PIP3- Restructuring nDEFI and other soft synth changes

Restructuring nDEFI and other Soft Synth changes

Its been 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

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
  • Introduce new nest nPOLY, a polygon ecosystem nests.
  • Create new 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

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:

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.

I looked into including some polygon metaverse/ gaming tokens but there is still a lack of liquidity available for them other than GHST.

  • Top 4 projects by TVL on Polygon that are not included in nDEFI + top 2 metaverse projects by number of daily active users on
  • 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:

nINFR

nINFR, another new nest, allows its holders to gain exposure to the infrastructure supporting the Polygon ecosystem. 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 would be:

Rebalancing

All rebalancing for new nests will follow the same structure as nDEFI

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
  • BAO/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

Smart.
Custom built pools specific to the network makes sense (nPOLY + nIFNR).
Like the idea of the adjusting nDEFI pool to project that operate across both ecosystems.

How soon could this be put in place?

Personally I think we should keep the BAO/ETH SLP farm, I know its not being used in any nest yet but it’d be nice for BAO users to still have somewhere off mainnet to farm off.