I would like to start off by saying that I’m very impressed at the level of engagement this topic has sparked within the community. Going back four weeks, hundreds of forum posts and thousands of discord messages, I can say that we all as a Decentralized Autonomous Organization should be very proud of the insightful discussions we have produced. Believe me, I literally read every single post, comment and thread in order to research and collect my thoughts for this article. If you take anything from here, I can only hope that I’m able to convey the level of confidence that I now have in the future governance of this protocol.
Despite the fact that most of the community had different takes on how this airdrop rewards mechanism should take place, I was pleasantly surprised to realize that every single suggestion tried to instill the same core principles throughout the whole demographic. This is important, because while accomplishing a full consensus is extremely difficult, sharing the same core values is all we need to achieve a compromise that all of us can be satisfied with. Here are the core values of the community, please familiarize yourself with them as they will be the inspiration, justification, and scoring metric for every mechanism that will be proposed here today.
Indigo DAO: Airdrop Core Values
- Rewards early community
- Builds project loyalty
- Marketing exposure & engagement
- Improves decentralization
- Avoids rewards gamification
- Limits developer team effort
The easiest consensus to gather from the community, to much surprise I’m sure, is that everyone agrees as a whole to overwhelmingly support prelaunch airdrop rewards. We can all cynically attribute this to the fact that given the choice no one is gonna say no to free money, and while true, the vast majority explicitly expressed that this was mainly due to how easily this accomplished several of our core values.
Yes it does reward the community with free tokens, but by doing so it also builds brand loyalty as those early holders will be incentivized to support and guarantee the success and future growth of this protocol. This is also a great marketing opportunity that will spur future engagement that is important for people who were not part of the airdrop as will be discussed in future sections.
Though a bit controversial, taking a snapshot of the discord community at a certain point before the airdrop conversations started is the only fair way to decide recipients if early community rewards really is the guiding principle. Lastly, this airdrop mechanism requires little to no effort from the developers.
I would like to add that a big topic of conversation revolved around whether a user’s level of discord engagement should entail a bigger cut of the rewards. While I do like this idea, reaching consensus on one metric to measure this against (which are all subjective, mind you) is more trouble and adds more complexity than is worth. I would propose a simple three tiered system:
- Tier 1: All members before the snapshot that achieve whitelisting requirements.
- Tier 2: Members that joined in the first few months, or that joined after the cutoff but have high comment count.
- Tier 3: Community leaders, those that have gone above and beyond in engaging in thoughtful conversation, governance and recruitment, to include ambassadors, translators and community managers.
I would personally leave it up to the Indigo Team to decide the rewards multiplier on Tier 2 and 3, month and comment cutoff for Tier 2, as well as who they believe qualifies as Tier 3 members of the community.
Finally, the other debate on the Airdrop conversation was what specific token will actually be airdropped. INDY, of course, is the vanilla option. Nothing wrong with it, but it serves little utility besides selling for a quick profit or hodling for dear life. I was personally a big fan of what Minswap was trying to accomplished with their two token system, but as much as I like what they’re doing in theory, I really hate how it actually works in practice. I believe this overcomplicates the economic mechanism of both tokens and drastically confuses potential users, specially ones new to DeFi.
Which brings us to the last, and preferred option; airdropping LP tokens of a SundaeSwap INDY/ADA liquidity pool. Not only is this innovate in the ecosystem, but it also paves the way into having the utility added of Yield Farming in order to limit airdrop dumping potential. Spoilers, I know. This will be discussed in detail in the YF section, but before we get there we gotta back up a little.
We first have to answer a very important question; in this model, where does the ADA to be paired with the INDY actually come from? Yes, this could be put forth by whatever funds the DAO currently holds, but as Indigo has no VC backers I’ll assume that’s not an option. There was talk of using the SundaeSwap Taste Test mechanism to fund a market value, but this wouldn’t give the the DAO control of the LP tokens. It would instead go towards the backers of the Taste Test.
I personally dislike this system for what we’re trying to accomplish as it gives ADA whales a first mover advantage on controlling a large portion of yet another asset within the Cardano ecosystem and directly contradicts our fifth core value of improving decentralization at all costs. So what option does that leave us, you may ask. Well, strap in you intrepid reader you, as we’re about to tread into completely brand new territory in DeFi. I present to you what I like to call an Initial NFT Offering.
Initial NFT Offering
I forget the context which sparked this idea I was playing with, I wanna say it had something to do with securities and taxes or whatever, but I shared it with DC and Robert from the Indigo Team early last month. They were both intrigued and interested by this, but at that point I don’t believe we had a use case to utilize this new model with, and am unsure if they even remember this proposal by now.
Either way, here’s how it works. The Indigo DAO would initiate an NFT sale that would be minted by users at a specified price. These NFTs would have the given utility to become Yield Farming rewards multipliers in much the same way that Genius Yield uses their Ape, Degen and Shark NFTs for the same purpose on their ISPO. The price to mint the NFT would accordingly be more expensive the more of a benefit it provides to the user.
I would of course leave it up to the Indigo Team to decide what multipliers and at what price points they would be up for sale. Though I will say that I believe the number of NFTs able to be minted should be a lot higher than the expected participation rate to ensure that anyone who wishes to purchase these NFTs will have plenty of time and the undisputed ability to get one.
The reason for that being that this NFT run is not meant to limit and commoditize participation, but rather to crowdfund the ADA side of the the SundaeSwap INDY/ADA liquidity pool. So unlike most NFT projects, the end of this run wouldn’t happen when all tokens are minted, but when a specific deadline is met. I personally feel like 30 days would be more than enough time to allow maximum participation.
It is at this point that the Indigo DAO would take all raised funds in this NFT sale, create the SundaeSwap INDY/ADA liquidity pool, and airdrop all LP tokens to the discord community according to the parameters previously outlined before.
It goes without saying that this whole process would be a huge marketing centered initiative, and its success in participation would directly correlate to the protocol’s brand loyalty endeavors, as well as improve our project’s independence from needing VC investors or whales to fund our liquidity. I hope everything is starting to come together full circle because here’s where we move on to the next section.
As was heavily foreshadowed in the previous sections, I strongly believe a Yield Farming mechanism should be used to stabilize the price of INDY, limit airdrop dumping, reward committed community holders with YF rewards, as well as introduce the INDY token to the free market. Keep in mind that if there is a sale pressure to cash out the LP tokens for ADA, Impermanent Loss would increase the ratio of INDY tokens against ADA, once again rewarding long term holders and believers of the project.
At the same time, positive buying pressure of the INDY token would not only increase the price of INDY, but it would also imply that the token is being bought in order to be deposited right back in with more ADA to mint LP tokens that can be used in the Yield Farm since this would be its only utility at this point. This would be the ideal Cardano community engagement, as this opportunity is now literally bringing in new members into utilizing the protocol itself, ensuring long term retention.
Concurrent to the start of the Yield Farm and after the Airdrop, I also believe Indigo should take a stab at improving the current paradigm of Initial Stake Pool Offerings, which I myself find quite lacking in its recent concerns of centralization and multi pool operators. I will admit, this is the section I’m the least knowledgeable on, and some of my ideas might even be not feasible with the current technology, but I figured I might as well shoot for the stars and land on the moon with the help of input from the community.
What I envisioned would be an ISPO that is agnostic to whatever pool you currently delegate to. I believe as a community we need to move away from chasing ISPOs by moving delegation every few epochs. This is not only a popularity contest that centralizes the network, but makes it increasingly difficult for small pool operators to forecast revenue and stay in business.
I hope that this can be achieved by requiring members to whitelist their staking address with Indigo to essentially sign themselves up as partaking in the ISPO. I debated whether ISPO rewards should be a flat rate across all participating addresses, but this would allow for gamification by setting up multiple staking wallets.
It is for this reason that I would suggest allowing the rewards to be quantifiable by the size of the stake in each wallet, but with the whale proof dynamic of a secret curve of diminishing returns as the size of the wallet increases. Since this parameter would be unknown to participants, it would greatly hamper anyone’s ability to abuse the system.
I’m assuming calculating the rewards would lag behind by at least one epoch, but after that point ISPO delegators would see their INDY tokens available through DripDropz. Furthermore, I believe it is imperative to use our platform to grow awareness and support for the Cardano Single Pool Alliance, and they would play a pivotal role by offering multiplier rewards to their delegators as well. This would incentivize ISPO delegation through CSPA pools without limiting satisfied stakers in other pools.
If DripDropz allows sending NFT’s, this would be a multiplier just like the ones available through the Initial NFT Offering. If they don’t, a dummy token could be sent which can then be exchanged for the NFT itself by using a Vending Machine smart contract. Either way, once ISPO delegators receive their rewards, they could once again cash out for ADA using the SundaeSwap liquidity pool or provide liquidity to the pool to Yield Farm LP tokens, both of which I think are beneficial to the long term holders of the protocol.
Post Launch INDY Airdrop
I will come out from the gate stating that I personally am not able to see a huge benefit from doing a post launch airdrop, but since this was the original Indigo Team vision I would like to keep discussion on this topic open so it has been included here for posterity. In my opinion, the rewards for actually utilizing the protocol at launch will be in its native Yield Farming for INDY tokens as outlined in the white paper and I believe these free airdrop INDY tokens would be better used to increase rewards in the pre launch phase of the distribution. I would like more of the team’s input on this as perhaps there might be a communication gap that prevented me from seeing the full vision of this idea.
TLDR: We can use an Initial NFT Offering to raise liquidity for a SundaeSwap INDY/ADA pool that would be used to airdrop LP tokens to the discord community. LP Tokens, along with the NFT multipliers would be used to Yield Farm more INDY rewards. At the same time, a whitelisted ISPO would be used to engage the wider Cardano community at large, giving them the opportunity to support the protocol by adding liquidity to the pool and participating in the Yield Farming as well.
I know this all may seem way too complicated at first glance, but I would disagree. I think every phase of this proposal uses very simple ideas and connects them to each other to create stronger ones that make up for each other’s shortcomings. There was a very important quote I read on one of the discussions that said something in regards to community rewards along the lines of “nobody has come up with an idea worth copying yet.” I like to believe that could be us.
I think that’s the most important accomplishment we can do to set us apart from every other DeFi protocol out there from a pre launch phase. If we can prove that we’ve got what it takes to set the standard on what community distributions should look like in the Cardano ecosystem, bystanders are gonna start questioning what other good ideas we have and why is it that this community is the one having them. That would be the greatest marketing potential to bring more users to the protocol and what we should strive for.
If you are still reading this, I highly commend you for taking the steps to engage and participate in what will be remembered in history as the first ever Indigo DAO Governance Vote. At the end of the day, we are only as successful as the efforts we put in to make us so, and from what I’ve seen so far we are well on our way to making that a reality. I implore all of you to please keep this level of engagement and encourage others to participate in future discussions as well.
We’ve got an uphill battle ahead of us; there is a good chance that by the time Indigo Protocol finally releases in Q3 we’ll be in a bear market. Not only that, but synthetic assets, as powerful as they can be, have had a hard time reaching their full potential in the crypto ecosystem as a whole. We definitely have some advantages over previous iterations in other blockchains such as very accessible transaction fees, the eUTXO model and the security of our assets that only Haskell and Plutus can provide.
We’re gonna need everyone’s help and ideas to make this project a success, and it’s up to you all individually to make that happen. I have no doubt in my mind that we’re all gonna make it, but we’re all gonna have to make it together.
Thank you for your time,