral but also launching sINV with a 1:1,000 split creates a bolder launch story that can attract greater attention and ultimately assist with adoption.
  • No impact on INV contract. Splitting sINV not modify the existing INV contract and therefore should have no impact on existing CEX listings. I.e. splitting of INV into sINV will not create the appearance of a dramatic drop in INV price.
  • Re-uses sDOLA and cross-chain sDOLA work. The product development effort for sINV is extremely modest due to its similarity as an ERC-4626 vault token with sDOLA.

Costs

  • There is little or no incremental engineering effort required to implement sINV at a 1:1000 split to INV versus implementing sINV at a 1:1 ratio to INV.

Risks

  • Confusion by users between INV and sINV when viewing prices on content publishers like Coingecko. For example, a 10% spike in sINV price that is not reflected immediately in the price of INV. Resolution: while price changes in either token may not be reflected on a 1:1 basis immediately, arbitrageurs have an opportunity to help ensure parity more quickly.
  • Users may ask why we don’t split INV at the same time. Resolution: splitting both would risk we bricking existing CEX listings and if sINV is as successful as we believe it will be, we may propose to split INV or migrate it in the future as well.

Next Steps

  • Check sentiment on Forum, potentially launch Snapshot vote if sentiment is mixed
  • If we proceed based on sentiment, sINV will be included in the main on-chain sINV proposal and does not require a separate on-chain proposal
2

In general I’m in favour of the proposal but in my opinion the low liquidity of the INV pools is a much bigger problem… The correlation between liq and valuation is stronger than that between supply and valuation. So how are we going to address the liquidity difficulties after having even more pools to feed?

3

Overall supportive of this. It gives the opportunity for some A/B testing of unit bias.

With regards to liquidity that is a problem we’ll face whether we redenominate or not. It’s a good problem to have however and one I believe Inverse will easily face given its positions in AERO and VELO.

4

Temp check snapshot vote on sINV split here: Snapshot

5

This is an idea that I’m personally not too keen on. I think to get the benefits from a “redenomination”, it’d need to be on INV itself rather than sINV, as this is what the majority of users will trade and hold (most likely). I also think this introduces significant confusion to users when trying to convert between sINV and INV mentally. Having an exchange rate that starts at 0.001 and then slowly increases will make it hard to calculate roughly how INV goes into sINV mentally. For the more standard starting exchange rate of 1, which is seen for the vast majority of other auto-compounding assets, it’s far easier to know how much INV your sINV is worth when the exchange rate is 1.2 or similar.