[PIP-3] Restructuring nDEFI and other Soft Synth changes

This proposal aims to improve the functionality and composability of nests on Polly Finance by addressing a number of issues, outlined below, that were experienced in the first few months of operation.

It has spent over 1 week in the Polly Concepts section of the forum to receive feedback. Comments can be viewed here

Areas for Improvement

Its been over 4 months since we launched soft synths on Polygon. They have lead to a some key learnings that can help us improve our product offering:

  • Liquidity is difficult to maintain, especially if there is no other reason for a token to be on the network.
  • Finding or establishing yield for tokens not already established on a network takes time.
  • Chainlink price feeds need to be established before you can ask other protocols to include them on their platforms
  • Low liquidity for underlying tokens discourages larger holders concerned with the costs involved with exiting.
  • The strategy used for nDEFI performed well
  • We could do a better job of embracing the Polygon native ecosystem

Proposed Solutions

Taking into account the learnings so far I would like to propose the following changes to our Polygon soft synths:

  • Significantly simplify nDEFI to only include tokens with good liquidity on Polygon and have a chainlink feed already
  • Take out the infrastructure components from nDEFI and create a separate nINFRA nest.
  • Introduce new nest nPOLY, a polygon ecosystem nests.
  • Create new nINFRA/ETH, nINFRA, nPOLY/ETH and nPOLY farms
  • End all nDEFI underlying asset farms
  • Clarify that multisig can change yield strategies on underlying tokens to any previously approved options for all nests.
  • After the proposed nests, focus for soft synths on Polygon will shift towards opening up the platform to allow anyone to create nests with plug in rebalancing and yield strategies instead of creating them ourselves

Simplify nDEFI

By changing the criteria for nDEFI to focus on blue chip DeFi projects that also operate on polygon we can remove the need to support our own liquidity, allowing for more incentive to mint nests as well as resolving some of the concerns for liquidity and yield. nDEFI inclusion criteria will change to:

  • Top 5 DEFI projects by TVL on Polygon according to DefiLlama, that also operate on ETH main net
  • Weighted by TVL/FDV
  • The token has at least $250k liquidity on a Polygon exchange
  • Has a chainlink price feed on polygon
  • Have at least 7.5% of the total supply in circulation and have a predictable token emission over the next 5 years.
  • The protocol must be live for at least 3 months
  • In the event of a safety incident, the team must have addressed the problem responsibly and promptly, providing users of the protocol a reliable solution and document a detailed, transparent breakdown of the incident.
  • Be Ethereum-focused
  • Must be sufficiently decentralized

nDEFI will rebalance every quarter as previously approved. Following the new criteriaat the time of collecting data the nest would start with this composition:

nINFR

nINFR, a new nest, allows its holders to gain exposure to the infrastructure supporting the Polygon ecosystem. It will be separated from the rest of nDEFI to enable better granularity of choice for users. The tokens will be weighted by their valuations

  • Top 4 tokens by FDV that provide infrastructure for the Polygon ecosystem to operate
  • The token has at least $250k liquidity on a Polygon exchange
  • At least 3 months old
  • Have at least 7.5% of the total supply in circulation and have a predictable token emission over the next 5 years.
  • In the event of a safety incident, the team must have addressed the problem responsibly and promptly, providing users of the protocol a reliable solution and document a detailed, transparent breakdown of the incident.
  • Must be sufficiently decentralized

The starting composition based on the above criteria at the time of data collection would be:

nPOLY

nPOLY will be a new nest that tries to focus on the top projects by DefiLlama TVL on Polygon that are native to the chain so would not qualify for nDEFI inclusion. The weightings take into account the FDV, TVL as well as the amount of Polygon’s TVL the project has. These projects are expected to be higher risk but are often key parts of, or are becoming key parts of the polygon ecosystem.

  • Top 4 projects by TVL on Polygon that are not included in nDEFI
  • The token has at least $250k liquidity on a Polygon exchange
  • Listed on DefiLlama
  • Have at least 7.5% of the total supply in circulation and have a predictable token emission over the next 5 years.
  • The protocol must be live on Polygon for at least 3 months
  • In the event of a safety incident, the team must have addressed the problem responsibly and promptly, providing users of the protocol a reliable solution and document a detailed, transparent breakdown of the incident.
  • Must be sufficiently decentralized

The starting composition based on the above criteria would be:

Rebalancing

All rebalancing for new nests will follow the same structure as nDEFI, detailed below.

Determination Phase

The determination phase takes place during the final 2 weeks of the quarter. During this phase the changes needed for the next reconstitution are determined.

The TVL and FDV of each project are recorded, including new projects that qualify for the nest and meet the criteria.

Proposed changes will be published on the governance forum for 1 week then a governance vote will run for the community to approve changes.

Reconstitution Phase

In the two weeks following a successful vote, the nest components will be adjusted as per the instructions published during the final 2 weeks of the quarter.

End all nDEFI underlying asset farms and start farms for new nests

nDEFI will no longer need the support of the farms providing liquidity for the underlying assets being used. Rewards from closed pools automatically redistribute to open pools. As a result we will end farming rewards for the below pools.

  • YFI/ETH SLP
  • CVX/ETH SLP
  • ALPHA/ETH SLP
  • UNI/ETH SLP
  • SUSHI/ETH SLP
  • CRV/ETH SLP
  • BAL/ETH SLP
  • COMP/ETH SLP
  • MKR/ETH SLP
  • ALCX/ETH SLP
  • LINK/ETH SLP
  • SNX/ETH SLP
  • UMA/ETH SLP

To support the creation of nPOLY and nINFR nests new farms will be created with similar weightings as other nests.

  • nPOLY/ETH - 8000
  • nPOLY - 3000
  • nINFR/ETH - 12500
  • nINFR - 4000
2 Likes

Perhaps outside the scope of this effort?? But I’d like to be able to store assets in my Alchemist Crucible Wallet

I had high hopes, but it looks like another failure for this team/community.

The move to xdai can be seen as a failure (baocx issues and premature ending of farms that the team did not see) and the same goes for the move to BSC (team should have seen the issues with the chain and now panda/rhino left for dead)…and now polygon (team should have been able to see these issues before the decision was made to build a franchise here).

The small number of people in the community that decided to support this move to polygon through supplying liquidity and participating in the nDefi are now (again) being left in the cold.

The GLARING issue with this proposal is there is nothing regarding what is to happen to existing nDefi holders/stakers/LPers. These changes have a new list of tokens with different weighting for nDefi…which means a new NAV. I am not a dev, but i dont think you can have TWO nDefi tokens with different compositions as they will have 2 different underlying values.

Both cant be in existence at the same time.

Are the existing nDefi user being asked to unstake and liquidate? If so, these users who staked/LPed will have to unstake and liquidate? If so and want to particpate in the “new” nDefi…they would have to unstake (0.1% for OG stakers) then restake with the new nDefi and incur another 0.75% fee and then restart the 30 day schedule to a min exit fee of the full 1%…? (As opposed to the 0.1% many enjoy)

If the same stakers of the existing nDefi stakers/LPers participate in the new nDefi, this will result in a new round of fees that would NOT have to be incurred but for the error the team made…is the team willing to compensate new nDefi stakers?

If no compensation…this is beginning to look like a bit of a money grab.

Its disappointing that these questions were not answered/addressed before this proposal was published…its as though the affects to the current nDefi particpants and how this change will affect them was not even a consideration.

This post is in no way a reflection of @Chickn who is the author of this proposal (who i think is a stand up guy), as i am sure that he worked with the entire Bao team in the background.

This post IS a reflection of the entire Bao team.
I believe that they have no malicious intent and they are trying their best, but due to the failures in the past and this current proposal which i believe to be severely lacking…i am questioning their competence in creating a viable product moving forward.

These are my initial thoughts based of the reading of the proposal. If i am wrong or made any errors in my thinking, i am open to discussion…hopefully i can be proven wrong.

We did see many of these issues as a potential problem before we launched on polygon. We decided to be ambitious and try to support some of our own liquidity. It didn’t work, so now we can fall back to plan b. Its much harder to do it the other way around.

I don’t see how anyone is being left in the cold. People were rewarded for providing liquidity for underlying assets for over 4 months and nDEFI holders wont have to do anything if they are happy with the new composition. The changes are party made with users in mind. Entering or exiting an nDEFI position could become troublesome without these changes.

There are no plans on having 2 nDEFI tokens, the current underlying assets will be liquidated to purchase the new nest assets. Its a simple process and very similar to a normal rebalancing. Again, nDEFI holders dont have to do anything.

1 Like

Thanks for clarifying what is to happen to nDefi…it will be a “rebalance”.
This however brings up the question…on this rebalance how is this going to be accomplished?
For the tokens that are being reduced in weight or dropped entirely…where are these sales going to be made?

Since one of the main reasons these tokens are being reduced/dropped is due to low liquidity and the Polly farms are one of the few places you can sell…are these reduced/dropped tokens going to be sold into the current Polly farms…or “dumped on our heads”?

I dont know how much of each token is to be sold, but it sounds like anyone who has liquidity in a token that is being reduced/dropped may face large IL as a result…?

If this is the case, i think the team should clearly outline how this sale is going to be done and allow any LPers the opportunity to pull their liquidity to avoid IL.

Yes, this would then dry up the liquidity that the team can sell into on polygon, but i believe its the right thing to do…perhaps any tokens that are to be sold should be bridged back to mainnet and sold there.

There is no where near enough liquidity on polygon to rebalance, so we will bridge tokens to main net, sell them, then bridge back the ETH - gas will be paid by the treasury. It will mean redeeming or minting for nDEFI will be “down” for a few hours while all the transactions are completed.

Can Polly be included in the nPOLY basket? I see no reason why as this would introduce some buying pressure and provide use case for Polly.

Polly isn’t in the top tokens by TVL, so we would need to create a new basket with different rules.

I would like to see vePolly implemented at some point & make accumulating Polly and locking it up attractive so you can have control over some key parts of the system, get boosts and share revenue.

1 Like