The Sigma Program

If you've spent any time on our Discord server, or reading our Twitter account, you'll possibly have seen mention of the 'Sigma committee', or 'Sigma pools'.

On this page, we'll quickly explain what the Sigma program aims to do, how it does it, what powers are available to it, and who currently holds the keys.

Last update: 14 June 2021

Introduction

In short: the Sigma program is designed to quickly create innovative products on the Indexed protocol and bring initial liquidity to them where necessary.

The 'core' products that are offered by Indexed - DEFI5, CC10 and ORCL5 - are maintained entirely by the DAO, in that their controller is owned by the NDX Timelock contract (the treasury), the admin of which is the Indexed Governor Alpha contract.

The upshot of this is that on-chain governance votes are required to operate these pools (i.e. adding or removing tokens from the asset lists). This is very much as things should be for our established products - reweighs and reindexes can be triggered by anyone, but changes need to be approved by protocol governance.

However, in the days of 300+ gwei gas prices, these are expensive changes to make, and they take time to be applied: three days for the on-chain vote, followed by a two-day timelock before they can be executed, assuming they reach quorum.

To this end, it was decided via IIP 4 to create a committee of 5 people that can quickly deploy new products and enact changes to their constituent lists, as well as assign liquidity mining rewards to them, operating via a Gnosis multisig. The people behind the keys are referred to as the Sigma committee as a whole.

Why Sigma? Because it's shorthand for adding things. Sorry.

The Committee

Here are the current members of the Sigma committee, along with their Discord usernames and Twitter accounts where available.

  • Dillon Kellar: @d1ll0n#8888, @d1ll0nk

  • Lito Coen: @litocoen#7160, @litocoen

  • Strategy: @Strategy#1694, N/A

  • Laurence E. Day: @Norsefire#1311, @laurence_e_day

  • blurr: @blurr#4511, N/A

Justification

There are two main issues with having the DAO administer the creation of new indices against the core controller:

  1. The proposer requires 1% of the total supply of NDX (100,000) to do so, and

  2. The scoring contract tied to said controller utilizes the square-root FDV method.

If the proposing party wishes to utilize something other than the square-root FDV methodology, the Sigma committee can get around the above on their behalf by deploying a new scoring contract (if it does not exist already) and creating the new index pool against the Sigma controller.

As the Sigma controller is owned by the committee multisig rather than the Indexed Governor Alpha, these 'Sigma pools' can be created and have their token lists adjusted in their infancy without the minimum token or timelock requirement associated with core pools, subject to a 3/5 majority vote.

Process

So, if you have a neat idea for a new index, the way to go about making it real is:

  • Create a new thread on forum.indexed.finance under the Sigma category.

  • Include the following things:

    • The name of the index,

    • A description of it's purpose or market sector,

    • The weighting strategy,

    • The starting price for the token (the 'initial index value'),

    • The number of tokens it will actively contain (minimum 3, maximum 10),

    • Criteria for token inclusion (age, market capitalisation),

    • The list of tokens to include at launch (maximum 25),

    • [Optional] If you're capable of making a large initial liquidity commitment, mention this,

    • [Optional] Ideas for an icon/logo.

  • The Sigma committee will look over the proposal and provide their feedback.

If everything looks good, the committee will deploy the pool for you. If you've requested a novel weighting strategy, this will require some development and testing time from those who are capable of doing so.

Note that if you provide a list of tokens that is larger than the number to be actively included in the index at any given time, the weighting strategy you define will determine what assets are included at launch. If you want to guarantee the inclusion of a given set of tokens, then you should only list as many tokens as there are to be active members.

Examples of successful applications made in this manner are:

Liquidity Mining

All NDX liquidity mining has been rolled into a single fork of Masterchef V2, which covers both single-sided staking, core pools and Sigma pools.

The details of the liquidity mining program can be found here, and the staking page itself can be found here - to ensure that your balances show up correctly, please make sure that your wallet is connected (top-right of the app) and that you're on Ethereum main-net.

The Circuit Breaker

One of the key benefits of deploying index pools via a controller that isn't behind a timelock is the ability to utilize the circuit breaker.

This is a service - currently running on a handful of DigitalOcean droplets - that monitors the price and supply of each token within a given index pool, and in the event that either of these jumps up or down by some percentage deemed excessive (currently 20% on all Sigma pools) from one block to the next, freezes swaps between assets in any pools that contain said token.

The ability to do this is what prevents an exploit in a single asset token from being used to drain the liquidity of an entire pool - we saw this occur recently in the attack on the Roll platform, where various social tokens were minted en masse: in the absence of a circuit breaker, an attacker could swap in vast amounts of an exploited token in exchange for unaffected assets.

It is important to note that whilst a circuit break prevents swaps from taking place within a pool, your funds remain accessible at all times. The holders of an index token are always free to burn them back into the underlying assets, at the weights that were frozen when the break was triggered.

The Future

Going forward, we believe that the DAO should elect a new Sigma committee on a quarterly basis.

As the Indexed protocol evolves, we aim to improve the ability for Joe Public to create their own indices, with the role of Sigma being relegated to simply maintaining the circuit breaker on newly deployed pools and enacting asset list updates for pools, rather than acting as reviewers and deployers.