Govern Dexter through XPRT and accelerate growth

Governance
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This forum post aims to

  1. Propose the decentralization of Dexter through the use of XPRT for governance
  2. Kickstart a discussion on new ways for LP incentivization on Dexter with XPRT to accelerate growth

Background

Dexter launched in January 2023 with a mission to be the liquidity hub of Persistence, the cosmos app chain for LSTfi.

Since its launch, Dexter has been aligned with Persistence and has contributed significantly by achieving the following milestones:

  1. Launched as the first CosmWasm product and the first DeFi lego piece on the Persistence core-1 chain
  2. Increased on-chain activity with $4.3M+ volume and $13k+ swap fees generated to date
  3. Onboarded 2,291 traders and 2,109 liquidity providers so far
  4. Bootstrapped deep XPRT liquidity on Persistence for the first time
  5. Introduced the concept of Persistence Community Owned Liquidity (PCOL) for Persisters to bootstrap and own initial liquidity on new pools (PSTAKE/XPRT, USDC/USDT, USDT/XPRT currently) on Dexter
  6. Launched five pools for stkATOM, XPRT, ATOM, PSTAKE, USDC, and USDT liquidity
  7. Significantly improved the LSTfi experience on Persistence (and in Cosmos) for users to liquid stake ATOM on pSTAKE and participate in DeFi by providing stkATOM liquidity on Dexter
  8. Built and improved CosmWasm tooling extensively on the core-1 chain for dApps to leverage in the future

Decentralizing Dexter

Problem: Centralization

XPRT, through its governance power, has been a significant enabler for Dexter’s success. Proposals 15 and 20 approved the Dexter team to upload and instantiate code on the Persistence Core-1 chain permissionlessly.

As a CosmWasm product, Dexter’s codebase (uploaded permisionlessly, as mentioned above) consists of various smart contracts that create new pools, add LP rewards, etc. These contracts have their own ‘admins’ who have permission to perform specific actions of that contract. ‘Admins’, as of now, are various multisigs comprising Dexter team members.

While this was done for a less complex and faster launch at the time, the Dexter team acknowledges that this possesses a Centralization Risk as it relies on multisig participants to act in good faith of Dexter, thereby, Persistence.

Solution: XPRT

The Dexter team proposes decentralizing Dexter to mitigate risk and bring more transparency. And when it comes to making decisions related to Dexter, who would be better than Persisters through XPRT governance? Dexter’s sovereignty is best placed in the hands of XPRT holders/stakers, governed by the XPRT token. Dexter will, therefore, NEVER have its own token–for governance, incentivization, or any other purpose.

Decentralizing Dexter would involve replacing Dexter’s contract admins (multisig addresses) with a new ‘Governance Admin contract’ that can be triggered solely through on-chain proposals, giving XPRT governance control over the following actions/parameters on Dexter:

  1. Creating new pools on Dexter
  2. Adding reward schedules to any pools on Dexter
  3. Changing fee or pool parameters
  4. Upgrading Dexter’s contracts like Vault, Multistaking, Router, Pool Types, LP tokens
  5. Instantiating any new contract
  6. Executing privileged functions in a contract, like changing parameters that affect the protocol

Notably, a portion of Dexter’s revenue (30% of all swap fees generated) and an emergency trading halt functionality (to act quickly and in time if required) will be with a multisig consisting of Dexter and Persistence contributors.

Traction on Dexter

Besides its power of governance, XPRT has also been a major enabler for traction. Dexter received a 450k XPRT grant from the XPRT community pool for LP incentives to bootstrap early liquidity and fund marketing, BD efforts, and other operational costs.

LP Incentivization through XPRT has been largely successful, as can be seen by the significant milestones mentioned at the start of this post. At the same time, XPRT tokens for incentivization from Dexter’s grant (Proposal 13) and the XPRT Liquidity Bootstrapping incentives (Proposal 21) have reduced in the last months.

The Dexter team acknowledges that another XPRT grant or Community Pool spend for incentivization is not a sustainable, long-term solution. Through this post, the Dexter team wants to start a conversation with Persisters and get their thoughts, ideas, and feedback around how XPRT can be used for incentivization on Dexter.

Simultaneously, the upward trajectory of traction is expected to continue, with new additions and improvements coming to Dexter soon.

  • Instant LP Unbonding Feature
  • Dexter Analytics
  • Integrating Dexter’s liquidity with DEX Aggregators like TFM, Skip Protocol, and Squid
  • Launching new pools
  • Strengthening security for LPs with additional safety measures

Benefits to Persistence

  1. Persistence Ecosystem and Dexter become more closely tied and aligned
  2. Strengthens the power of XPRT for governance
  3. Increased XPRT token utility through its role in increasing Traction
  4. It paves the way for other dApps (in the future) to launch without the hassle of a token and prioritizing protocol features
  5. Mitigation of centralization risk of using multisigs

Final Thoughts

By being responsible for Governance and Traction on Dexter, XPRT will become the defacto token of Dexter. The Dexter team requests everyone to actively participate in what could be one of the most important things we discuss on the Forum and share their feedback by answering the following questions:

  1. Do you agree with the proposed decentralization of Dexter?
  2. What do you think of this strengthening XPRT’s governance power?
  3. What are the different ways in which XPRT can be used to incentivize liquidity on Dexter uniquely?

Following the discussion on 1. and 2. points above, an on-chain signaling proposal to decentralize Dexter will be put up, considering relevant inputs from community members. Given this signaling proposal is passed by XPRT governance, two proposals (for the Governance Admin Contract mentioned in this post) will follow to complete the proposed decentralization of Dexter.

Simultaneously, discussion is expected to continue on point 3., finding better alternatives and developing new, innovative solutions for incentivizing liquidity on Dexter. Following a significant amount of discussion, hearing the community’s ideas, and gauging feedback on what seems to be a preferred way to proceed, a separate on-chain proposal will be put up to change how liquidity is incentivized on Dexter.

8 Likes
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Excited to see this becoming a reality! I’m fully aligned with Dexter’s vision of completely decentralizing the protocol.

My questions are:

  1. How will the revenue from Dexter (30% of all swap fees generated) be utilized? Who decides this? Can we vote on what occurs with that revenue?
  2. What are the Dexter/Persistence contributors that will have access to the multisig?

Also, we MUST explore a way to stop utilizing XPRT as an incentive for Liquidity Pools. We could strategically utilize the revenue generated from Dexter to incentivize pools instead. If pSTAKE would also be open to sharing a portion of ALL revenue it generates from stkASSETS minted on the Persistence Chain, then incentivization MIGHT be able to ONLY occur from REAL YIELD (not from inflating XPRT).

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1- I Agree 100% with descentralization of Dexter
2.- As a governance token this fit really well to the pourpose of XPRT
3.- I think we must stop using XPRT as incentive for liquidity, instead we should be using more actively PSTAKE token as utility token, same as NEO and NEO Gas or THETA and TFUEL, XPRT could be used only in stretegic pairs aim to capture liquidity as USDC and USDT pairs as well in ATOM, PSTAKE has greater reach because isn’t limited by protocol to COSMOS and could be more widely adopted as crosschain token.

I propose to enable pay fees in PSTAKE token to coinbase transactions and remove the zero fee feature in wallet and apps but keep fees in XPRT on LPing and staking.Maybe in future could be a burn mechanism to reduce PSTAKE supply as the ecosystem gains traction and more transactions are executed on chain.

3 Likes
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I agree that the only thing unclear is how access to the multisig controlling the profits is gated.

Why does the community have to take full responsibility of all the risk for making onchain decisions, but have no say in how the rewards from their decisions are used and invested?

It makes sense and seems like a good path forward at first glance. That one little unclear component, however, makes it feel like the team is offloading risk while retaining the rewards.

I think better clarity around how the multisig membership is maintained would help address this potential misinterpretation. It makes sense to have a Treasury team that manages funds in a smaller decision circle.

It does beg the question, however:

Why is it appropriate to have code upgrades approved by the general community, who have zero expertise to review them properly, but it’s not appropriate to have them make finance decisions with the revenue generated?

I’m a big fan of decentralization, but I’m also a big fan of appropriately distributed decision making authority, gated by knowledge and qualifications. Meaning sometimes a smaller group of experts is more secure than a global group of uninformed, apathetic voters.

Massive props to the Dexter team for not launching a token tho. Moving in the right direction.

Just need to figure out how to better manage decision authority distribution and revenue management, in my opinion.

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Hey everyone,

Great to see some community feedback to this proposal.

From my end I wanted to emphasize that imo this is a crucial step forward for Dexter, marking a significant stride in decentralization and stronger alignment with the Persistence Ecosystem. This move concurrently reinforces the authority of XPRT governance, starting a flywheel effect within the Persistence ecosystem. It sets the stage for future dApps to launch seamlessly without the burden of introducing a new token while prioritising protocol features.

The positive reception of this idea by Persisters is heartening to see!
Addressing concerns raised by @CosmonautStakes, @llildur, and @Trigs, I envision a two-step approach to address this transition.

Step 1: XPRT Governance for Dexter

If the community agrees, Dexter will transition to XPRT governance, and the team is committed to executing this seamlessly. After this, XPRT stakers can truly start steering Dexter into a direction which will make most sense for the ecosystem.

Step 2: Utilisation of Dexter’s Fees

In my opinion, the discussion around the future or utility of Dexter’s fees deserves dedicated attention and should be treated separately from Step 1.

In the meantime, to share some details with everyone for full transparency:
Dexter protocol fees accumulate into the Dexter Keeper contract, which is owned by the dexter treasury multisig contract, which is a 2/3 multisig controlled by Persistence Labs contributors. No funds have been/will be extracted or moved without community awareness.

However, initiating a conversation on the future of Dexter’s fees, including the possibility of implementing a fee-sharing model with the Persistence ecosystem or using it for incentivisation, could be an exciting prospect.

We can discuss this with Dexter and Persistence contributors and start a separate dialogue to determine the best course of action. If you have more ideas around the same, feel free to share them here or with me.

I’m really looking forward to seeing what the governance decides for #XPRTforDexter!

2 Likes
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I fully support the proposed decentralization of Dexter through the use of XPRT for governance. This is an excellent way to mitigate the risks of centralization while empowering the Persistence community to guide Dexter’s future direction.

I also agree that finding sustainable incentive models is crucial. Relying solely on grants from the XPRT community pool is not viable long-term. Engaging the community to brainstorm creative solutions for LP incentives leveraging XPRT is the right approach.

Been thinking about this and here are some random ideas off the top of my head:

  • Allocate a portion of Dexter’s revenue to buy back and distribute XPRT to LPs
  • Implement vesting schedules or lock ups for XPRT rewards to encourage long-term provision of liquidity
  • Reward LPs with governance power, such as increased voting weight, to further align incentives

Finally, let’s look at what the community thinks.

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Thank you to everyone who has participated in this discussion. The decentralization of Dexter through #XPRTforDexter is pivotal as it aligns Dexter even more closely with the Persistence Ecosystem and strengthens the power of XPRT governance.

Decentralizing Dexter (XPRT for Dexter) involves three crucial proposals that require approval from XPRT governance across two proposal cycles. The proposed actions are as follows:

  1. Migration of the multi-staking contract
  2. Instantiation of Dexter Governance Admin contract
  3. Transfer ownership from Multi-staking admin and Vault-admin multi-sigs to Governance admin contract

The commencement of the first proposal cycle is expected to be live soon.
Every Persister is encouraged to vote on these significant proposals that cement XPRT for Dexter.

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It is a significant decision for the Dexter team not to launch its own token but rather to utilize the robust and established XPRT governance along with its supportive community. We are generally in favor of this move.

The only aspect that raises some concerns is that certain stakers and holders may lack interest or expertise in the development of the Dexter Dex. It is difficult to predict the level of engagement and the quality of decision-making that will result. It is like the Cosmos Governance would be responsible of the future of OSMOSIS. Some XPRT holders may not wish to be associated with a decentralized exchange.

Additionally, what if more DApps are created in the future? Will XPRT Governance assume responsibility for all upcoming projects? Where will the community draw the line in onboarding a project to the governance?

Moreover, as previously discussed in the forum, it would be beneficial to provide more details on how the generated gains will be spent in the future.

We anticipate the proposal going live and observing how the community will react in the end. As mentioned earlier, we believe it’s a positive move that will strengthen the bond between Dexter and the community.

Cheers, the Stakecito Team

1 Like