Indexed

Summary

Last month, the community voted to halve the revenue share that goes to dNDX in this proposal: https://gov.indexed.finance/#/proposal/QmUtE66finNuxUsShWGmfoHPqwVL76jqLNwSoXCiJ7L7C8.

While governance never promised the fee split would be static, I think this poses a question of fairness with respect to the previous dNDX depositors. The ideal resolution would be to temporarily allow people to withdraw their NDX with no penalty; unfortunately, the contract does not allow this. Early withdrawal fees can only be permanently disabled.

One option we have is to unlock dNDX deposits and redeploy the contract so that people who no longer wish to hold dNDX given the new fee split have the option of withdrawing and those who do can redeposit; however, this creates a second issue with respect to those who fall into the latter category but do not notice the redeployment before fees are disbursed.

The simplest option is to distribute the revenue that was already accumulated before the fee-split vote at the original ratio of 60/40, as that revenue should have been distributed some time ago, use 30/70 going forward, and leave the existing dNDX contract in place. There is a trade-off of fairness either way, so the community needs to decide which option is best under the circumstances.

If we do redeploy dNDX, I think it makes sense to take two additional steps:

• Delay disbursal of the accumulated revenue for 15 days or so, to give people time to redeposit.
• Reduce early withdrawal fees by half.

Early withdrawal fees were set in a way that disincentivizes deposits with a long duration for which the depositor has no desire to wait until expiry. We can calculate for a given lock duration what the APY would need to be for it to be worthwhile to withdraw early at any time before the lock expires; by halving both revenue and early withdrawal fees, we’d preserve the relationship between the actual APY and the APY needed to make early withdrawal profitable.

Options

I’m proposing 5 options:

1. Leave dNDX as is. Distribute the revenue accumulated before the split-change proposal at 60/40 dNDX/treasury, and use 30/70 for future revenue.
2. Re-deploy dNDX with the same fee parameters. Distribute the revenue accumulated before the split-change proposal at 60/40 dNDX/treasury, and use 30/70 for future revenue.
3. Re-deploy dNDX with halved fee parameters. Distribute the revenue accumulated before the split-change proposal at 60/40 dNDX/treasury, and use 30/70 for future revenue.
4. Re-deploy dNDX with the same fee parameters. Distribute all revenue at 30/70 dNDX/treasury.
5. Re-deploy dNDX with halved fee parameters. Distribute all revenue at 30/70 dNDX/treasury.

Option 1 is the easiest to implement, as it won’t require any contract or interface changes. It also removes the possibility of existing depositors losing out on accumulated revenue because of a failure to redeposit.

Options 2-5 differ in how accumulated revenue is distributed and the early withdrawal fees. All of these options would include transferring all of the NFTP, DEGEN, and ORCL5 held by the treasury (minus 4,994 DEGEN) to the fee seller contract, which would then sell the tokens and split the ETH between dNDX and the treasury. The same will be true for Nirn vaults once it is fully released.

If 2-5 combined receive >50% votes in favor, I will create an on-chain proposal to execute whichever receives the most votes. If 1 receives >50%, I will create a proposal to begin distribution.