Locked INDY for voting (veINDY) and POL

Hello all. First of all, really great ideas here and loving the yellow paper. I can’t wait to see where this goes.

I wanted to start a discussion around the concept of veINDY (vote escrow INDY). This actually seems like an easy step since there is already discussion around staking INDY on the Indigo site. Those who are unfamiliar, veTokens are locked versions of governance tokens, usually allowed to be locked for varying amounts of time. The longer you lock, the larger amount of votes you have. Currently, Curve is doing this on Ethereum (Curve Wars) and Saber is doing this on Solana (Saber Wars). I have a couple thoughts around this.

First and foremost, given that Indigo plans to reward DEXes, LPs, Liquidation Pools with INDY tokens through emissions, why not let existing INDY tokens dictate where emissions go. This is pretty similar to what Curve and Saber are doing. Each week you could have voting on which pools (Liquidity or Liquidation) get a higher share of the INDY token emissions that week. Down the line, its even possible to see bribing becoming a thing, the way Convex does with Curve. I could eventually see other protocols wanting to incentivize liquidity on certain asset pools (lets say Sundae wants to bootstrap liquidity to the Sundae/iUSDC pool, so they bribe veINDY token holders to vote for the Sundae/iUSDC pool for better emissions == more liquidity). Hopefully this makes enough sense and you can see where this can go.

veINDY doesn’t just have to be for emissions voting. It can be for all of the other governance aspects of Indigo (what assets to accept as collateral, what iAssets to mint, etc.) veINDY could be the true governance token. It proves that holders are willing to lock up their INDY for periods of time to have a say in the governance. This creates long term incentives, and no token emission dumping like you see for many protocols who try to bootstrap liquidity through emission based Liquidity Mining.

veINDY could be the sole token for any revenue distribution as well. I have been following Lifinity on Solana, and they are in the process of releasing their tokenomics papers (only part 1 of 6 is out). I think they have a novel view at tokenomics and a lot of it could be used for Indigo here.

Finally, kind of tangentially related but still related… POL (protocol owned liquidity). Especially at the beginning of Indigo’s life, it might be worth thinking about POL. Indigo may want to bootstrap liquidity to some of the most important pairs (I am thinking iUSDC/USDC, iADA/ADA, iUSDC/ADA, etc.). Instead of rewarding DEXes directly, Indigo could propose a bonding concept (think OHM on Ethereum, IN on Solana). Bonding would allow Indigo to own the liquidity on some of these pairs, creating permanent liquidity (along with a constant source of revenue through the fees). For those unfamiliar, bonding is a way for a protocol to issue discounted governance tokens (INDY) if a user deposits LP tokens into a bonded contract. So user Larry would go to a DEX, deposit iUSDC/USDC, get the DEX iUSDC/USDC LP token, then go to Indigo and deposit that iUSDC/IUSDC LP token to get discounted INDY in 5 (or some number) of days. This is a way for Indigo to actually own the Liquidity of some of its main pairs. This would create permanent liquidity and prevent any mercenary capital in the iAsset liquidity space.

I would love to discuss all of these topics. I think Indigo is going to be huge for Cardano. But there are some hurdles around liquidity that may come up. Some of these ideas may help tighten up the tokenomics even more.

Thanks,
Marco

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About vote escrow INDY, wouldn’t the concept of bribing kills the competition. Let us say a particular iAsset is listed on 5 DEXs. Now it will be easy for 1 DEX with enough resources to bribe the holders and get all the liquidity while other 4 will strugle due to this. A perfect Monopoly I would say.

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I enjoyed reading your discussion on locking up INDY to create veINDY. Spent a couple hours reading about projects that use this locking method for voting and also protocol owned liquidity (POL) to be better informed. A lot to digest but feel the points you made are important and look forward to more discussion around them.

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I think that is definitely a possibility. We as a community would have to think about how to handle something like this. Maybe there can be a set % Max (say 50%) of INDY to 1 DEX. So even if that 1 DEX gets 100% of the ve Votes, they could only get a max of 50% of the INDY allocated to their LPs for that epoch. Just an idea. Definitely a good point though. I would have to look to see what Curve and others have done about this issue.

Or maybe veTokens only work for mature markets with multiple viable DEXes. So this would only work for Indigo once there is a more mature DeFi ecosystem in Cardano?

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