DIP-3: Tokenomics Revamp Proposal
This article explains in detail what the DIP-3 (DEXTF Improvement Proposal) is about, why it has been proposed and why this is useful to bring DEXTF Protocol to the next stage.
Changes if applied will simplify the liquidity mining as well as the fund manager/investor reward’s programs to prepare for the upcoming token value accrual mechanisms.
By now, it must be clear that there are 3 main players in DEXTF:
- Portfolio Managers
- Investors
- Arbitrageurs/Traders
Each player must be properly incentivised to bootstrap a well functioning ecosystem.
Currently Portfolio Managers, and in particular those that reinvest the awarded tokens for compounded gains, have been disproportionately incentivised. This is also true for Arbitrageurs/Traders when taking into consideration that they earn through the liquidity mining program by LP-ing.
Both players individually have been receiving more rewards than Investors, who are the foundational layer to any successful asset management protocol.
To not properly incentivise Investors essentially means that the main source of liquidity that encourages larger AUMs in XTF funds will take a longer time to actualise. Larger Funds’ AUM lead to higher transactions made which in turn means higher fees payable to Portfolio Managers and Arbitrageurs/Traders.
This is why DIP-3 aims to bootstrap a vibrant investors’ community through a simplified yet rewarding incentive program.
In the initial stages of the protocol, the rewards’ program favoured Portfolio Managers so that a large number of funds could be launched for Investors to choose from. We believe that the objective was well-realised.
For the reasons stated above, the scheme should now focus on driving Investors’ activity.
To accomplish this, we are working on 3 staking contracts and 1 Escrow contract:
- DEXTF staking contract that provides access to a 3-tiered APR
As such, staking will resolve into assuming 3 different roles (inspired by Roman history) within DEXTF based on lock-up period:
I.Patricio: requires 10 days cool-off to open a 24h window for withdrawal [a-la-AAVE]
II.Tribunus: requires [6] months lock-up then freely withdrawable
III.Consul: requires [12] months lock-up then freely withdrawable
2. Fund Staking contract
This Staking contract will lock-up your XTF_Fund_tokens and it will require a 10 days cool-off period to open a 24h window for withdrawal [a-la-AAVE]
3. LP Staking contract
This Staking contract will lock-up your LP_tokens and it will require a 10 days cool-off period to open a 24h window for withdrawal [a-la-AAVE]
4. Portfolio Manager Escrow contract
INVESTOR MINING
This proposal would eliminate the current reward system for “top investors” and replace it with a more generous one based on the invested amount.
- The reward allocation will be of [450k] DEXTF per month
- Escrowed (vested) for [9] months (once the staking contract is developed)
On an immediate basis:
- Reward accrual will be calculated proportionally to:
Investor_SumOfFund_AUM / Total_Fund_AUM
- Manually calculated daily and streamed over 2 months starting 15th of the following month of rewards’ accrual
Once the DEXTF staking contract and Fund Staking contracts are ready
In order to earn rewards XTF_Fund_tokens must be staked in the Fund Staking Contract and DEXTF tokens must also be staked in the DEXTF staking contract. Calculations and escrow will be managed by the Fund staking contract.
The amount of DEXTF staked will set an upper bound to the AUM that is counted for distribution.
Thus the allocation is proportional to:
min(staked_DEXTF, Investor_SumOfFund_AUM) / Total_Fund_AUM
Rewards’ distribution is based on rank, the longer the lock-up the higher the rewards’ ratio received. The contract will:
- Distribute 25% of rewards among all ranks (Patricio,Tribunus and Consul)
- Distribute 35% of rewards among Tribuni and Consuls
- Distribute 40% of rewards among Consuls
PORTFOLIO MANAGER MINING
This proposal would eliminate the current gameable reward structure for Portfolio Managers and substantially simplify it to 2 rewards based on AUM and on performance.
The reward allocation will be escrowed (vested) for [12] months:
- [120k] DEXTF per month for AUM
- [1.2m] DEXTF per year for Performance
On an immediate basis:
Allocation 1 is proportional to:
Fund_AUM / Total_Fund_AUM
Allocation 2 is proportional to the realised performance:
Fund_$_Performance / Total_Fund_$_Performance
Fund_$_Performance is the performance times the size of the fund.
E.g. a Fund with USD100k in AUM which does 21% performance has a Fund_$_Performance = USD21K, a Fund with USD2m in AUM with a 7% performance has a Fund_$_Performance = USD140K
Once the DEXTF Staking contract and the Portfolio Manager Escrow contract are ready
In order to earn rewards XTF_Fund_tokens (Fund investments) must be staked by Investors in the Fund Staking Contract and DEXTF tokens must also be staked in the DEXTF staking contract. Calculations and escrow will be managed by the Fund staking contract.
The amount of DEXTF staked will set an upper bound to the AUM that are counted for distribution
Thus Allocation 1 rewards are proportional to:
min(staked_DEXTF, Fund_AUM) / Total_Fund_AUM
And Allocation 2 rewards areproportional to:
min(staked_DEXTF, Fund_$_Performance) / Total_Fund_$_Performance
As with Investors’ mining, distribution is based on rank, the longer the lock-up the higher the rewards’ ratio received.
- Distribute 25% of rewards among all ranks (Patricio,Tribunus and Consul)
- Distribute 35% of rewards among Tribuni and Consuls
- Distribute 40% of rewards among Consuls
LIQUIDITY MINING
This proposal would eliminate penalties for exiting Liquidity Pools early and simplify LP rewards by encouraging DEXTF-XTF_FUND LP-ing.
The reward allocation will be [37k] tokens per day (to be reduced over time to manage inflation) and escrowed (vested) for [6] months with the following proportions:
- 55% of Tokens to the sum of all XTF FUND-DEXTF pools
- 30% of Tokens to DEXTF-ETH pool
- 15% of Tokens to the sum of all XTF FUND-ETH pools
Only whitelisted Liquidity Pools are eligible for this program.
For a pool to be whitelisted for rewards, the below has to apply:
- A Fund should NOT have more than 50% allocation to a single token (or tokens pegged to each other, or tokens pegged to same value, for example USDC, USDT and DAI will all fall within the same category of tokens pegged to same value)
- A Fund should NOT be paired with any token that has more than 20% allocation within the fund, except for the DEXTF token
- Funds MUST have at least [10%] allocation to DEXTF token to be considered an XTF FUND-DEXTF pool
On an immediate basis:
The reward is proportional to:
LiquidityProvider_AUM / Total_LP_AUM
Once the DEXTF staking contract and LP Staking contracts are ready
In order to earn rewards LP_tokens must be staked in the LP Staking Contract and DEXTF token must also be staked in the DEXTF staking contract. Calculations and escrow will be managed by the LP staking contract.
The amount of DEXTF staked will set an upper bound to the LP_AUM that are counted for distribution
Thus allocation is proportional to:
min(staked_DEXTF, LiquityProvider_AUM) / Total_LP_AUM
NOTES:
Liquidity Mining Rewards and Investor Mining Rewards are additive for the FUND pools (as every LP contains 50% of Funds)
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