Authors: Nour Haridy PatB
nakamomo@indexcoop.com @n3bs basedxeno@gmail.com @thealientourist @cryptoharry
Note: this proposal improves on the original INV+ proposal dated 31 Dec 2021 INV + Proposal Draft v1.0
Summary
Transition the tokenomics of INV from a simple governance token with optional staking rewards to a positive-sum rewards and revenue sharing token that drives organic demand for DOLA.
Background
Like most stablecoins, Inverse Finance is seeking better ways to grow organic demand for DOLA, increase cross-chain AMM liquidity, as well as finance the expansion of Inverse Finance DAO operations. Inverse’s experiment with Olympus Pro during November is internally seen as successful and worthy of expansion.
Olympus Pro liquidity rewards today are funded via INV taken from the current Inverse Finance treasury, which retains a total of approximately 30,000 INV tokens. Inverse receives swap fees from the SLP tokens it permanently owns and indirectly boosts the generated DOLA interest revenue as a result of the Olympus Pro bonds, but the supply of INV rewards from the treasury will be depleted in the short-term as our liquidity needs expand. A change in the tokenomics of Inverse is therefore contemplated as a way to overcome this INV token supply cliff.
Objectives of INV+
- Boost Inverse treasury holdings in order to increase the supply of lendable DOLA towards our goal of 1 billion DOLA circulation in 2022
- Ensure that the Inverse Finance product line is optimized for maximum performance and competitive strength
- Expand Olympus Pro LP bond capacity
Core Proposal Features
- Positive Sum Rewards Token. INV+ marks the transition of the INV governance token to a Positive-Sum Rewards Token as a means of attracting new INV holders and boosting demand and liquidity for DOLA. This upgraded version of INV will provide stakers with a higher rate of staking rewards and consequently a higher rate of return than is currently offered with staked xINV. By attracting new investors to our INV token, we generate additional capital necessary to fund protocol-owned liquidity acquisition programs and most importantly, expand DOLA lending capacity. This updated emissions model for INV is preferable to simply minting new INV tokens without protecting INV stakers, which may trigger negative price action on INV.
- xINV Continuous Rewards. INV which is staked in Anchor receives INV on a continuous basis as they are generated with each new Ethereum block, enabling compounding not once per day or three times per day, but at current rates approximately 6,400 times per day. Along with the collateral utility provided by Anchor, this is a powerful incentive to stay staked.
- DOLA Interest Sharing Rewards. INV+ ushers in another industry innovation: DOLA Interest Sharing Rewards give a percentage of DOLA lending revenue to xINV stakers as new DOLA circulation milestones are reached. As DOLA’s popularity increases, value accrues to INV stakers in the form of DOLA.
- Low-interest DOLA borrowing against xINV on Anchor. We continue to press forward with offering some of the lowest decentralized stablecoin borrowing rates in the industry. INV+ enables us to expand borrowing towards our goal of at least 1 billion in DOLA circulation in 2022.
- Accelerated Leverage Engine (ALE). The ALE is a “looping” feature in Anchor that provides easy one-click leverage up to 11x. Borrow DOLA, buy INV, stake, repeat – up to eleven times. Geared toward more experienced DeFi investors. Coming soon in INV+ version 1.1.
How INV+ works:
The INV+ “Elevator Pitch”
- “Inverse built the first positive sum rewards token which combines a stablecoin, money market, and permanent protocol-owned liquidity all under one roof but with a very generous rewards program as well as revenue sharing. You can use INV as collateral and borrow against it at low interest rates.
Benefits For Inverse Finance
- Turbocharged Inverse Finance Revenue Model. Provides Inverse with a more coherent and “full circle” business model that combines three of the most attractive DeFi legos available (stablecoin, money market, and permanent protocol-owned liquidity) into one and demonstrates value accrual in a novel and easily understood way. There is currently no comparable business model like this today.
-
Boosts DOLA. Increased Treasury holdings leads to increased DOLA circulation and interest revenue. It improves DOLA borrowing options on Anchor and enables a greater number of collateral types.
Better Liquidity Strategy. INV+ enables higher rates of (permanent) ownership of cross-chain liquidity & higher swap revenue from LP tokens.
Summary of Continuous xINV Reward Rate Framework
- With INV+, xINV rewards occur on a near-constant basis, not an arbitrary interval (e.g. 8 hours). Continuous rewards are issued with the creation of new Ethereum blocks Ethereum Blocks Per Day which today are mined 6400 times per day.
- The amount of xINV rewards received by stakers is determined by a Policy Committee initially comprised of seven members who monitor and adjust the xINV Continuous Rewards rate with the following goals or criteria in mind:
- Grow the Inverse Treasury to support at least 1 billion in circulating DOLA on a sustained basis
- Issue rewards within the aggregate limits proscribed by the Delegate Council, who are responsible for replenishing the INV Continuous Rewards allocation approximately every 90 days.
- Limit sudden downward price action linked to changes in the xINV Continuous reward rate
- With an initial allocation of 15,500 INV for purposes of xINV staking rewards, a base reward rate APY of 100% is anticipated, with a hard cap of 500%.
Summary of DOLA Interest Sharing Rewards Framework
- Background
- In order to provide a value accrual component to INV+, the protocol will begin sharing DOLA lending revenue collected by Inverse as DOLA circulation reaches and surpasses measurable and quantifiable milestones. This further highlights the difference between INV+ and conventional rebasing tokens which often simply operate as hedge funds and generate profit through treasury ops.
- Goals
- Share revenue with xINV stakers in the form of DOLA as part of our value accrual story for INV+
- Design an interest sharing reward whose mechanics are easy to understand
- Avoid issuing interest sharing rewards in a manner that creates unwanted price volatility for INV
- Avoid issuing interest sharing rewards in a manner that harms the DOLA peg
- Minimize Inverse gas costs in distributing interest sharing rewards
- Features
- Establish DOLA circulation milestone.
- The first DOLA circulation milestone is to be set in this first INV+ proposal - 1 billion DOLA. This milestone is to be monitored in Dune Analytics and also monitored by the Policy Committee.
- DOLA Milestone Declaration Date.
- A milestone is considered achieved when the milestone is sustained, on average, over a 30 day period. The Policy Committee will announce the achievement of the milestone to the Inverse Community on a date we will call the Milestone Declaration Date.
- Compute DOLA Interest Sharing Reward
- The mechanics for computing the DOLA Interest Sharing Reward will be decided in a separate upcoming vote on GovernorMills.
- Establish DOLA circulation milestone.
Policy Committee To Manage xINV Reward Rates and LP Bond Allocations
- An off-chain Policy Committee will be responsible for setting reward rates for xINV as well as allocate INV for LP bonding campaigns.
- The rationale for the Committee is to ensure reward rates are optimized for purposes of marketing/customer acquisition but also to ensure maximum flexibility in the event of unknown circumstances that may require more prompt action than is possible today.
- An additional rationale for the committee is to ensure an optimization exists between LP bonds allocation of INV and xINV staking reward rates.
- The Policy Committee will submit a new request for allocations of INV approximately every 90 days for these purposes via GovernorMills and the Delegate Council.
- The Policy Committee will be comprised of seven INV team members who have been active in the development of INV+ and will serve on the committee for a one year term:
- Nour, patb, basedxeno, thealientourist, nakamomo, n3bs, and cryptoharry.
- No additional compensation for serving on this committee is required. Inactive or retiring committee members may be replaced by vote on GovernorMills.
- Voting requires 5 members to achieve quorum and decisions are decided by majority vote though the committee will endeavor to reach unanimous consent on rewards decisions. All voting conducted via text messages on Discord.
- Reward rate changes are submitted by the Policy Committee to Nour or Thealientourist for implementation within a maximum of 24 hours.
Timeline
| Deliverable | Duration (d) | Target Completion | Complete |
|---|---|---|---|
| Develop v1 Concept, post to Discord | 3 | 17 Dec 2021 | 17 Dec 2021 |
| Gather feedback, refine proposal, complete requirements doc, post proposal to discourse forum for comment | 5 | 31 Dec 2021 | 31 Dec 2021 |
| Post updated proposal to Forum, finalize 1.0 feature set with engineering, complete backend INV+ engineering work | 7 | 21 Jan 2022 | |
| Post “master” on-chain vote, Draft complete UI requirements, identify designer, announce plans for INV+ to community, announce OP bonds refill | 1 | 28 Jan 2022 | |
| First draft of new documentation, complete UI requirements and get engineering OK | 7 | 28 Jan 2022 | |
| Complete “master” on-chain vote | 5 | 2 Feb 2022 | |
| Finalize UI designs & submit to engineering | 1 | 7 Feb 2022 | |
| Frontend Engineering & Design implementation | 15 | 11 Feb 2022 | |
| Internal UI Usability//Closed Beta | 14 | 14 Feb 2022 | |
| Public launch of INV+ | 28 Feb 2022 |
Revenue Model
- DOLA lending interest revenue
- Bond revenue
- LP token swap fee revenue
- Treasury productivity revenue
On-Chain Actions To Approve
- Authorize 15,500 INV from the Inverse treasury to be used as xINV rewards contract at <>. These xINV rewards will be allocated by the Policy Committee over an estimated 3-4 month period. Also authorize hard cap of [ ] INV per block (approx. 500% APY) for this rewards allocation.
- Authorize setting of Policy Committee address in xINV Manager Contract
- Authorize amending the contract for vesting INV holders at <> to enable both vested and unvested INV to be treated as staked INV (xINV) while held in the contract. Authorize INV vesting contracts for theAlienTourist and patb retroactive to their start dates.
- Authorize amending the existing xINV contract to reduce the current withdrawal period from ten (10) days to zero (0) days.
- Authorize amending the existing xINV manager contract to allow Inverse Delegate Council to set a hard cap on reward rates set by the Policy Committee.
Off-Chain Actions To Approve
- Creation of Policy Committee consisting of Nour, patb, basedxeno, n3bs, nakamomo, thealientourist, and cryptoharry. Term of one year, no additional compensation, can be removed by Delegate Council if in active. Policies approved by majority vote with 5 votes required for quorum.
- Approve DOLA Interest Sharing Reward upon DOLA circulation reaching an average of 1 billion in circulation for 30 days. The mechanics for computing the DOLA Interest Sharing Reward will be decided in a separate upcoming vote on GovernorMills.
