Baby Power Index (MVP of Power Index) is launched in Ethereum mainnet.
DISCLAIMER: The Baby Power Index is a test (MVP) product. So, some bugs and other drawbacks are expected. The product is in an early stage and its functionality can be changed at any moment. Please note that.
The Power Index — a product, proposed by Delphi Digital on our Power Forum. It has been developed from an idea to a mainnet product in ~3 weeks. It is an unaudited and liquidity capped MVP (the Minimal Valuable Product), created for demonstrating certain features and functions of the future Power Index. The link to test Baby Power Index: https://app.powerpool.finance/#/mainnet/pools/shared/0xb2B9335791346E94245DCd316A9C9ED486E6dD7f
The list of functions available in Baby Power Index:
- Supplying GT liquidity
- Withdrawing GT liquidity
- Issuing an index share (PIPT or simply pool LP token) and usage it as a basket of 8 GTs
- Voting in the governance of underlying protocols, using pooled tokens (COMP and UNI are available from launch, the possibility to vote for other GTs will be implemented soon)
- Direct swap GT on GT
- Charging fees for operations and distribution of them to LPs and PVP (Permanent Voting Power contract)
The Power Index
The Power Index is a liquidity mined Defi ETF, constructed and weighted according to community vote, which implements meta governance for the composite protocols (including layer 2).
The index is entirely community-curated: CVP holders can add, remove GTs, or change their shares in the index via governance proposals. It will help the community to keep Power Index up to date, keeping its composition relevant and adapting it to market changes. Adaptability and ability to change fast is the main feature of any Defi product that is aimed to have a long life on this market.
The initial composition of the Power Index (which tokens will be in and their shares in the pool) will be defined by CVP holders in voting soon. This vote will be held shortly after the Baby Power Index will be successfully tested.
The Power Index share is represented by PIPT (Power Index Pool Token). PIPT is issued by the smart contract when anyone provides liquidity to the Power Index. There will be a secondary market for PIPT: an incentified PIPT/USDC pair at Uniswap and also a lending market for PIPT.
The Baby Power Index
Index composition
The Baby Power Index is the MVP version of Power Index, which offers the almost complete functionality of the future product. The initial composition of the Baby Power Index is defined by the PowerPool team and Delphi Digital and contains 8 tokens: YFI AAVE(LEND) SNX COMP MKR UNI WNXM CVP. These tokens were picked according to two goals:
- Create a highly correlated portfolio to decrease the impermanent loss of LPs (also it confirms that these assets have similar market behavior)
- Diversify index across top-tier Defi protocols offering useful tools for ecosystem (user base criteria)
Note that this index is created only for demonstration/MVP purposes. CVP holders can decide to select another basket of tokens when it comes to the Power Index mainnet launch.
The correlation matrix:
Current index composition and project sectors:
- YFI — Yearn.Finance. Asset management and yield aggregation protocol.
- AAVE(LEND) — Aave. Lending market & leverage
- MKR — MakerDAO. Decentralized “central bank”, leverage
- SNX — Synthetix. The main Defi derivatives protocol
- COMP — Compound. Lending market with an active on-chain governance
- NXM — Nexus Mutual. The leading insurance protocol
- UNI — Uniswap. The leading DEX and Defi liquidity pool
- CVP — PowerPool. The first meta-governance Defi protocol
As the Baby Power Index is launched users can deposit mentioned tokens into the pool, exchange them and use LP token, granted for liquidity provision as a single asset representing this portfolio.
Technical implementation
The Baby Index Pool is built on top of Balancer code with certain upgrades:
- Governance. CVP holders make collective decisions regarding using the voting power of pooled GTs, pool composition, and LP rewards. Power Index governance is integrated into the overall PowerPool governance system and includes the possibility to vote using L2 networks, BPT/UniV2 LP tokens, Beta/Gamma locked tokens. Vote Lock (named as “Vote Boost” in our documentation) and several other sources of votes are under development, but modular integration was already made.
- The brand new UI/UX, developed especially for index usage, governance, and liquidity management
- Price oracles (Power Oracle). It is critically important to track the prices of GTs to maintain the desired index composition. For this purpose we implemented trustless oracles for GTs, price feeds for which were not available on the market
- Fees structure. The fee structure of the Power Index significantly differs from ordinary Balancer pool (read further)
Fees structure & operation of Baby Power Index
Baby Power Index (as well as the main one) has entry and exit fees. Both fees are collected into Governance Tokens Blackhole or Permanent Voting Power contract (further in this article PVP).
It works as follows: collected fee is transferred to the PVP contract. The mission of this contract is to store a portfolio of fees and using them in future votings. It is a protocol-owned contract and CVP holders govern the usage of these funds.
Note, that currently, liquidity provision in Baby Power Index requires 8 GTs at the same time. It is a temporary measure for the index bootstrapping phase.
Taking into account the complexity of supplying 8 GTs and associated gas costs the following rewards structure was proposed. It is designed to reward early LPs, which spend their time and gas to supply 8 tokens instead of the single one.
The current cap of the index is set as $20k. No individual caps. We will expand it once it will be reached.
The rewards structure is presented below:
1. Initially the cap is $20k. Rewards allocation: 6.5k of CVP per week.
Note, that vesting isn’t implemented yet due to technical reasons. It will go live in 2–3 days, so the first days of Baby Index mining will be even without vesting.
2. The next cap is $50k. Rewards allocation remains 6.5k of CVP per week (6.5k CVP/week for $20k was a bonus for early LPs)
3. The next cap is $100k. Rewards allocation: 10k of CVP per week
4. The next cap is $200k. Rewards allocation: 17.5k of CVP per week
Assuming CVP price at $2, even at $200k with 17.5k CVP per week APY is >900%. For early LPs ($20k and $50k caps) the rewards are ~3300% and 1320%, so from the first view, it looks like a great incentive for early LPs.
Such big rewards are also connected with the fact that early LPs need to supply 8 tokens, and later (at $100k and $200k) we plan to allow single-side liquidity provision which is much easier and cheaper in terms of gas costs.
The idea is that once the cap is reached, we monitor it and if for 24hrs it doesn’t drop less than 95% of the target (for example $19k for $20k cap), the team will expand it. So, early LPs will have at least additional 24hrs to get high rewards without competition from one side, and from the other one, the rest of the community will know when the cap will be expanded and would prepare GTs for that.
Note, that the mentioned rewards will be distributed to PIPT stakers (users, provided liquidity into the Baby Index and staked their PIPT in the special mining contract to receive rewards) and PIPT/USDC pair liquidity providers.
So, for the first week, there are 6,500 CVP rewards. For PIPT/USDC reward will be 1.5x from basic PIPT staking rewards (as uniswap LPs face IL): 2600 CVP PIPT staking, 3900 PIPT/USDC LPs.
The Baby Power Index fees structure
Using the Baby Power Index users pay the following fees:
- Entry fee — 0.1%, paid in PIPT, transferred to PVP
- Exit fee — 0.1%, paid in PIPT, transferred to PVP
- Swap fee — 0.2%, paid in GT, remains in the pool growing pooled assets (belongs to LPs)
- Community fee — 0.1%, paid in GT, transferred to PVP, applied to GT on GT swap in case if it is not related to supplying/removing GT liquidity
Answers on questions regarding the Baby Power Index operation
Some of the questions were raised during the discussion in the official “baby-index-testing” discord channel. the answers to them are also published in this article.
Q: I supply liquidity into the pool. Is there any fee for that?
A: Yes, you will pay a fee of 0.1% of the amount of liquidity supplied. This fee is charged in PIPT token and will be sent to the PVP.
Q: I want to swap COMP for UNI via the Baby Power Pool. Which commissions will be charged in this case?
A: You will pay [Swap Fee + Community Fee] = 0.2% + 0.1% or 0.3% in total. Note that 0.2% remains in the pool (belongs to LPs) and 0.1% will be transferred to the PVP.
Q: I want to remove liquidity from the Baby Power Pool. Which commissions will be charged in this case?
A: If you remove liquidity as 8 GTs (in this case you will receive 8 governance tokens to your wallet) only a 0.1% exit fee will be charged. But, if you need additional conversion the additional 0.2% swap fee will be applied. Note, that a 0.1% community fee is applied only to swaps GT on GT, not related to liquidity supplying or withdrawal.
Q: Why do I need to supply 8 tokens, and not a single one?
A: Currently it is in the index bootstrapping phase. Liquidity is low, and single-side liquidity provision can lead to a serious imbalance in the pool. For example, users will deposit a lot of CVP (or any other token) and tiny amounts of remaining index GTs. Note, Index cannot be balanced effectively while it is low liquid. So, we decided to launch it this way. Understanding the complexity of it for the end-user, early LPs are offered high rewards for their work.
Q: So, if there are no individual caps whales can fill the index cap and receive all rewards?
A: Yes, now everybody can add as much liquidity into the pool as he wants according to the cap. From the one side, we want to allow more people to participate, and from another one, we need to bootstrap liquidity into the index to provide our community a chance to “play” with it — use PIPT token, trade GT on GT, provide/remove liquidity, etc.
So, index liquidity is our priority for testing. If some “whale” will take the risk of purchasing 8 GTs and execute all operations (8 unlocks and other ones) and fill the cap — it is good for the main goal of index testing. In 24 hrs cap will be expanded, and other users will have a chance to supply liquidity and get rewards.
Our main goal is to launch the main Power Index (an uncapped and audited Index version) fast, but with a high level of security and reliability. These rules will help us to accomplish this goal. We hope that the community understands that. If a cap of $100k will be filled fast — we would return to this discussion.
From the technical side, it takes 5 mins to expand the cap. We all here just need to agree on terms of expanding (rewards, etc).
And note please, that we have other groups of users beyond LPs, which can test index operation even when the cap is filled:
1. Traders (users using Power Index for swapping GT on GT without intermediary cross-trades)
2. Users of PIPT token, representing a basket of 8 GTs for their own goals
3. LPs on PIPT/USDC pair at Uniswap
So, the cap limit affects only the Index LPs, not other groups of users
Q: I plan to provide liquidity to the Baby Power Index. How can I receive rewards for that?
A: You need to use your PIPT tokens for that purpose. You would have two options: (1) stake PIPT in the special mining contract or (2) provide liquidity to the PIPT/USDC pair (we wait for the community to launch it).
So, for the first week, there are 6,500 CVP rewards. For PIPT/USDC reward will be 1.5x from basic PIPT staking rewards (as uniswap LPs face IL): 2600 CVP PIPT staking, 3900 PIPT/USDC LPs.
In case of expansion of the index cap, rewards will be calculated according to this rule (1.5x vs 1x). So, please choose your option!
Q: In this article, a lot of variables (fees, rewards, etc) were mentioned. Can the community change them via proposals?
A: Yes, of course. All these variables are manageable via the PowerPool governance system. We established only the initial values of them and expect that the community will change them in the future.
Join our discord to discuss Baby Power Index: https://discord.gg/smPUzvx
Test Baby Power Index: https://app.powerpool.finance/#/mainnet/pools/shared/0xb2B9335791346E94245DCd316A9C9ED486E6dD7f
