CIP #23 - Yield Bearing Avalanche Ecosystem Index V3 on Avalanche

Status: Proposed

Discussion Link: Yield bearing Avalanche Ecosystem Index V3 on Avalanche

Created: 04/07/2022

Executive Summary

Often referred to as “Ethereum Killer,” Avalanche ($AVAX) is a matured blockchain ecosystem that has gained significant traction. Since its launch in September 2020, it has grown to become one of the leading PoS (proof-of-stake) consensus networks with smart contract capabilities.

Over the past decade, the blockchain space has evolved rapidly, primarily due to the effect and performance of the two mega projects - Bitcoin and Ethereum. While it would be naive not to acknowledge the impact of Bitcoin as the first proven use case of blockchain technology as well as Ethereum’s impact as a benchmark for creating DApps and DeFi protocols.

However, these two mega cap projects are heavily reliant on the Proof of Work protol which has yielded some formidable points of concern in terms of scalability. These concerns include slow energy consumption, slow transaction speeds, and high transaction costs. Consequently, protocols like Avalanche (AVAX) have now evolved in the crypto space to play a major role as formidable alternatives by providing unique solutions to energy consumption concerns and scalability issues that Bitcoin & Ethereum have become synonymous with respectively.

Even as the big two crypto have the lion’s share of the crypto market share, Avalanche Ecosystem has sparked a wave of innovation with its efficient, value-adding smart contract functionalities. Avalanche has captured its fair share of value as it emerged as a formidable layer 1 protocol with desirable features of decentralization, security, and scalability.

For instance, Ethereum’s block validation limit of 15 transactions per second pales greatly in comparison to Avalanche’s superior transaction processing time of 4,500 transactions per second. The parallel nature of Avalanche’s consensus protocol is what enables the Avalanche network to validate transactions significantly faster than Ethereum.

The growing influence and prominence of the Avalanche Ecosystem in the blockchain space is underlined by the astounding volume of Total Value Locked (TVL) within the protocol.

Within just 2 years Avalanche has reached a TVL of $11 billion, spread throughout different dApps and DeFi protocols within the ecosystem.

As the Avalanche continues to grow in stature, dApps & DeFi protocols built in the ecosystem also have a great potential to develop and capture value rapidly.

It is on this premise of value creation and innovation that the Cook Finance team has decided to create an Avalanche Index (Avalanche Ecosystem Index) on the Cook platform. This enables our users and index selectors to benefit from the value-adding innovative solutions that are created in the AVAX ecosystem.

The YB-AEI tracks major avalanche native protocol tokens. Those tokens are wrapped to gain APY. The Yields are then deposited through the yield aggregator.

Problem Statement

The blockchain space is nascent, fast changing and highly dynamic. As a result it is important to constantly keep an eye on the market and get with the times. As a result of its scalability and smart contracts functionality, new projects spring up in the AVAX ecosystem on a daily basis. Therefore for the YBAEI to remain relevant and efficient for its selectors, it is imperative for the COOK team to regularly update the list of native protocol tokens in the YBAEI from time to time.

Likewise, as new projects are launched, new Yield-aggregation strategies also spring up as well. As things currently stand, the YB-AEIV2 is outdated and needs to be updated as soon as possible to maintain relevance and yield-bearing efficiency, in accordance with the current strategy landscape of the Avalanche ecosystem economy.

Proposed Solutions

To solve the aforementioned problem, we hereby propose that the COOK team should implement the following solutions:

  1. YB-AEIV2 should be updated to YB-AEIV3 by adding the following new tokens as they are crucial to the fundamental functionalities of the contemporary Avalanche ecosystem:
  • PTP (Platipus), a stable coin swap protocol on Avalanche
  • XAVA (Avalaunch), a launch pad protocol on Avalanche
  • GMX (GMX), a perpetual trading protocol on Avalanche
  1. YB-AEI index and AEI index should be combined into one single index such that users in the Avalanche space can easily track and monitor their holdings through only one index.
  2. Introduce a new strategy to compound Joe rewards on Yak released

Rationale

  • Relevance: By updating YAEI-V2 to V3, index selectors will be able to benefit from new native tokens on the Avalanche network. Newly launched projects also have the potential to grow at a faster rate than older and more saturated projects. Therefore the addition of new tokens into an existing index can elicit greater yields.
  • Yield Efficiency: In defi, it’s always more efficient to stake or put tokens into a single yield aggregator protocol. With the YB-AEIV3 update, newly supported tokens can now be staked through current cook protocol, rather than listing a separate index.
  • Easy Index Monitoring: By combining YB-AEI index and AEI index, selectors can now monitor their indexes at a glance.

Specifications

  • The YB-AEIV3 should consist of the tokens listed in the table below.
  • The percentage allocation should be determined by the combination of market cap and Total Value Locked (TVL), with relevant figures taken from top market monitoring protocols including; Coingecko, Coinmarketcap and Defilama.
Component Tokens Allocation Yield source
AVAX 25% Yield Yak
JOE 18% Yield Yak
QI 15% Yield Yak
YAK 5% Yield Yak
PNG 5% Yield Yak
PTP 10% None
XAVA 9% None
GMX 13% None

We hereby propose that the Cook Tech team should expedite the implementation of these updates, by creating YB-AEIV3 in accordance with the specifications above.

3 Likes

creating YB-AEIV3 in accordance to the specifications above is great idea

2 Likes

I support this proposal and hope that it will be implemented soon, this is true “space is nascent, fast changing and highly dynamic” and we need to keep up

1 Like

I am using Avalanche because of the Avalanche Ecosystem Index. Those 3 additional tokens, PTP, XAAVA, and GMX look promising based on your explanation. It’s essential for the Avalanche ecosystem. Let’s make it happen.

As an Avalanche supporter, I can say this proposal is on the right path. Avalaunch, Platipus, and GMX are potential projects on Avalanche. V3 is needed to make this index has a wide range of future potential tokens for this index in the future.