Note: this is a DISCUSSION thread meant to gather feedback on the concept and finer points of the Cortex Improvement Proposal template below. The weight vote structure provided in this thread may be subject to another CIP in the case of major protocol updates. This is not a proposal, nor a proposal draft. Please provide any feedback you have in the comments below.
The goal of this proposal is to decentralize the Convex Index by allowing the DAO to regularly vote on the portion of the index allocated to each liquidity pool.
If passed, this proposal would enable voting to determine the Convex Index gauge weights.
A Snapshot vote will be created containing all of the pools currently in the Index as voting options. The percentage of votes in favor of each liquidity pool in the Index would directly influence the percentage of the Index allocated to each pool. I.E. If 5% of the total vlCXD used to vote on this proposal vote in favor of Pool A, 5% of the protocol TVL will be allocated to Pool A.
There will be a maximum allocation cap, where only up to a certain percentage of the Index can be allocated to each pool to maintain adequate diversification.
In exchange for managing the index, DAO members (vlCXD holders) are rewarded with fee distribution (already enabled). DAO members are incentivized to optimize the index performance as a better-performing Index would reward larger fee distributions.
Note: CortexDADO multi-sig approval is still required to establish outcomes of all CXD Snapshot votes for both governance and index weight votes. In almost all cases, we will vote in-line with vlCXD holders. However, Cortex, Convex and Curve benefit each other, and proposals considered to be blatant attacks damaging either protocol will not be signed for.
Currently, the index weights are allocated into each pool in accordance with a risk-screening process factoring TVL, pool volume, slippage, stablecoin volatility, and risk-parity.
By hosting regular snapshot votes on the Index weights, the DAO will have more decentralized control over the Index and its performance.
- Voting would be done via Snapshot.
- Gauge weight votes would be bi-weekly (DAO to discuss).
- Emergency gauge weight votes may be proposed in the case of black-swan events
- Gauge weight votes would not have a quorum.
- Individual vlCXD holders may spread their voting power among as many pools as they wish.
- Each pool can have a maximum of 20% of the total Index allocated to it.
- Excess votes after the cap would be distributed to other pools in proportion to their vote weight.
- Each gauge must receive at least 0.10% of the votes before weight is assigned.
- Voting would occur after bi-weekly Convex gauge weight votes to ensure voting occurs on the most recent gauge weights.
- Gauge weight votes would not have a quorum to ensure gauge weights are reallocated regularly.
- Each pool can have a maximum cap of the total Index allocated to it to ensure there is adequate pool diversification of the index.
- The cap at 20% would ensure there are at least 5 pools in the index at any given moment.
- The cap would need to be lowered to ensure broader diversity across more pools.
- The minimum voting weight for each pool may need to be increased to ensure returns can sufficiently cover operational costs such as gas fees.