This is the first of two votes required for a new product to be onboarded to the Index Coop.

A passing vote here signals the Index Coop’s intent to further research the LINK2X-FLI feasibility resulting in a product prioritization score.

Passing Thresholds:

• 5% or more of circulating supply must participate (2,181,385*0.05 = 109 069)
• 50% or more of participating tokens must vote FOR

FOR - Pass LINK2X-FLI through Decision Gate 1. Begin work to research & assign LINK2X-FLI a product prioritization score.

AGAINST - Do not pass LINK2X-FLI through Decision Gate 1.

DG1 is a signaling step to gauge community sentiment. The full-text LINK 2x Flexible Leverage Index proposal exceeds Snapshot’s character count limit. Below is an abbreviated proposal. Check out this forum post to read the full proposal.

================================================ Title: Launch LINK 2x Flexible Leverage Index (LINK2X-FLI) Status: Proposed Author(s): Pulse Inc Created: 29-Oct-2021 ‌

Summary

Pulse Inc proposes that the Index Coop manages a new index that provides two times the return of Chainlink’s LINK token, using the FLI strategy that was proposed in IIP-13.

Abstract

‌LINK2X-FLI is based on V0.1 of the FLI methodology that is also used for ETH2X-FLI and BTC2X-FLI.

Motivation

Manually maintaining a leverage position requires continuous monitoring of the health of the position in order to avoid liquidation and incurs high gas fees when the position is frequently rebalanced.

Rationale

Flexible Leverage Indices (FLIs) solve this problem by wrapping a collateralized debt position in a single token that can be bought and sold on an exchange and by socializing implementation costs. Furthermore, FLI’s unique index algorithm reduces rebalancing needs by an order of magnitude. Emergency deleveraging is possible during Black Swan events for additional safety.

Specification

Overview

At inception the following parameters are proposed for LINK2X-FLI:

At inception the following parameters are proposed for LINK2X-FLI:

Asset and strategy parameters:

• Underlying Asse: LINK
• Borrow Asset: USDC
• DeFi Lending Protocol: Aave v2
• Target Leverage Ratio: 2
• Maximum Leverage Ratio: 2.3
• Minimum Leverage Ratio: 1.7
• Initial Supply Cap: 250,000 tokens
• Token value at inception: USDC 100

Rebalance parameters:

• Rebalance Interval: Daily / 24 hours
• Recentering Speed: 5%
• Slippage Tolerance: 2%

Ripcord parameters:

• Ripcord Leverage Ratio: 2.7
• Ripcord Slippage Tolerance: 5%

Initial liquidity:

• Pair: LINK2X-FLI / LINK
• DEX: Sushiswap

More detailed rebalance parameters to be discussed after DG1.More detailed rebalance parameters to be discussed after DG1.

Size of opportunity

While LINK has a market cap similar to WBTC, it has significantly higher trading volumes and volatility indicating demand and opportunity for a LINK2X-FLI product. Chainlink is one of the most widely used protocols in the Ethereum ecosystem that has gathered a strong community behind it. On Aave v2, LINK is the most supplied non-stable coin after BTC and ETH. Demand for a 2X-FLI product is therefore expected to be stronger than for WBTC.

Market & Customer Research

Target Customers

1. LINK holders who use the minting of a FLI token as a USDC loan while keeping their long LINK exposure and who cannot afford gas fees caused by the frequent rebalancing that is needed to maintain the debt position. In addition, some of these holders may act as LPs in a LINK2X-FLI / LINK pool resulting in a 1.5x leveraged LINK position that also earns LP fees with limited impermanent loss.
2. Traders who are taking short term bets on LINK price movement.

Methodology

Objective

Flexible Leverage Indices enable market participants to take on leverage while minimizing the transaction costs and risks associated with maintaining collateralized debt.