[xEIP Draft] Creation of a Strategic Fund

Title

Creation of a Strategic Fund

Summary

This proposal aims to establish a Strategic Fund. The purpose of this Fund is to incentivise strategic actions to develop and grow xExchange and its ecosystem. The Fund will be managed by the Governance.

At start, the Fund will receive all undistributed farm rewards of xExchange, both those undistributed to date, valued at ~$2,290,356 as of 11/17/2023, and those to be undistributed each subsequent week.

Description

This proposal aims to establish a Strategic Fund. The purpose of the Fund is to incentivise strategic actions to develop and grow xExchange and its ecosystem. The Fund will be managed by Governance.

This proposal only aims to establish the Strategic Fund, not to determine how it will be allocated. That will be the purpose of subsequent proposals.

Possible usages of the Fund

Even though this proposal doesn’t aim to determine the allocation of the Fund, it is important to start imagining how the Fund could be used. For example, it could be used to:

  1. Offer attractive prizes for xExchange hackathons, such as the prestigious Battle of Yields competition.
  2. Reward those who aid in the testing of new and exciting features on xExchange, ensuring smooth and efficient rollouts.
  3. Support protocols that choose to build on top of xExchange, further enriching the xExchange ecosystem.
  4. Reward the community for implementing xExchange features or tools, further improving xExchange user experience and capabilities.
  5. Reward the community for creating high-quality content around xExchange, further increasing our presence and visibility.
  6. Burn more MEX.

There are probably many other great ways to allocate the funds of the Strategic Fund, and this will be the subject of subsequent discussions and proposals.

First source of funding

The first source of funding of the Strategic Fund will come from undistributed farm rewards.

A user who deposits an LP token into a farm earns base rewards and a part of the bonus rewards he is eligible to. This part depends on his energy: he earns 0% of the bonus rewards if has no energy and up to 100% of bonus rewards if he has sufficient energy. Moreover, he has 4 week to claim his bonus rewards. Past this time, he will lose them.

The undistributed farm rewards to go in the Strategic Fund are the bonus rewards that users were eligible to but didn’t earn because they either lacked energy or didn’t claim them on time.

To add the undistributed farm rewards in the Strategic Fund, an endpoint will be added to the farms. This endpoint will mint the undistributed farm rewards as XMEX locked 4 years and send them to the Strategic Fund.

As of 11/17/2023, 339.3 billion XMEX farm rewards have been undistributed, which are valued to ~$2,290,356. If you want to compute by yourself the undistributed rewards or get more up-to-date numbers, you can run this script:

https://dash.deno.com/playground/undistributed-xmex-rewards

Release

If this proposal were to be approved, the farm smart contract would need to be changed in order to allow the strategic fund to claim the undistributed rewards. This change would be released only after xExchange v3 is released.

40 Likes

Hi Lucas,

This is a very cool xEIP,

To me the 3rd Option is the most interesting because it encourage the chain to be more open towards other existing protocols and encourage existing people on other chains to test and get to know MultiversX Blockchain,

The fifth option could also be interesting but only granted to people outside of the ecosystem with significant user base, meaning existing threadors shouldn’t be eligible,

Maybe the better solution would be to prioritize the most important option first while still retaining a certain percentage of funds for all other options,

My toughts on this,

Good day,

9 Likes

Interesting points @angie44120 :pray:

Please note that for this xEIP the only purpose is to create the Strategic Fund without deciding how the fund would be allocated. It will be the purpose of follow-up xEIPs to decide how the fund will be allocated.

9 Likes

Hello Lucas,
I will try to put all these in a swot (strenght, weakness, opportunity, threats) format for each of the propositions (I al not fan of long sentences) :

clarification needed for me in italic

  1. Offer attractive prizes for xExchange hackathons, such as the prestigious Battle of Yields competition.
  • S: attract* developers
  • W: already done in the past (boring for some)
  • O: bring ideas to third parties to leverage on xexchange
  • T: usage of bots helps in winning the competition
    Questions to develop : what is the participation rate from BoY to BoY ?
  1. Allocate funds to reward those who aid in the testing of new and exciting features on xExchange, ensuring smooth and efficient rollouts.
  • S: Helps better UX
  • W: delays the launch and innovation
  • O: more robust feature and exchange with users
  • T: feature not existing enough to attract real test
  1. Support protocols that choose to build on top of xExchange, further enriching the xExchange ecosystem.
  • S: Increase number of farms, investment opportunities
  • W: Dilution of pools if not positive cash flow
  • O: liquidity (goes both ways)
  • T: Increasing number of bridge → increase of pool drain risk
    If you mean other chain, do we have any idea before hand on the cost to bridge token between the 2 protocols?
  1. Reward the community for implementing xExchange features or tools, further improving xExchange user experience and capabilities.
    I believe what is meant are aggregator and energy future users ?
  • S: The concept and advantage of energy (trust bringer) has to be widespread as innovative
  • W: Limited to current mvx landscape
  • O: There is no example of external energy usage for the moment, I could be the moment to give the idea
  • T: First trials are the riskiest
  1. Reward the community for creating high-quality content around xExchange, further increasing our presence and visibility.
  • S: brings visibility
  • W: Building content on complex systems is tough and discouraging for influencer
  • O: The reach on influencer is strongly dependent on current price action.
  • T: The regulation in EU (FR) is limiting this kind of promotion

Feel free to ask question on the topic, I will be glad to develop.

7 Likes

Hi @angie44120,

Agree with you on your point for the fifth option. First of all, the ecosysteme has rewarded content creators like me a lot, which is greatly appreciated and helps us a lot financially in these troubled times, especially when we’re full time crypto and trying to proffesionalize our involvement. It allowed the emergence of new key opinion leaders in the community and this was a very important phase.

On the other hand, these rewards must not be directed solely at us, because it don’t allow to acquire new members in the community. As we’ve seen with the HyperGrowth and xMoney challenges, despite the large sums involved, the incentive has barely crossed our borders. So I think there’s a fine balance to be found in order to allow for both, so that we don’t just cater to each other, and also continue to push the community to specialize and educate itself!

One option that I think would be perfect would be to reward the most fervent participants in governance for members of the current community, and direct rewards for content produced on other platforms (X, Youtube etc) only to key opinion leaders with a community outside MultiversX.

8 Likes

Hi @lucaswillems,

Very good initiative, we’ll have plenty of time to discuss the possibilities of use later so let’s try to concentrate on the proposal itself.

A few questions and idea that come to my mind:

  • Are these xMEX already part of the circulating supply, or are they currently just a “fictitious supply” that exists only in the data of the energy factory smart contract and enabled by today’s tokenomics? (I guess the answer is that they’re not minted yet, but I’d rather be sure.)

  • What is the energy state of this supply? Do each xMEX batch have its own time lock according to the date of their production, or is this variable generated at the time of the claim? If the lock time is not general, should we energize them to the max before use them or will we have to take into account the different time locks according to their future use?

  • Would it be in our interest to allow these xMEX to be unlocked by removing the fees associated with de-energizing for certain specific uses? In the case of financing for example, this would be of little interest if they can’t be used for several years, or lose 80% of their value if unlocked. Unless, in the not-too-distant future, they can be used as collateral for loans.

There is other alternative to a strategic fund?

  • A burn => would bring nothing as this would only maintain the status quo imo.
  • A fair reallocation in current farming rewards = > Increasing farming incentives now would be of little interest. Should the need arise in the future, this may well be decided by the strategic fund governance.
  • Use them as base liquidity to create ESDT<>xMEX pools => much more interesting in terms of relevance, but same idea as above, it can be part of the strategic fund’s responsibility.
  • Allow the xExchange team to keep part of this amount => This could be interesting as part of the above proposal, not least to avoid tying up funds if the DAO can’t reach a consensus on how to use them, and leave room for manoeuvre to the core team in the event that important decisions have to be made that the DAO does not like. Sometimes centralized choices by experts may be necessary. This should be seen as a “just in case” approach, to avoid closing off certain possibilities. It could also help restore a degree of fairness if the DAO’s choices become too directional.

Does anyone see other alternatives to the creation of a strategic fund that might be worth considering?

8 Likes

I think you develop interesting ideas above, let us start with those :point_up_2:

I was thinking yesterday that the attribution of metastaking and metabonding is not part of the current proposal but it should if possible.
These are certainly part of deal in the past with the projects in metastaking and metabonding.
So the simple question is : is there any room to increase those rewards using the fund or should it be kept in the hands of the xexchange team?, or is it purely in the hands of the project allocation (project decide 100% of their allocation to metastaking / metabonding)

The idea is interesting, in case of lack of understanding on a specific topic. Funds could be allocated to produce a report or video or whatever on “explain me as I am 5 what does it mean for a DAO to allocate fund to metastaking”. This would allow more users to be part of the decision which is key.

If we are 4 to participate on this thread, it certainly means that the latest is top priority for example.
NB: It is a lot to read, an easy peasy -15min- twitter space sometimes can help settle things down and check if users having ‘skin in the game’ are ready to discuss. I am !

2 Likes

This will enter into the use of the funds, which will only be debated once the recovery of the funds by the DAO has been voted.

But it does raise some interesting points. At the very beginning, metabounding/metastaking acted a bit like a listing fee from what I understand, then it was certainly a negotiation between xExchange team and project to chose the APR or the amount of token. But this is no longer true now that xExchange is permisonless, so there will be some very interesting points to discuss about these mechanisms, how to improve them and so on.

On the other hand, I don’t think it’s up to the DAO to pilot the APRs of these two product, as this involves tokens over which we have no legitimacy. But we could imagine an entry prurchase fee in xMEX for using these products, or similar incentives to encourage projects to participate financially in the DAO.

Agree, I will certainly write a thread on twitter to encourage people to come and participate actively.

5 Likes

GM,

This is an excellent xEIP proposal!

As you’ve mentioned @lucaswillems, this proposal aims to discuss whether a Strategic Fund should be created or not. But at the same time, for a fund to be voted upon, one needs to know what defines it.
In addition, defining what incentives it could cover to avoid proposals that fall outside the strategic fund’s scope could be helpful.

The five examples you’ve mentioned are great, and I believe they can be resumed to something similar to this:
The Strategic Fund incentivises strategic actions linked to the xExchange, including new features, testing, enhancements and interoperability.

For the use of undistributed farm rewards, @xfoudres has already brought up most questions I had in mind.

I don’t think the community would appreciate unlocking the xMEX in the actual market conditions, as it would be seen as a new selling pressure.
Receiving xMEX from the Strategic Fund is an additional incentive, which comes with a shared long-term vision for xExchange.
The incentive will allow to increase farming rewards, voting powers and any additional features future xEIP might give to xMEX.

Like Foudres, I can’t see a better use for the unclaimed xMEX than creating this Strategic Fund.

I’ll only mention the last point brought up, which is related to the Core Team.

In the case of a proposition made by the Core Team to the DAO that fails to pass the approval or reach consensus, the funds should remain in the control of the DAO, in my opinion.

From the MEX tokenomics, I believe parts of the supply are yet to be used and could serve those purposes.
I’m referring to the 150B in Developer Grants and the 350B in Ecosystem Growth, mentioned here Broad Distribution And Compelling Tokenomics: Introducing The MEX Economic Model — MultiversX

I look forward to seeing where this conversation goes and voting on the first xEIP!

3 Likes

Thanks a lot @johnnyxmas @xfoudres @joaquim for these very thoughtful messages!

Good questions @xfoudres regarding the implementation! As I don’t know all the specifics here, I am forwarding your questions internally and will update the draft as soon as I have more information.

Regarding your other alternative to a strategic fund, these alternatives could just be seen as a strategy of the strategic fund. The strategic fund could decide to burn, to reallocate, to use as base liquidity, etc. For me, all of this are just specific strategic that could be discussed and voted later on. Do you see what I mean?

@joaquim You are totally right that having a general description of the scope would be great! And thanks for the proposition!

In a few days, I will update the draft to put a second version taking into account all the good points raised here!

4 Likes

Thanks @lucaswillems !

On the subject of my alternatives, which aren’t really alternatives at all, that was kind of the point of my message to show that creating this strategic fund is a bit of a no brainer choice. Because there’s no other alternative that wouldn’t fall under the use of this fund, apart from the decision to refuse it by burning everything, which doesn’t bring any real benefit !

2 Likes

Good point @joaquim, it’s true that a large part is still in the team’s wallets, so there would be no need to allocate a part of this xMEX funds to the team since it already has.

As you explain, having the possibility of unlocks at no cost, even if important for funding, would only add additional downward pressure. So rather than funding, it should be seen as a long-term incentive and be decided not to intervene in any way in their unlocking. Which brings me to another point :

What links can we make with this strategic fund and energy DAO’s smart contracts, which were created several months ago? Would it be possible to see this fund, rather than an xMEX fund, as primarily an Energy fund that acts as an energy relayer. So rather than giving xMEX as rewards or funding, which could be instantly unlocked and sold by the receivers, propose instead to relay some of the energy as rewards.

Therefore the DAO will only grants power to contributors, not funds.

And for a proper incentive to a protocol that want to build on top of xExchange, we could create a special energy smart contract for funding.The protocol could use the energy as it sees fit, but the xMEXs would only be distributed once their energy had been used up and if the protocol had fulfilled its commitment, and therefore distributed in MEX.

You could think of it as an energy vested grants.

As for their uses, rather than thinking about what we can use them for (although a definition could help frame future proposal), I think it would be more interesting to propose bans if some of them prove necessary, and to be included in the vote for the strategic fund. i.e (just idea, not my own proposal):

  • Any rewards distributed cannot be unlock and sold before the initial unlock schedule of the given xMEX (hence my proposal above).
  • These xMEX once unlocked can never be sold by the DAO
  • etc…

And finally, I believe it will be important to clarify the use of this fund in the governance through its voting power. Since the DAO already votes for the proposals, letting the entire DAO vote with this energy makes no sense. It would therefore be interesting to create an elected board with the most important minds and contributors to governance and the agora, so that they can have power relative to their contributions.

As I’ve already done a lot of research on gouverannce, I’ll certainly prepare an xEIP on this subject once the strategic fund has been voted on.

4 Likes

Hi @xfoudres ,

I have the answer to these questions of yours:

Q1: No, they are not. However, tokenomics allows to mint them and at that time, they will appear in the supply.

Q2: At the moment the rewards are claimed / minted (that’s the same things), they will locked for 4 years and sent to the Strategic Fund.

Q3: The project could choose to unlock them and pay the unlock fee.

4 Likes

@xfoudres @joaquim I’ve updated the draft with a new version:

  • I’ve made included the answers to your questions @xfoudres
  • I’ve added a clear statement of the purpose of the fund @joaquim
  • I’ve added the “burn” option in the examples of usage @xfoudres

I’ve also made a few other points clearer, especially that the sole purpose of the proposal is to estabilish the fund, not to determine the precise usage.

Thanks for all the feedback! Let me know if you have still questions / feedback :pray:

2 Likes

The whole idea of establishing a fund out of the unclaimed xmex is detrimental for the retaining of the users that to this day have not grasped the concept of “energy “. Not all holders of MEX and EGLD have understood the “migration” to energy. I would say 90% have come to Elrond and now metaverseX with a simple concept: I buy/acquire EGLD → I stake it → I get rewarded. Introducing the energy concept has put a big question mark for those that are not geeks and don’t want to get brain damage by trying to understand and foresee what will happen to their funds. We have exchanged the simplicity for an extremely complex and convoluted way of grasping what happens in the multiverseX. And implicitly adoption is at the lowest point. Yes, there’s a bear market but I have not seen in the past year statistics on how many new accounts have been lately. And in my opinion, no matter how good a project is, adoption is paramount! MultiversX is now just as difficult to understand as a MetaMask wallet for the “not so computer literate “ people. Which makes some 90% of the population or more! Back to the subject: if those that have unclaimed MEX understand/find out that because they did not comprehend the “claiming procedures and requirements “ now they will lose whatever little they can get back as a benefit because they did not read/compute , they will move away from the ecosystem with a bitter taste. Bring back the simplicity, make the system work for the average people not only for the geeks and “elites”. Mass adoption means simple to understand and simple to use. Do not lose sight of what is at stake. Otherwise the whole crypto is doomed to fail.
Hope my rant is coherent enough. If there’s anything unclear, I apologize. I am writing this in a bit of a rush.
Ready for discussions if anyone feels the need.

3 Likes

Hi @erd1e5sjp_wnspcnhte ! Thanks for sharing your thoughts!

Since xExchange v2, people who don’t claim within 4 weeks lose the unclaimed rewards. This proposal doesn’t plan to change this. The only difference is that these lost unclaimed rewards will be moved to the strategic fund.

Does it make sense?

5 Likes

GM @lucaswillems

Can we expect this draft to become a proposal in the coming weeks?

2 Likes

Yes, it is the plan, we are currently finalizing the governance smart contract that is necessary to vote.

5 Likes

Losing unclaimed rewards will definitely make busy people leave the space. We should incetivize people to stay, not leave the ecosystem. I see that it would probably increase the number of transactions but why would you do something like this?

1 Like

That’s why in xExchange v3 they will make autoclaiming those rewards, but in my understanding it will be a premium feature so maybe it will be a paid feature i don’t know at this point since this hasnt been announced yet but i still think than even after v3 there will still be unclaimed rewards.

Also unclaiming for like 4 weeks in a row seems just that you aren’t interested in the project at all so maybe it’s better that these rewards serve another more usefull purpose but yeah this is debatable.

6 Likes