osmosis

Prop 504: Allow IBCX Contracts to be Uploaded

This is a proposal to allow the address osmo14n3a65fnqz9jve85l23al6m3pjugf0atvrfqh5 to upload contracts relating to the IBCX project. If passed, IBCX, a Cosmos Index token, will be launched on Osmosis.

Related Links

  • ibcx_core.wasm: 4af59fe174c58b7a05e1c1ab3c28f8c4afdd028d4515429f94a7bdd84d212324
  • ibcx_periphery.wasm: 88f2d423b02c144cc3246cc6c43117f2913db5a327f19e471cb9e86dfdb039a6

Context

The contract audit was completed by Oak Security on May 2nd and IBCX, built by the ION DAO dev contributors and the ION DAO, is about to be released.

  • IBCX held the first beta test last December, resulting in meaningful outcomes.

Let us briefly list the data of the beta test.

  • Number of registered wallet addresses: 7,919
  • Number of connected wallet addresses: 3,125
  • Number of unique wallets that minted or burned IBCX: 1,134
  • The total amount of minted $IBCX: 27,207.75 (about 2,720,750 testnet OSMO)
  • Number of feedback reports received: 720

Besides the first beta test, the IBCX has been recruiting testers to proceed with the final test before the main launch. https://twitter.com/IBCindex/status/1653399146299277312?s=20

Now, the ION DAO dev contributors and ION DAO are ready to ship the product in May. This proposal aims to deploy contract codes for the minting, burning, and rebalancing of IBCX.

The user stories for Mint/Burn/Rebalancing will be the following: Mint Contract: Users can mint IBCX through the Swap contract by utilizing their ATOM, OSMO, USDC, etc. Burn Contract: Users can burn the IBCX they own through the Osmosis swap contract and acquire assets such as ATOM/OSMO/USDC. Rebalancing Contract: Users can vote on quarterly portfolio rebalancing on ION DAO (ion.wtf) every 3 months. This contract will enable the IBCX portfolio to be automatically rebalanced upon the ION DAO on-chain governance result. By deploying these contracts, ION DAO dev contributors will be able to release IBCX on Osmosis, and users will be able to utilize the Mint, Burn, and Rebalancing features on https://index.ion.wtf.

About IBCX

IBCX is a Cosmos index token that’s designed to benchmark the leading Cosmos tokens’ performances. It aims to achieve this by procuring and maintaining those tokens as its collateral. IBCX price is dynamically calculated based on the spot prices of its selected components, or the collateralized Cosmos tokens. The weight % of each token is determined and periodically rebalanced based on the ION DAO’s governance voting results. ION is a native token of Osmosis, and ION DAO plans to fully utilize the liquidity of Cosmos’s #1 AMM to ensure the successful operation of IBCX.

Osmosis’s ION DAO governs IBCX, and it aims to provide new opportunities to the Cosmos Ecosystem.

Operation: Rebalancing

IBCX aims to represent the fundamental values of the Cosmos ecosystem. Therefore, it's imperative to keep its portfolio updated and as a best representation of Cosmos. The initial portfolio should and will change accordingly, and we'll call this process portfolio rebalancing. ION DAO will be responsible for this process after IBCX launches.

We explained above that the token quantities in a unit of IBCX are held constant to ensure the fungibility of the index token.

Therefore, ION DAO proposals on IBCX rebalancing will change the quantities, whether adding, reducing, or completely removing.

After the passing of each rebalancing proposal, the rebalancing logic will perform swaps of the portfolio tokens on Osmosis to match the newly decided weight %s. The dev contributor team will propose viable solutions to avoid a significant impact on the token prices deriving from large trades, such as maintaining specific intervals between the swaps.

ION holders essentially decide the future of IBCX by directly participating in the portfolio rebalancing process via ION DAO. ION holders will be able to vote on ongoing proposals and propose new rebalancing ideas of their own. We wish and expect to see a vibrant community of Cosmonauts collaborating and freely debating on ION DAO to decide the assets that best represent the Cosmos and the future of interchain.

How Does the Rebalancing Work?

Rebalancing is the most crucial part of IBCX’s operation. Thus, anyone from ION DAO will be able to upload a rebalancing proposal besides the ION DAO dev contributors.

After the rebalancing proposal is passed, the rebalancing contract will automatically swap underlying assets according to the newly determined portfolio.

Rebalancing Process

The IBCX portfolio will be adjusted based on ION DAO on-chain governance results every three months. Please refer to the rebalancing process below.

  • ION DAO dev contributors will remind of the upcoming rebalancing date 15 days in advance before the next rebalancing.
  • ION DAO dev contributors and anyone can create a Commonwealth thread to discuss the next rebalancing details during the 15 days.
    • Commonwealth thread will be mainly used to have conversations regarding each rebalancing.
    • The thread will contain the portfolio at the moment. You are welcome to join and drop comments.
  • On the rebalancing date (after 15 days from the initial announcement), ION DAO dev contributors will make on-chain governance, including on-chain messages to run the rebalancing.
    • We assume that the ION DAO dev contributors will usually do it, but anyone can also upload an on-chain proposal if they want.
  • If passed, the IBCX contract will automatically swap underlying assets according to the newly determined portfolio.
  • Assuming that the first portfolio was 50% ATOM, 40% OSMO, and 10% ION
  • If the rebalancing proposal suggesting to change the portfolio to 50% ATOM, 50% OSMO, and 0% ION, the contract will swap ION to OSMO to equalize the ratio.
  • The next rebalancing date will be set up three months after the end of each rebalancing.
  • If it’s not passed, ION DAO dev contributors will upload a modified proposal again based on community feedback. Each rebalancing could be skipped if ION DAO does not want to execute it at the moment.

Details

  • Rebalancing Cycle: Rebalancing should be reviewed by ION DAO governance at least every quarter.
  • Rebalancing Period: It depends on market conditions. We expect it will take up to 14 days to complete each rebalancing as each step is designed to minimise the slippage for the overall rebalance.
  • Please note that you can’t both mint and burn during the rebalancing period. Instead, you have to trade on https://app.osmosis.zone/.
  • The service provider should announce each rebalancing date 15 days in advance at least.
  • All details regarding the execution of each rebalancing of the IBCX portfolio depend on ION DAO on-chain governance result. Please note that the rebalancing schedule could be changed based on the ION DAO governance status.
  • Rebalancing the IBCX portfolio could be executed immediately (some steps could be skipped) due to requests from the ION DAO community and fluctuations in the market, even if there are remaining dates until the next rebalancing. ION DAO will confirm the details in those cases as well.

Operation: Fees

The dev contributor team will continue to be responsible for leading the operation of IBCX. We propose to charge an annual Management Fee of 0.55% on the total quantities of the collateral tokens to cover the operating costs. A IBCX smart contract will incur this fee on every block and allocate 30% for the operation costs and the rest (70%) to the ION Treasury.

In addition, we propose imposing another fee of 0.15% on the burning of IBCX. This fee is to be used as a safeguard to protect the IBCX price from sudden sell pressure in the market. We emphasize that there will be no extra fees for selling IBCX on any of the IBCX pools available on Osmosis. Like the Management Fee, 30% of the incurred Burn Fee will be allocated for the operation costs and 70% to the ION Treasury.

The contract will send the all collected fees to the ION DAO Treasury first.

Mint Fee

There will initially be no fee to mint IBCX.

Streaming Fee

IBCX’s annual streaming fee is 0.55%. The streaming fee will be charged every second based on the fee rate and how long users hold IBCX.

This means that users can only burn the amount of IBCX they have held minus the streaming fee. The streaming fee will be paid by every token in the IBCX portfolio.

About a 0.55 fee will be charged as the streaming fee if you hold a 100 value of IBCX for 1 year.

Burn Fee

Burn fee will be charged at the moment users burn IBCX. They will pay the burn fee with IBCX before receiving OSMO (or USDC or ATOM). After that, they will receive OSMO (or USDC or ATOM) in IBCX equivalent minus that burn fee. The burn fee will be paid with IBCX.

Commonwealth Thread:https://commonwealth.im/osmosis/discussion/9807-contract-proposal-ibcx-mintburnrebalancing-contracts