FIP04 - Restructure the FXN boost program

[Tao]

Proposal: Restructuring the FXN Boost Program to a TVL Referral/Loyalty System

Summary
This proposal aims to restructure the FXN Boost program from a governance voting weight (veFXN vote) system to a Total Value Locked (TVL) referral/loyalty system.

Background
The FXN Boost program has been operational for four epochs, encouraging community participation in the ALD ecosystem and promoting the fxUSD product. However, due to the rising price of FXN, the existing governance voting process requires improvement.

The following pain points have been identified:

• Lack of quantitative metrics to measure the boosting impact. (The need for Key Performance Indicators (KPIs) to measure the impact)

• The current voting system relies solely on governance voting weight, which may lead to unfair distribution, especially considering the governance voting power held by vlCVX holders over cvxFXN holders. For instance:

  • Some active booster members who produce high-quality content and consistently promote the project may not receive adequate votes. Also, certain Aladdin core members who work diligently behind the scenes may not be appropriately recognized.
  • Certain whales might easily receive a significant portion of the boost program rewards, even if they are not actively engaged in the community.

• The voting and execution processes involve multiple snapshot votings and impose a substantial operational burden on the Aladdin DAO core team, necessitating a more streamlined version.

• For boosters who receive small reward amounts, claiming, waiting for unlocking, and reinvesting can be costly due to gas fees.

Motivation

• Customer Obsession First
  To achieve the $1B TVL goal, it is essential to prioritize customer acquisition and retention. The boosting program should align with this objective by rewarding contributors based on their TVL contributions.

• Group Teams and Delegate Voting Power (No Gas Cost, Worry-Free)
  If users do not wish to actively manage their boosting rewards, they can contribute to existing boosting teams or form new teams, thereby delegating their voting power.

Implementation

Establish KPIs to Measure Boosting Impact:

Initially, TVL will be the sole KPI. Contributions from holding fxUSD, xstETH in wallets, staking fxUSD in rebalance pools, or providing liquidity on fxUSD Curve pools will be calculated based on the dollar amount per address.

Referral and Loyalty System:

A web3 form (possibly deform) will be implemented for the following purposes:
Booster and Team Registration: Similar to the current booster system, but allowing for team formations (e.g., Aladdin-Core-Team, A-team, Leviathan-News, CVX5 team).
User Referral and Loyalty Registration: Whales can fill out a form indicating that all TVL contributed by their address will be rewarded to a specific booster or team. This selection can be changed as needed, hence the “referral and loyalty” terminology.

Boosting Reward Distribution:

If an address contributes 1% of the TVL during the whole month, 1% of the boosting reward will be allocated to the referral booster or team account.
If the address is not registered in a referral account, the reward will be split 50% to the A-team and 50% to the Core-team.
These boosting FXN rewards will be ve-locked, and the cash flow generated will be used for a Task-based Reward System.

Task-based Reward System:
Rewards can be distributed for various tasks, such as meme contests, Dune dashboard contests, or Twitter thread contests.
For the A-team reward system, rewards can be offered as scholarships for event tickets (e.g., ETH Denver or other crypto conferences) to promote ALD products.
Rewards can be paid directly in fxUSD or afxUSD.

By implementing this TVL referral/loyalty system, the FXN Boost program aligns with the goal of increasing TVL while providing a more transparent and equitable reward distribution mechanism. Additionally, it streamlines the operational processes and introduces a task-based reward system to incentivize community engagement and promotion of f(x) products.

Note: It is just the draft and proposal. Please let me know if you have any suggestion or comments we can continue improving our boosting program.

[DAdvisoor]

Hello Tao

Thanks for taking the time to build a proposal. Indeed, many changes are required, and indeed the issues with the current system are to be dealt with.

Also, a lot of positive and interesting directions on the offer for sure. Will go over it again several times during the weekend.

That being said, not realizing exactly how this rewards people who create content for the DAO and its products, people who actually drive a community into the DAO that creates its culture that leads it forward, and also the incentivization process is not so clear to me.

One example - as A-Team members, FXN is rewarded only by TVL and links, locked as veFXN, generates revenue, and then again requires tasks in order to get paid from? Seems like working several times and get paid only after several rounds.

This is to come instead of a proposal including organized and fixed payment for A-Team members as before? And also not being able to earn FXN individually?

There are good stuff on the current booster program that we should imo keep. Just make sure that money does not go to people who do not support the project and simply use voting power to get votes or vote directly for themselves.

On first look, imo a different structure should be considered, one in which the ref program is just a part of the incentivization, not all of it.

Ofc, such a program would have to make sure both the team itself (first and foremost!) and organized teams working consistently for the DAO like A-Team and individual contributors will be able get rewarded for their work.

Wehave a community that has aligned itself around the community booster programs, and making sure we preserve its core and real participants is key imo.

I ask for time to come up with a different proposal offering another alternative.

Thanks again and thanks for your creative thought and work, hope it’s ok I’m sharing my honest thoughts about it.

[Tao]

@DAdvisoor

have a community that has aligned itself around the community booster programs, and making sure we preserve its core and real participants is key imo.

Thanks for the honest feedback. This proposal indeed change a lot from our current one.

I do have the small modify version,

• allocate 50% to referral system
• set the max vote from each source. Like 5% max from each voting source, and 5% max for total voting source.

However, I don’t think it will resolve the unfairness part using governance voting power

[kmets]

Tao,

Firstly, I want to thank you for being bold and brave enough to put forth this proposal to spark discussion around an issue that many in the community are concerned about. It’s always tough being the first guy to formally lodge a complaint against something you care about, but I appreciate you doing so and in a way meant to stimulate thoughtful and productive conversation.

Regarding your proposal, let me first outline the parts where I am in agreement with you and then the parts where I have a differing school of thought:

Where we agree:

1. TVL acquisition should be our top priority. We are a defi protocol…full stop. Getting users to use our products is our number one goal, and that means having users invest their funds into our products.
2. Task based reward system. The people who put in work should be rewarded. Rewards should not be based on governance power, political connections, or just to people who are self-promoting members of the community. KPIs should absolutely be included in this system.

Issues to address:

1. TVL is a priority, but sticky TVL is even higher, and above that is permanent TVL. We can not be rewarding TVL just to whales who do not make a commitment to the long term health of FXN (and by proxy, AladdinDAO). Referral systems can be gamified: If I have $10MM in ETH, and I invest in FXN, what’s to stop me from giving a referral address to myself and getting the rewards?
2. It is very expensive and laborious to reward individual users through the booster program. FXN has become a very valuable commodity and we need to be using those tokens for high value targets…and there are too few individuals that meet that criteria that are also willing to make a long term commitment to the DAO (essentially max locked FXN).

At a 30,000 foot level, Aladdin and f(x) need to address a couple things that are of immediate need to the community/DAO (in my opinion) to create the type of sticky TVL and hype to make FXN great:

1. We need all FXN products to be on L2. And in massive quantities. With the incredible drop in fees from the Dencun upgrade, this is a no brainer.
2. We need multiple teams building products on top of f(x), and integrating fx tokens into their products. Especially on L2. Having teams integrating our products into dapps and protocols creates much better usage and TVL than having whales invest into our products for a short time until the next big thing that offers free money comes along. We need defi teams to invest their time and energy into f(x) to make things the DAO can’t produce on its own and that make f(x) an even better protocol.

Considering the items we agree on, and the issues I believe we need to address, I think the following might be an interesting twist on the booster program:

Instead of an individual booster program, f(x) should perhaps consider evolving to a team grant program. By using the majority of designated community funds in the tokenomics allocation for a team grant program, we solve the following issues:

1. We can start incentivizing small teams on L2’s to build dapps and protocols that can integrate things like xETH, fxUSD, rUSD, and various other products that can create long-term value-add for f(x) on L2. As use cases build out on L2, the TVL naturally becomes stickier, and users become familiar with fx products and how they work. Plus it will make off-ramping and on-ramping funds much more seamless, easy, and cheap for fxUSD and rUSD users. Details about the grant program can be worked out later obviously, but we can have a program where teams get:

• 25% of their grant up front
• 50% is max locked and the yield is streamed out so long as their product is in production, active, and serving the needs of f(x)
• 25% has a 12 month cliff with a 24 month vesting period once the product is live

2. We can start to incentivize members of the community to bridge funds to L2. Perhaps give them a rebate for their bridging costs to L2, if they use the official Aladdin bridge.
3. We can reserve a small portion of the funds, say 5-10%, for actual marketing like writing articles. Perhaps this can be integrated into something like galxe or zealy.
4. We can reserve a portion of the tokens for the core team and A-Team to distribute to community members as they see fit for items such as business development assistance, marketing assistance, bug bounties, etc…

These are just broad strokes that I am laying out. I think with the items I listed above we can address not only the issues you have pointed out, but some other prominent ones that the DAO faces as well. Any feedback from anyone on this would be terrific. Thanks for your reading this novel…looking forward to your thoughtful feedback!

[DAdvisoor]

Good stuff Kmets. I don’t think this should be the whole thing, yet these are issues we should definitely include. Attracting teams to build on f(x) is a great idea, should be a meaningful part of the new structure.

Thanks ser. Will think about stuff and add thoughts.

[Cryptovestor]

I don’t necessarily disagree with the concept of a team grant as it fosters long-term growth. However, here are some key issues I see with this:

1. We are in a bull market now, and we probably only have 10 months to a year left to have a maximum impact on TVL growth before things start turning down again. Any building that gets done will probably take six months to have any meaningful impact on TVL. Unfortunately, as much as I hate it, I feel like compensating whales directly, at least during a bullish period, will probably have a more meaningful impact on TVL. A team grant program is probably better served during a bear market where builders focus on building.

2. I love the L2 idea; however, again, this is not where the majority of liquidity is right now, and while this can change, Ethereum mainnet is orders of magnitude bigger than any L2. In addition, if we are trying to attract large depositors, it will not come from L2s, at least not for the time being

I have some ideas to solve the stickiness of the liquidity issue while using direct incentives. I do realize, however, that this is not completely avoidable. I also think I can incorporate elements of this idea or concept into my proposal.

I will hopefully have a proposal up by Sunday to address many of the issues mentioned.

[kmets]

Makes sense. I’m ok with bringing in TVL however we need to right now to address a growing protocol and taking advantage of the bull market. Just want to make sure we are always thinking about the future too.