[xEIP] Creation of a Strategic Fund

General Discussions
1

Title

Creation of a Strategic Fund

Summary

To accelerate the growth and sustainability of the xExchange ecosystem and to implement key strategic initiatives that will drive the development of the entire MultiversX ecosystem, this proposal aims to create a new Strategic Fund. This fund is envisioned as a catalyst for growth, innovation, and strategic investments that will strengthen the ecosystem and support long-term objectives. Proposed time window for community discussions: 7 days (until Oct 24).

Description

Rationale

xExchange platform is at a pivotal point in its development with the launch of the V3 version, with a long-term North Star of becoming a leading liquidity layer in the DeFi ecosystem. However, to realize this vision, it is essential to have a dedicated fund that can be directed towards initiatives that foster innovation, contribute to user adoption, incentivize development, and create sustainable value within the MultiversX ecosystem. Our ecosystem already has the foundation in place, but to achieve the next level, we need to invest in what truly matters:

Supporting Builders and Innovators: We want to attract the brightest minds to develop useful solutions that enhance the capabilities of xExchange and create synergies across MultiversX.

Strengthening Liquidity and Market Presence: By boosting liquidity incentives and attracting trading volumes, we aim to create additional value for everyone involved in xExchange.

Fund Structure and Initial Funding

The Strategic Fund will be seeded with all undistributed farm rewards from xExchange, comprising 714 billion (valued at ~2,343,763$ as of writing) undistributed rewards as of October 9, 2024 and all rewards that will remain undistributed in subsequent weeks, providing a continuous flow of resources into the fund. As we propose the creation of this fund to drive the growth of xExchange, we also advocate for an essential step: the decision to fully unlock all undistributed rewards as MEX, without penalty fees. This approach allows greater flexibility in determining how incentives are allocated for strategic initiatives, while still retaining the option to distribute them as locked tokens if needed. Resource allocation from the Strategic Fund will be guided by a governance process for initiatives that will require more than 10% from the fund, involving community proposals and voting. Given the dynamics of the DeFi sector, this threshold aims to allow a rapid response in capturing the right moments for expanding the ecosystem. Additionally, 10% of the initial funds and the upcoming claims will be reserved for covering ongoing operational costs of the xExchange, and this allocation will not be subject to governance voting.

These undistributed rewards are generated by users who deposit LP tokens into a farm, earning both base and boosted rewards. The boosted rewards depend on the user’s energy level and their position within the farm. For instance, a user with no energy would only receive the base portion of the allocated rewards, while the boosted portion would remain undistributed. To receive the full allocation of rewards, users need to maintain an optimal energy level relative to their farm position.

In addition to this mechanism, there is a four-week deadline to claim the boosted rewards. If the boosted rewards are not claimed within this period, they will no longer be eligible for claiming and will instead be added to the pool of undistributed rewards.

xExchange is fundamentally an open and decentralized exchange protocol, operating in a transparent way through the power of blockchain technology. We are outlining the mechanism to calculate not only the undistributed rewards as of this moment but also all future rewards eligible for collection. Each farm smart contract utilizes a series of queryable storage structures that together provide the information needed to determine undistributed rewards:

  • getRemainingBoostedRewardsToDistribute: based on a week number, it provides information about uncollected undistributed rewards for that specific week
  • getUndistributedBoostedRewards: it provides information about the collected undistributed rewards that are subject to this governance proposal

Next Steps

Upon approval through community on-chain vote, the following steps will be initiated:

  1. Fund Activation: Perform the necessary changes for smart contracts and redirect all undistributed farm rewards to the Strategic Fund.
  2. xExchange Growth Initiatives: Allocate an initial portion ($200,000 in MEX tokens) from the Strategic Fund to support a series of campaigns aimed at driving further growth and expansion. These campaigns will include, but not be limited to, Energy League Awareness Campaign, Trading Competitions, Stablecoins/BTC/ETH Liquidity Campaign. A draft presenting several growth campaigns will be unveiled in the upcoming week.

Open to feedback

We invite all community members for a period of 7 days between Oct 17th and Oct 24th to review this proposal and share their thoughts, suggestions, and support for establishing the Strategic Fund.

4 Likes
2

Start by simplifying the post. No need for fancy words. It’s a message for the community, not PR.

Challenge: can you express the same in less than 500 words?

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First of all, why was this proposal not created in the xEIP Drafts section? Please move it there or recreate it. The xEIP section is for creating and discussing the drafts, not the general section.

After reading the proposal I have many questions:

  1. “[…] October 9, 2024 and all rewards that will remain undistributed in subsequent weeks, providing a continuous flow of resources into the fund.” → What is “subsequent weeks”? Do you mean as in, “forever”? Or just for a month? What is this?
    1.1. Assuming this means “forever”, it would pose permanent tokenomics changes, that were not previously approved of by the community. This needs to be known by the community and they need to be aware what they are voting on.

  2. “714 billion (valued at ~2,343,763$ as of writing)” → Not all of these 714bn+ MEX are allocated in the proposal. There is no clear allocation of how the funds will be used. Some percentages are mentioned, but there is no clear split up.
    2.1. Assuming, again, these changes are permanent with the undistributed MEX being used for the fund, then there has to be a fixed version of how the funds are being used. If not, we basically blindly trust the xExchange Company to do the right thing (but that’s not the point of a DAO and transparency).
    2.1.1. In the future, new proposals can be made to reallocate parts of the fund to other parts of the fund if necessary, but there needs to be an initial distribution chart.

  3. *"the decision to *fully unlock all undistributed rewards as MEX, without penalty fees" → So you will bypass the entire energy system, and instantly unlock the xMEX to MEX, and so, without any fees. So the 714bn xMEX that were never distributed will be given to you, the fund, in pure and unlocked MEX? I get that this is necessary to get more money for the campaigns you are planning, but it needs to be well considered by all holders, if they want to allow this to happen.
    3.1. Again, assuming “subsequent weeks” means forever, then these again pose changes to the fundamental tokenomics of MEX.

  4. The use of the funds is not only not clear, but the campaigns and everything else proposed is extremely vague, allowing a lot of legroom for the xExchange Company to decide what will happen with the money in these campaigns. I expected a little more detail in such an important proposal regarding over 2 million USD and counting. How am I supposed to confidently vote for this proposal when I do not know exactly what it is being used for.

  5. The proposal seems, in general, overall, way too short and undetailed. It is basically 4-5 paragraphs long, and that for a proposal that is deciding the fate of the 2.4 million USD.

  6. The proposal does not specifiy the alternative: what happens if we vote no? What happens to those 714bn+ MEX and counting? Originally in the original tokenomics, these MEX should simply not exist. So what happens if we vote no? We will keep the current tokenomics and the 714bn+ MEX will not be created (and minted in the form of MEX)? This is not outlined although a crucial part of such a vote: “what is the alternative?”.

  7. The company behind Curve typically creates new proposals whenever they need money and the Curve DAO approves it, given specified explanations what they will use it for, and how, etc. With this proposal, essentially we give you a 714bn+ MEX grant for very vague uses that are not explained in detail, and also into the future - since it at least goes on for “subsequent weeks” if not forever.
    7.1. This way you will bypass (if “subsequent weeks” indeed means “forever”), this way you will bypass any need for future approvals by the DAO for new funding, new grants etc.

I hold the team to higher standards than myself, and this proposal has so many holes and missing details - it needs to be improved. My proposals are as detailed as I, myself, can write them. You should have higher capabilities to write proper proposals. If this is the final version before governance vote starts then…

To clarify, I am a fan of the ideas, really - more campaigns and liquidity is always good etc etc. but I cannot confidently vote yes on this proposal with so many missing details. I WANT TO VOTE YES, but we need all the details first.

//EDIT: This is the level of detail and greatness we once had - we voted on this for the change to V2. This is a proper governance proposal.

And now we get this ^

image

10 Likes
4

TLDR - $2M+ Strategic Fund for Ecosystem Incentivisation.

1 Like
5

The fund is a good idea, especially if used to raise awareness and increase stable coin liquidity.

However, I think we should have a point where the funds become available for use. Selling or distributing at the very bottom of $EGLD and $MEX price is a bad idea in my opinion.

Wait until sediment and $EGLD partially recovers from current bottom prices.

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LESS WORDS? That would mean even less details! Buddy, we are talking about 2.3mln USD and growing. We need all the details and no 500 word summary.

1 Like
7

To state the obvious, this is only $2M worth of MEX in the absence of additional sell pressure in a market

Try selling this in a thin market to drive anything, it’s just going to be an EGLD grab of the few people that still maintain an LP.

Unless you expect sudden buy pressure on the LP, but then why mute the effect.

I don’t think the secondary effects of this proposal have been thought out too well.

Having said this, it’s not clear how this Mex will be used and if it’s not just going to be sold, how exactly will it be used to help?

2 Likes
8

Hello @claudiu-lataretu,
Welcome to this new endeavor, Propositions made above are too general to be discussed by the community as such. **edit
In your tweet I see that you set the aim of this strategic fund

  • overall growth
  • incentivizing building on top of xExchange
  • increasing liquidity & market presence
    In this post, we see that you insist on the 2 last bullet points.

My 2 cts,

  1. building on top of xexchange is too early, xechange has to show strength first. Unfortunately price/TVL is strength at this point of time.

It seems you actually already have a good idea behind the use of this strategic fund and that the content will be revealed in the coming weeks. We discussed few month ago about this topic already.
So do we have any way to contribute within a week or you are just presenting what you intend to do ?
All the best, JN

1 Like
9

To begin with, this is an agora post, not the governance call.
The principal distinction is that the agora post is to incite engagement, questions, clarifications and bring up the definitive shape of the eventual governance call.

Some details are scarce intentionally as they might not particularly make the point of the proposal which is the creation of the fund itself. For example, the specific uses of the funds held by this fund, might be unknown and can happen at any point in time based on need and subject to governance voting for anything that requires >10% of the fund’s value as stated above.
The idea of the fund is that it has to exist to allow usage of it for any strategic purposes and it has to be governed somehow.
To extrapolate to the case of Curve DAO you mentioned specifically, the DAO already has a community fund to oversees. That’s what the DAO does basically: they manage that fund. This proposal intends to create that specific fund so that it can be further used wherever needed, subject to the DAO’s (governance driven by energy holders in our case) approval on case by case basis.

Now, to underline a specific aspect that probably wasn’t clearly understood and would probably answer most of your questions:
The MEX under discussion is already part of the actual tokenomics and they do not alter it in any way.
The fund is made of unclaimed boosted rewards that users permanently lose if they don’t claim on time.
To make an analogy, the entirety of MEX distributed by the farms according to the current tokenomics form a pie each week. Each week, people can claim portions of that specific pie. If they don’t claim their portions in due time, those specific portions will go rotten and become useless.
This proposal recommends to take those rotten pie pieces and use them to fertilize the land.
If the proposal doesn’t pass, those pieces just continue rotting uselessly → that MEX just remains stuck and wastes other potential uses.

I believe this is why the proposal is so short. The existence of this fund doesn’t affect the existing tokenomics so it doesn’t create other effects than the ones already in place if everybody would’ve just claimed all their rewards.
In other words, what’s under debate now basically boils down to “exchange energy users” deciding what does happen with the wasted MEX “the inactive exchange energy users” lose anyway.

I would recommend you to read the proposal again with this clarification in mind and think about this fund itself, how should be used, how to be deployed, then let’s talk further if they lead to new questions.

10

You have my support. I completely agree with everything.

Only one thing I would like to add about this: fully unlock all rewards not distributed as MEX, without penalty.
Basically they can (want), we can’t. This is something I don’t like at all because it would set an unacceptable precedent from my point of view.

2 Likes
11

Well ok, those funds wouldn’t be used that’s right but if they do they are affecting the price in a inadequate timing period.

But if it passes it would create “eventually” a sell pressure on MEX in a certain period of time, we would like to evaluate the risk together if there are? let us decompose

  1. We don’t know the timing of the use of this fund.
  2. 10% of the funds are for operation which is normal, how big are the need of operation, are they the only source of funding at this point of time?
  3. Evaluation of the sell pressure : the spread is 0.6% on CEX, the market cap of MEX is 12 or 13 M$ depending on where we look. so 200k$ if they got to be swapped are 1.666% of the market cap. It is pretty substantial. What are the potential price effect of this swap ? Can we simulate it and do some risk management ?

All the best, JNX

1 Like
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Don´t agree with fully unlock all undistributed rewards as MEX, without penalty fees seems unfair to LP providers. Unlock it with the penalty or distribute part of it among LP providers.

3 Likes
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No. This is false, as this is nowehre mentioned. It does not intend to create a Fund managed by the community. Instead it intends to create a fund managed by the Company.

Yes - they permanenently use it. Which means it shouldn’t exist anymore. The original “Strategic Fund” proposal by Lucas addresses this better.

It does, by 1) using these unclaimed xMEX and 2) completely bypassing the unlock schedule for xMEX.

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Extremely good point, another missing piece of information in this proposal.

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The existence of the fund doesn’t directly correlate to sell pressure and I doubt the exchange team intends to suicide itself by doing this.
Ideally, the fund will be deployed to create a positive effect on the MEX price, otherwise it’s pointless. How to do this? Well this part in specific is debatable, but it goes beyond the existence of the fund itself.
In regards to the first 200k, the proposal states that it should go toward Energy League Awareness Campaign, Trading Competitions, Stablecoins/BTC/ETH Liquidity Campaign which, ideally would drive volumes & tvl larger. Would it create sell pressure on MEX? Probably, we’ll have to see how exactly those initiatives look. Would it be worth it? Remains to be seen if efficient, but it’s definitely better than doing nothing and expecting things to just happen out of nowhere.
To your points:

  1. That’s the idea of having a fund and not directly financing initiatives.
  2. As you’re probably aware, xExchange doesn’t perceive any fees for any service provided to its users because it wanted to bootstrap nicely and give as much as possible to the community. This in my opinion was wrong from the start because it created false expectations to people that are now reluctant to face reality. Other exchanges do perceive taxes. Operational costs mount up for paying for developers, website infrastructure, maintenance fees, marketing costs, etc. Since the team went fine so far without perceiving anything, there should still be some available leeway probably, but the 10% should cover for all these costs facing forwards through time, while anything more (if needed) should be on their own. As far as I can see it, the alternative would be to just let the team burn through whatever resources they still have then let them disolve, which in turn would make the exchange an un-maintaned ruin as well, which at this rate without intervention would probably happen way before everyone’s 4 years XMEX would unlock. Not sure who would be confortable taking up this bet.
  3. Not directly I think, though there might be calculators on the web available to calculate price changes for constant product pairs like ours. You can have a look here to figure it out: Price impact and how to calculate it Basically, calculate current constant by [current constant] = [current egld in pair] * [current mex in pair] then [egld after swap] = [current constant] / ([current mex amount in pair] + swapped value). The price of MEX afterwards would be ([current mex amount in pair] + swapped value) / [egld after swap].
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  1. Did you even read the proposal before saying that?

Resource allocation from the Strategic Fund will be guided by a governance process for initiatives that will require more than 10% from the fund, involving community proposals and voting.

  1. I don’t understand what you mean, but on the other point, Lucas’ initial proposal is the same thing except the unlocking XMEX part.

  2. If people would’ve claimed everything, it would’ve been the same tokenomics. Sitting around uselessly is the same thing and same tokenomics. Again, I fail to get your point.
    On part two of this point though, that’s a thing indeed and in my opinion that’s the only point needing a discussion here. This doesn’t violate the emission rate of the tokenomics in any way, but the locking part is a debatable nuisance of the tokenomics, therefore subject to this proposal. Funny enough, the creation of this Strategic Fund IS also part of the approved tokenomics so it’s also debateable whether the team really needs this discussion anyways, but very glad it is actually a discussion without direct act on it.

The thing with the XMEX locking is an useless pain currently and it can be removed completely even for farm rewards while still not violating any emission rate in the tokenomics. It wouldn’t change anything in how much people would dump it if it weren’t unlocked right now anyway, but I suppose everyone would rather wait and just keep the status quo by just being afraid someone sells before their bags get unlocked, without seeing the real benefits that might and should affects their bags in the meantime if used wisely.

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Less useless words. A simple diagram with tokens flow could clarify the intention.

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Hi Claudiu,

I think all is good, but for strenghthening liquidity why not wait to allocate the 200k$ after xExchange V4 is finalized ?

Do we want to create a hype when market is better (along with many concurrents btw) but when the market crash again then all mercenary capital will move on again, or do we wait for xExchange to be a bit more attractive before putting this game on ?

We still missing perp, rewards swapped in xMEX, Bribes and voting power for xMEX holders, trading arena, quests etc …

Honestly for all dexs i’ve tested, xExchange still feels subpar in term of dynamics of its economy.
Simplification was good but now it’s time to switch to improve the yield and game theory behind all products.

I don’t think new people will really be interested in more MEX for creating a LP position until this has been implemented, and when those updates are implemented it could help bootstrap and bring in new users saying xExchange has really evolved to be one of the best DEXS.

Anyway it only represent around 10% of the total Strategic fund but why not wait a bit more at this point, to really bring new people, otherwise i see existing LP peoples already in place taking all the incentives.

Thanks for reading !

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until v4 is finished it will take another 16 months minimum

market is good NOW, so we need to take advantage of it. Bitcoin made new ATH, and close to making a new ATH, TOTAL3 looking good, only thing looking not good is bitcoin dominance, but it’s primed to fall any time now.

by waiting for the perfect opportunity, you lose it.

You can never perfectly time the bottom, you can never perfectly time the top.

The time to move and try to improve xExchange was not today, not yesterday, it was 2 years ago.

They should really focus on everything asap, no matter if it is the “perfect time” or not.

You can NEVER reach the perfect time for anything, really.

20

I did read it, but true, i did misinterpret it.

yes which is fine

No it wouldn’t have been because the tokens remain locked

The tokens get unlocked

Never claimed it did, but it bypasses the lock mechanism which are an essential part of the tokenomics

1 Like