VIP5: Enter into partnership with Solidex

https://github.com/ve-DAO/governance/blob/main/VIP5.md

vip: vip5 title: Enter into partnership with Solidex status: voting authors: nickbtts [multisig holder], gabagool [multisig holder], homura [multisig holder] sponsors/seconders: zeentraland, cryptoboi, kellhus discussions-to: https://forum.vedao.io/t/proposal-vip5-enter-into-partnership-with-solidex/50/3

created: 31 Jan 2022

Simple Summary

Proposal to enter into a long-term partnership with Solidex, providing immediate ve(3,3) position fractionalization, establishing permanent governance power over Solidex, and allowing long term treasury revenue generation.

Motivation & Rationale

The veDAO team have spent the last few weeks dissecting, assessing and discussing a wide range of options, with the following core values at heart:

Maximizing value for the veDAO community.

Working collaboratively within the Fantom and web3 ecosystems.

Assessing the Solidly code, gaming out potential strategies, engaging with other projects and progressing discussions within and around the Fantom community has taken time, so it’s important we thank you for your patience. We have strived to listen to the community throughout this process and will continue to do so.

We believe that continual votelocking of Solidly emissions is the optimal strategy to maximize voting power versus other protocols. The Solidly ‘flywheel’ means votelockers attract emissions, whilst voting attracts fees and bribes. With that in mind, we have a dilemma; how do we offer VeDAO members the option to redeem their share at any point without diluting the value over the time it unlocks?

To this end the team believes partnership with Solidex represents the best balance of immediate and long-term value to WeVE holders. Solidex is a Convex-esque layer built on top of Solidly. It will allow users to provide liquidity on Solidly and earn an equivalent yield as a boosted position without having to hold the requisite vote-escrowed Solidly tokens. The top level benefits of Solidex are:

NFT ‘Fractionalization`. veDAO’s NFT position will be effectively fractionalised into SOLIDsex ERC20 tokens, giving options such as staking management by the future veDAO team in order to increase voting power over the Solidex protocol, thus increasing and compounding project revenue, or even allowing for proportionate distribution to $WeVE holders. What we do with the fractionalized position would be subject to a subsequent vote.

Partners. Solidex has already announced Multichain, Curve, REN and Geist as partners, teams we respect and trust. We expect Solidex to have significant control over the Solidly ecosystem (current partners represent 17% of veNFT distribution), so being a part of this group strengthens our ability to shape the future of Solidly and support the efforts of Fantom protocols.

Long Term Treasury Value. As an early partner, veDAO would retain a percentage of all future Solidex emissions. Votelocks on Solidex are up to 16 weeks, allowing for more liquid rewards versus long term continuous votelocking of Solidly’s token.

Long Term DAO Value. Managed voting, votelocking and staking within Solidex will allow us to accrue a greater share of voting power, having a significant say over the potentially dominant force within the Solidly platform. We have seen the demand to accrue CVX on Ethereum; we have a head start should the DAO wish to pursue Solidex voting power accrual as a long term value proposition. It would also still allow us to build future products, should the DAO wish, on top of the Solidex layer.

Code. It is difficult to provide specifics on Solidex’s code and team due to project sensitivities, but we can say that Solidly’s code is endorsed at the highest levels, with the Solidex team contributing to development of Solidly codebase. Similarly, the Solidex team have been endorsed by prominent figures within the Fantom Ecosystem and broader DeFi.

Of course, the veDAO team examined many other options whilst calculating what we believe to be the optimal strategy. These included:

Allow position to vest and distribute liquid token. The position is vote-escrowed, meaning it would take many years for the tokens to divest. During this time, the supply should increase significantly, diluting the value of the eventual reward.

Sell the veNFT. There are difficulties in valuing the position, but it is important to note that this would negate any long term benefits, rendering the WeVE token valueless after redemption. It is difficult for us to meet our second core value of working collaboratively and helping provide value to the space doing this, and would render valid arguments we are a value drain to the Fantom ecosystem.

Self-manage the veNFT. With continuous emissions for veNFT holders, a significant percentage of the initial supply and a capable team, this is an attractive option. Effective management should allow the position to be maintained in terms of overall governance power. However, in line with our core values, continual votelocking of the position’s emissions means little to no liquid assets, and it is important for us to give the DAO the option of an immediate distribution. Similarly, although we hold a significant percentage of Soldily voting power, it is important we work collaboratively with other teams in order to shape the future of the protocol. The best way, in our opinion, to do this is with a ‘unionized’ approach, such as with Solidex or Radial.

Fractionalize using a custom application. A subset of the team, with external quants, investigated using a modified version of the RICKS code to fractionalize the NFT, effectively creating a continuous auction for shards of the NFT and rewarding long term staked holders. Whilst this innovative solution appealed, expanding the development team, developing the code and testing the product would not be possible in time for launch. Also, this would still require the position to be effectively managed after fractionalization.

Partner with Radial. We would like to extend a thank you to the Radial team for their engaged, well informed, positive discussion throughout; their product also operates as a Convex layer, but with more voting authority given to early partnering projects. Again, Radial was an attractive option, but our second core value of collaboratively working with other Fantom ecosystem projects meant that Solidex became a preferred option, even if we could potentially have greater power over Radial.

Partner with a third party. There were a number of discussions with third party protocols about building a completely separated product that would use the Solidly platform and our voting power to drive liquidity. This would be a long term endeavor, and partnering with Solidex would not prevent this. Talks remain open with some incredibly visionary teams.

Specification

Solidex is a Convex-esque layer built on top, and built for, Solidly. Depositing our NFT with Solidex is a one-way street; the position is effectively fractionalized, but is used by Solidex to continually earn and lock SOLID. The economics are below, with an early partnership allowing veDAO to:

· Receive liquid tokens (SOLIDsex) in exchange for our veSOLID that can be either distributed to the community or used by the DAO to accumulate more SEX, thus removing the need to fractionalize a single NFT into smaller pieces and incentivize liquidity

· earn a proportional share of the SEX protocol token in addition to SOLIDsex

· earn more fees from the Solid protocol

The SEX Partner program is characterized by the following functionality:

· Partner protocols will share a minimum of 10% of the total SEX supply

· Partner protocols will receive a pre-mint of SEX on launch

· Following the advance, partners will earn a share of all SEX in perpetuity (for every 10 SEX minted, 1 SEX will be shared between participating protocols)

The current percentage of Solidex owned by partner protocols is 10%, increasing to 15% if more than ten partners join. Future partnerships would affect our percentage, but with current announced partners we would have the highest share due to the weight of our vote-escrowed Solid position.

The SEX token itself can be votelocked in order to earn additional revenue. Note that these votelocks are significantly shorter than Solidly’s vote escrow. Lock SEX for 1-16 weeks, and the DAO will get:

voting power

trading fees in a common pool + third party incentives

bribes (from the pools you voted for)

ve(3,3) emissions (as SOLIDsex)

5% of all SOLID farmed by protocol (as SOLIDsex)

As mentioned, the original voting power would be fractionalized into SOLIDsex. This can be distributed or retained by the DAO to further compound our Solidex voting power and thus bribes and rewards. Staking SOLIDsex attracts:

10% of all SOLID farmed by protocol (as SOLIDsex)

SEX rewards (on mint like for sex partners)

LP SOLIDsex/SOLID pool get:

SOLID emissions like any LP (but hardcoded 5% voting from protocol always)

SEX rewards like any LP

LP SEX/WFTM pool, get:

SOLID emissions like any LP (but hardcoded 5% voting from protocol always)

SEX rewards like any LP

Other LPs get:

SEX Rewards

Boosted SOLID Rewards

In summary, veDAO would receive an immediate benefit of SOLIDsex, that can be distributed, or staked/LP’d for further SOLID and SEX emissions. Longer term, veDAO would have strong initial voting rights within Solidex due to the SEX advance, allowing the DAO to earn both fees, bribes and SOLIDsex (which, of course, can be staked for SOLID and SEX rewards) with managed voting. We would also earn SEX in perpetuity, with a percentage of each SEX minted given to the DAO.

FAQ

What does the $WeVE token do?

The WeVE token allows you governance control over the veDAO treasury (in accordance with SIP1), which we aim to grow through our proposed partnership with Solidex. There’s already been many proposals, and with a significant share of Solidex voting power there may be many parties that wish to have some say over our future decisions.

Do I get SOLID tokens?

Our allocation from Solidly is vote-locked, so we have no liquid tokens to distribute. With this proposal our ve(3,3) NFT would be converted into SOLIDsex tokens, which operate in a similar way to the CVXcrv tokens, tokenising a vote-escrowed position. These SOLIDsex tokens can be used by the DAO to increase our revenue, or could be distributed. This is up to a future vote.

Can we get our NFT back?

No, this is a one way street.

ELI5 me why this is best for my bags.

Convex has become the dominant force over Curve on Ethereum, with increasing amounts of money being spent on Convex bribes. Solidex is likely to become the Convex of Solidly, with established partners and a large percentage of the voting power. With our plan to accrue SEX voting power, we can generate revenue to the treasury and retain the option to build future products, all whilst working collaboratively with the other partner teams to help shape the future of Solidly and Fantom.

What is the long term vision?

The long term plan will be shaped by governance votes, but we see a future where we can accumulate a compounding share of the Solidex voting power, thus generating greater bribe, fee and token revenue for the treasury.