Community Airdrop Summary / Analysis / Suggestions

Introduction

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

  1. Rewards early community
  2. Builds project loyalty
  3. Marketing exposure & engagement
  4. Improves decentralization
  5. Avoids rewards gamification
  6. Limits developer team effort

Community Airdrop

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.

Yield Farming

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.

Whitelisted ISPO

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.

Summary

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,

Blocks

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I will take this opportunity to shamelessly shill my other proposal on what a Perpetual Futures AMM should look like. Please give that a read and provide any feedback if you have the time.

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Thanks. That’s an incredibly detailed proposal!
Could there be an issue with the team creating the LP pool though? It would effectively mean the team setting a price for the Indy token with out any price discovery?
I’ll need to read through again to digest it all further. Appreciate all the thought and effort that’s gone into to this!

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I like the Idea of the Initial NFT offering. But I have two questions. I understood the utility would be a reward multiplier of the yield created by the SundaeSwap liquidity pool but I don’t think SS cares on whether you own such an NFT when giving out ss tokens as rewards since lp tokens are the only thing that matters ( from which you get 0 from buying the nft).
And even if the NFT offering goes as proposed above I think buyers of the NFT should get a bit more benefits to make the acquisition of it less risky.

Because personally I wouldn’t like buying this NFT and later finding out I’m not even eligible for the airdrop . Because at this point I would need to again buy INDY and Ada to then supply in the lp. All that only for my NFT to have any Point. To prevent that I would propose that buying this NFT ( and therefore supporting Indigo as a project) should , along with the above mentioned benefits, whitelist the buyer for a small part of the lp tokens. ( Only a very small part tho)

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I don’t know if I’m wrong, but the NFTs would be to get the ADA to build the LP tokens and the multiplier only when it comes to distributing the rewards.

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wow, what a read. Very cool. As I understand it, doing an nft sale raises the ADA in question that can be ‘doubled up’ with indy from indigo dao, which combined, forms the lp token?
I do not have the knowledge to say anything useful in particular besides that I have my doubts that this can be pulled off with little effort by the team. Altough the ‘easy’ alternative has probably put an insane workload on the liquid team.
Perhaps the nft’s would not need to carry any pictures or art on them? just ‘a’ nft? I’ve personally disliked art nft’s since inception

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Very well thought out and informed post sir. Kudos to you for taking the initiative and continuing to set a high standard here! As with any of the recommendations and distribution mechanisms Indigo will consider, we must of course run any ideas past legal council to ensure we’re not stepping over any boundaries with regards to SEC laws. It’s imperative for the team to ensure we are squeaky clean in our development and release of Indigo Protocol into the hands of the Indigo DAO.

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Good question! The price discovery would actually occur in the Initial NFT Offering phase by proxy, as it would be the ADA funds raised through the sale of the multiplier NFTs that would provide the liquidity to initiative the SundaeSwap liquidity pool. I hope that answers your question!

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My apologies for the confusion on this matter, but just to clarify the Yield Farming would happen on the Indigo Protocol platform, not on SundaeSwap. SS only mints the LP tokens that will be needed to Yield Farm INDY tokens. I am optimistic that since both protocols are part of the Cardano DeFi Alliance, SundaeSwap would hopefully be willing to help us out by letting us use their Yield Farming smart contract for inspiration. Our version would have the additional utility of the NFT multiplier feature added, but I’m hoping this will require minimal resources from the developer team.

I would love for the additional benefits of these NFTs to carry over into the main net protocol’s native Yield Farming rewards as outlined in their white paper. But that’s a huge parameter with lots of implications that I think only the Indigo Team can accurately forecast, and would be definitely be leaving it up to them.

Well, technically there shouldn’t be any confusion at all on airdrop eligibility. Either you joined before the cutoff date when airdrop discussions started for the first ever vote of our DAO, or you didn’t.

Yes, THAT would be the point of the NFT. You gotta keep in mind that Yield Farming is the most profitable revenue stream ever created in DeFi, and that in itself is the biggest incentive on the INO participation. Just look at the SundaeSwap Yield Farm, as soon as the APR rewards were made public at 340% APR a couple days ago, liquidity provider participation instantly skyrocketed in the platform. That’s what we’re aiming for here as well.

I would definitely like to see more discussion on this possibility from the community, and I really thank you for bringing this up as I believe if the DAO is willing to reduce the expected size of their individual airdrop bags in order to incentivize a wider adoption of the Initial NFT Offering model that is a very honorable and commendable sacrifice for the future and growth of this protocol.

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Basically it’s offering nft indigo for sale and the proceeds from the sale put it into an ada/indy liquidity pool and the airdrop would be the lps of that pool, correct? if people decide to sell it, that would generate an impermanent loss and whoever sold it would sell it at a loss, in fact, only those who really want the project in the long term are left, but there is still the risk of a price drop after the airdrop, right ? but the question I have is the following, how do I know if the amount of lp ( indy/ada ) would be the same amount that you would receive in indy in an airdrop ?

Congratulations on the article, very cool !

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That is correct!

I would like to clarify that we’re only trying to limit the DEVELOPERS from having to devote any resources as everyone would rather they keep working on the main protocol itself. The rest of the Indigo team would indeed be investing a lot of time and effort to make this whole community rewards program the huge success it can be. If you read DC’s medium article reviewing the Liqwid airdrop process it is clear that team members outside of the developers definitely put a ton of extra work to make their airdrop run smoothly. I believe we can greatly benefit from their experience to plan our rewards program even better than what LQ did.

I’m not a fan of art NFT’s myself either, but you gotta admit that they are indeed the most popular use case and community building tool in the ecosystem and we should capitalize on the opportunities that might make available. Indigo has its own in house graphic designer, so coming up with some good artwork to boost marketing in the Initial NFT Offering shouldn’t be too hard.

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Really appreciate the support!!

Ah, I actually remember now that when I spoke to DC about the Initial NFT Offering model he was like “interesting idea, definitely need to run it by legal.” Totally understandable, none of us wants to get sued by the FEC. Though I wouldn’t mind having to testify in front of Congress one day. That’s how you know you have really made it.

I’ll take this opportunity to add that if legal counselors decide against using the INO fund raising model, our other option would be to run a typical ISPO through the Cardano Single Operator Alliance to raise the ADA side of the liquidity pool. If that were to be the case, I do believe that an airdrop to the discord community should happen alongside the ISPO, as opposed to choosing one or the other. In my opinion both are just as important.

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Thanks man, you have it well thought out. Sounds like a good proposal to me

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That is correct! I’m optimistic that while being a brand new and foreign concept this idea is really clicking with readers as a legitimate alternative to other fund raising models.

Yes, that impermanent loss occurs on the ADA side of the pool, meaning that each individual’s LP share of the tokens would entail a bigger ratio of INDY against ADA. Keep in mind that since the LP token holders did not directly fund the ADA in the pool, this impermanent loss is kind of a moot point, and if their long term goal was to hold the coin rather than sell they would actually be accumulating more INDY as people cash out for ADA.

Absolutely, but remember that if someone is participating in the community rewards, the biggest incentive NOT to sell is the ability to use their rewards to Yield Farm even more rewards. This mechanism should stabilize the price for INDY, limit airdrop dumping, offer a revenue stream to supporters of the protocol, and introduce the INDY token to the free market with all the exposure that will bring to the project.

Can you elaborate on this question? I’m not sure what you mean by that.

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Yeah I wrote something like that too. But I dont think that the initial NFT offering would be an efficient price discovery mechanism.
Because people buy the NFT because of the rewards it gives you. There is no reason to stop buying the nft even when you think the price would be fair at the moment . Because at the end of the day you use your ada to buy a reward multiplier and not INDY

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Props to you for the effort put in this proposal. I would say that I agree 50/50 with the things mentioned here, there are some really good ideas. We need more proposals like this one definitely, more options are needed to get the best end-result through community voting.

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If I put the tokens received in the airdrop in a pool (ada/indy) would it be the value that I would receive in the lp ?, that is, the difference is that I would not receive the token but the lp?

Thanks for a wonderfully detailed description of your thoughts! Very well written, and enjoyable to read. I do, however, feel that an INFTO is too easily gamified. How do you stop whales from buying up all the NFT supply? You can limit the NFTs to 1 per wallet perhaps, but that is still easily gamed (which is contra to core value #5).

You also make the assumption that a fair airdrop ala liqwid, would ruin the price as people take a quick profit. Firstly, we shouldn’t be overly concerned with price at this stage. Secondly, if we follow what has happened with liqwid, this has not been the case. There were buyers and sellers from the beginning, and volume was healthy. Hence, I think it is much better, and fairer to allow the market to decide what the price of INDY should be, and it would be a lot less complicated to put the responsibility for adding liquidity to liquidity pools with the individual. If we move forward with an airdrop of LPs instead of INDY, I would simply split it evenly among all eligible parties rather than use the NFT mechanism. Creating tokens is basically free; there’s no need to fund them, otherwise you already have some value attached which maybe a liability (in SEC terms).

Also, if you make people have to mint a whole bunch of NFTs, you’re adding a lot of inefficiency into the transaction, since everyone has to pay a minting fee. It costs basically nothing to mint all INDY tokens at once, airdrop to white listed (KYCd) discord/forum contributors, and let the market stabilise. As innovative as the NFT idea is, it just adds more steps, more fees, and the increases the potential to be gamed.

I hope my feedback is not too critical, and I appreciate the time and effort you’ve put into your thinking on the matter.

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Another idea that I’ve not seen discussed yet, is the learn-to-earn model. Binance have this with several projects, and essentially, users are airdropped a certain amount of tokens based on their successful completion of a mini course, designed to familiarise users with the token and its opportunities. Despite being ideologically against centralised services, for the airdrop at least, this would be very hard to game if we used Binance, or some other KYC provider’s service, since verified users could only complete the course once. It could, in that sense, provide a complementary marketing push to the pre-airdrop, for those that missed the window.

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Thank you for sharing this summary and your innovative ideas.

SundaeSwap Taste Test is a very fair and efficient mechanism for price discovery. I think there’s a bit of misunderstanding about how it works so I’ll help make it clearer.

The way SundaeSwap Taste Test works is there’s a 10 day period for everyone to deposit funds into a pool. After 10 days deposits are closed and the total tokens in the pool are used to form a Liquidity Pool (LP). This sets the price of the token and each depositor gets their proportional share of LP tokens.

Let’s put this into an example for Indigo. If Indigo were to use Taste Test, the Indigo DAO would deposit 350k INDY (1% of total supply) into the pool. Market participants would then have 10 days to deposit ADA into the pool. There’s an ability to both deposit and withdraw ADA. If you think the price is too high you can withdraw your ADA. If you think it’s too cheap you can deposit your ADA.

10 days pass and the Taste Test is over. Let’s assume that collectively everyone deposited 2M ADA into the Taste Test. A SundaeSwap LP would be formed consisting of 2M ADA and 350k INDY. This would price INDY at about 5.7 ADA (2M ADA / 350k INDY). This is the price INDY would launch at.

In this case the price is set by the market without any involvement from the Indigo team. It’s up to all of you to decide what INDY’s price should be. Indigo doesn’t need to find a method to collect ADA for the LP since market participants contribute directly to the LP.

The SundaeSwap ADA/INDY LP would consist of approximately 836,660 LP tokens (√(2M * 350k)). The total value of the LP tokens would be 4M ADA (2M ADA, plus 350k of INDY worth 2M ADA). Each individual LP token would be worth about 4.78 ADA (4M ADA / 836,660 LP tokens).

Because the Indigo DAO contributed 50% of total value to the LP (100% of INDY in a pool that is made up of 50% INDY and 50% ADA), Indigo DAO would receive 50% of the LP tokens. Thus, Indigo DAO would own about 418,330 LP tokens worth about 2M ADA (836,660 / 2).

Let’s say Bob participated in the Taste Test too. Bob deposited 600. Bob would receive about 125.5 LP tokens (600 * (836,660 / 2) / 2M). This would be worth about 600 ADA (125.5 * 4.78). If Bob were to redeem his LP tokens he’d receive back about 300 ADA (125.5 / ((836,660 / 2) / 2M) / 2) and 52.5 INDY (125.5 / ((836,660 / 2) / 350k) / 2).

As soon as INDY starts trading the price will begin to fluctuate, so the exact proportions of ADA and INDY Bob could end up redeeming may differ depending on the market.

SundaeSwap Taste Test is a little complex. I hope this helps. Let me know if you have any other questions.

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