Summary

1. About this Report
2. Referendum-Info
3. ANALYSIS
1. ■Impact on the Ecosystem
2. ■Governance Compliance
3. ■Cost-Benefit Ratio
4. ■Transparency and Traceability
5. ■Track Record and Credibility
4. Sources
5. Evaluation
6. Voting

About this Report

vonFlandern has developed a methodology to analyze OpenGov proposals as objectively and transparently as possible, and to evaluate them based on the central question:

Does the proposal contribute to Polkadot’s long-term success?

Referendum-Info

Title: Volmex Integration with Polkadot DEX Ecosystem

Track: 33 | Origin: MediumSpender | Amount: 425.000 USDC

Status: Rejected

Summary of the proposal

Volmex Labs has proposed integrating their leading volatility indices, BVIV and EVIV, with Hydration, a Polkadot-native decentralized perpetual futures exchange. This integration aims to enhance Polkadot's DeFi capabilities and strengthen its ecosystem. The project involves smart contract development, platform-specific adaptations, advanced liquidity management, and security audits. The budget for this three-year initiative is $425,000 USDC, covering initial integration, maintenance, legal compliance, and market campaigns. The timeline spans nine months for the initial rollout and three years for continuous upgrades and expansions. The team's expertise includes top-tier talent from traditional finance, crypto quant groups, and software powerhouses. Performance metrics and success criteria include technical metrics, adoption metrics, and a risk management framework. Future developments include the rollout of Prime Rate Indices, Factor ETF Indices, and ongoing Volmex indices methodology enhancements.

ANALYSIS

■Question 1 of 19

Does the proposal measurably contribute to the long-term development, adoption, resilience, or relevance of Polkadot?

The proposal expands the Polkadot ecosystem by introducing professionally developed, on-chain volatility mechanisms, addressing a previously underdeveloped financial value chain, which makes the network more attractive in the long term. However, its contribution to resilience is less clearly quantifiable.

Justification

Polkadot’s DeFi ecosystem is still in an early stage and exhibits a significant growth and innovation gap in derivatives—the integration of volatility indices directly addresses this demand. The integration of BVIV and EVIV into Hydration could strengthen Polkadot’s DeFi ecosystem by providing advanced risk management and speculation tools, attracting new users such as traders and institutional investors. Critically viewed, success depends on Hydration’s market acceptance, and uncertainties regarding actual product usage and the budget increase of 50,000 USDC compared to the rejected Referendum #1421 could raise skepticism.

Score: 7/10

■Question 2 of 19

What sustainable added value does the proposal bring to the Polkadot ecosystem in the long term, beyond the immediate project duration?

The proposal offers sustainable added value through the permanent availability of volatility products and the potential enhancement of treasury stability, though the extent depends on market acceptance and regulatory developments.

Justification

After the three-year project duration, the integrated BVIV and EVIV products are expected to remain available on Hydration, enabling continuous usage and development. The planned introduction of Prime Rate Indices and Factor-ETF Indices could further diversify the DeFi offering and foster innovation by encouraging developers to create similar or complementary products. The diversification of the treasury through non-correlated assets, as mentioned in the proposal, could enhance financial stability by reducing the risk of volatile assets, similar to how volatility indices serve as hedging instruments in traditional markets. This could make Polkadot more resilient to market fluctuations and strengthen institutional trust in the long term. The successful integration of Volmex indices on platforms like TradingView and Bitfinex demonstrates that the products are technically robust and marketable. However, sustainable added value heavily depends on actual usage and the ability to maintain liquidity pools over the long term. Additionally, regulatory hurdles, particularly for financial instruments like volatility indices, could impact sustainability, as such products are subject to strict regulations in many jurisdictions.

Score: 6/10

■Question 3 of 19

Is an existing structural weakness addressed?

The proposal addresses the structural weakness of the lack of advanced DeFi products on Polkadot, though it only partially mitigates the treasury’s risk exposure.

Justification

Polkadot currently lacks specialized DeFi products like volatility indices, which are available in ecosystems like Ethereum, limiting its competitiveness in the DeFi sector. Focusing on Hydration carries the risk that the products may not be utilized ecosystem-wide, constraining their reach. While the proposal mentions “compelling ideas around how BVIV could be used to diversify and strengthen the Polkadot treasury,” it lacks detailed strategies on how the treasury would actively use these indices for risk hedging.

Score: 6/10

■Question 4 of 19

Does the proposal promote interoperability, user retention, or parachain development?

The proposal promotes interoperability, user retention, and parachain development by integrating specialized DeFi products (BVIV and EVIV) into the Hydration parachain for the first time, encouraging cross-chain interactions via XCM, fostering long-term user engagement through marketing and incentive programs, and outlining a roadmap for further parachain expansions, though immediate impact is limited by the focus on Hydration and lack of multi-parachain details.

Justification

Interoperability: The integration of volatility indices on Hydration leverages Polkadot’s Cross-Consensus Messaging (XCM), promoting asset transfers between parachains and enhancing network-wide liquidity.

User Retention: Tutorials, community events, and incentive programs like trading competitions motivate traders and investors to remain active in the ecosystem.

Parachain Development: The partnership with Hydration demonstrates how specialized DeFi projects can emerge; the announced expansion to additional parachains signals development potential beyond a single project, though specific implementation plans are still lacking.

Score: 7/10

■Result category 1

Total score: 26/40 | Average: 6.50/10 (65%)

■Question 5 of 19

Does the proposal clearly fall within the scope of the chosen origin (Treasury, Tipper, Spender)?

The proposal clearly falls within the scope of the chosen MediumSpender origin, as the requested amount of 425,000 USDC is within the 100,000 DOT limit.

Justification

The proposal was submitted under Track 33, MediumSpender origin, which is designated for treasury expenditures up to 100,000 DOT, as outlined in the Polkadot OpenGov documentation. As of May 12, 2025, the DOT price is 5.27 USD. The requested 425,000 USDC thus equates to approximately 80,645 DOT (calculation: 425,000 / 5.27 ≈ 80,645.16), which is well below the 100,000 DOT threshold.

Score: 9/10

■Question 6 of 19

Are there previous proposals with comparable content, and if so, what were their outcomes?

There is a previous proposal with comparable content, Referendum #1421, which was rejected, providing relevant context for the current evaluation.

Justification

Referendum #1421, also submitted by Volmex Labs, requested 375,000 USDC for a similar integration of volatility indices into the Polkadot ecosystem and was submitted under the MediumSpender track. This proposal was rejected with 47.9% approval and 52.1% disapproval. The rejection of #1421 indicates that comparable content has already been discussed. The adjustments in #1555 reflect a response to prior feedback.

Score: 8/10

■Question 7 of 19

Is the governance system being used meaningfully or burdened?

The governance system is being used meaningfully, as the proposal responds to community feedback, achieves high approval, and effectively utilizes governance processes without burdening the system.

Justification

The revision of the proposal following the rejection of Referendum #1421, including the incorporation of feedback on marketing and DeFi integrations, demonstrates an iterative approach that respects and strengthens governance mechanisms.

Score: 9/10

■Result category 2

Total score: 26/30 | Average: 8.67/10 (87%)

■Question 8 of 19

Is the requested amount proportionate to the potential or demonstrated benefit?

The requested amount of 425,000 USDC is proportionate to the potential benefits, as the integration of Volmex’s volatility indices could enhance Polkadot’s DeFi capabilities and attract new users and liquidity, though concrete evidence of actual impact is lacking.

Justification

The high amount requires a conservative evaluation, as the actual impact depends on user acceptance and market developments. Without clear forecasts or comparable success metrics, a residual risk remains, limiting proportionality.

Score: 7/10

■Question 9 of 19

Is the budget framework reasonable compared to similar proposals?

The budget framework is reasonable compared to similar proposals but appears not fully justified due to unclear compensation for the partner Transistor and the budget increase of 50,000 USDC compared to the previous proposal.

Justification

The proposal outlines a breakdown of 425,000 USDC: 225,000 USDC for initial integration, 100,000 USDC for maintenance, 50,000 USDC for legal compliance, and 50,000 USDC for marketing. The budget increase of 50,000 USDC compared to the previous proposal (Referendum #1421) raises questions, as the rationale is not sufficiently documented. Similarly, the lack of clarity on Transistor’s compensation impacts transparency. Without this information, the framework is not entirely convincing, though it aligns with comparable projects.

Score: 6/10

■Question 10 of 19

What specific added value does the Treasury or network gain in return for this expenditure?

The Treasury and network gain access to advanced hedging instruments, increased liquidity, a diversified asset base, and a stronger DeFi presence.

Justification

The integration of BVIV and EVIV into Hydration provides users with professional volatility indices, simplifying risk management and speculation. This could attract new users, particularly institutional investors, and boost trading activity on Polkadot parachains. The Treasury benefits from potential diversification through non-correlated assets, which could enhance long-term financial stability. The planned introduction of Prime Rate Indices further expands these opportunities. Additionally, increased liquidity through incentive programs could boost transaction volume and network efficiency, as observed in similar DeFi projects. Measurable metrics, such as monthly active users and liquidity depth, provide a basis for evaluating success. However, the actual added value depends on user acceptance and market developments, introducing some uncertainty.

Score: 8/10

■Question 11 of 19

Were cheaper alternatives considered?

The proposal does not mention cheaper alternatives.

Justification

The proposal provides no indication that alternative approaches, such as collaboration with other protocols or internal development of similar indices, were considered. Volmex Labs, however, is an established provider of volatility indices with a proven track record, suggesting that an external partnership is more cost-efficient than internal development, which would require significant resources and time. The partnership with Transistor enhances implementation efficiency. Nevertheless, a discussion of alternative approaches or a cost analysis would have strengthened the proposal’s credibility. Without such information, it remains unclear whether cheaper options were available.

Score: 4/10

■Result category 3

Total score: 25/40 | Average: 6.25/10 (63%)

■Question 12 of 19

Is it clearly communicated how and for what purposes funds will be used—including KPIs, milestones, metrics?

Milestones are detailed in the timeline for months 0–3 (Foundations & Infrastructure), months 3–6 (Parallel Integration), months 6–9 (Public Launch & Optimization), and years 1–3 (Maintenance & Enhancements). Technical KPIs, such as a transaction finality of under two seconds, system uptime of at least 99.9%, and a target of zero security incidents, are clearly defined. Adoption metrics include monthly active users, liquidity depth, and cross-chain volume to measurably assess user acceptance and market depth. These specifications enable transparent monitoring of progress and evidence-based evaluation of the proposal. However, details on the compensation of the partner Transistor are not provided. Similarly, the rationale for the budget increase of 50,000 USDC compared to the previous proposal is not explained.

Justification

The clear budget breakdown and structured specification of specific milestones and metrics provide a high degree of transparency regarding fund usage and objectives. However, the lack of partner compensation details and the unexplained budget increase leave questions about the completeness of transparency.

Score: 7/10

■Question 13 of 19

Are budgets, timelines, and work packages clearly specified?

Yes, the proposal outlines a total budget of 425,000 USDC, broken down into 225,000 USDC for initial integration, 100,000 USDC for maintenance and technical support, 50,000 USDC for legal and compliance aspects, and 50,000 USDC for go-to-market operations. The timeline includes a nine-month launch phase with stages for Foundations & Infrastructure (months 0–3), Parallel Integration (3–6), and Public Launch & Optimization (6–9), followed by three years for maintenance and enhancements. Work packages encompass the development and integration of smart contracts, platform-specific adaptations, advanced liquidity management, and comprehensive security audits. This clear and structured presentation enables transparent tracking of project progress. However, a more detailed breakdown within budget categories, such as between development and audit costs, is lacking, which limits transparency.

Justification

The precise breakdown of budget amounts, along with a defined timeline and clearly named work packages, meets the requirements for comprehensive project planning and traceability. The granular phases allow for systematic progress monitoring. However, additional subcategories in the budget could make fund allocation even more transparent.

Score: 8/10

■Question 14 of 19

Are there success criteria for later evaluation?

The proposal defines technical success criteria, such as transaction finality under two seconds, system uptime of at least 99.9%, and a target of zero security incidents. It also includes adoption metrics like monthly active users, liquidity depth, and cross-chain volumes to measure user acceptance and market depth.

Justification

The combination of clearly quantifiable technical metrics and user-centric adoption metrics enables comprehensive success evaluation. The specification of precise performance and operational stability targets supports technical oversight, while adoption metrics allow for evidence-based assessment of market resonance. However, the lack of specific annual or monthly targets for user growth could improve the precision of success measurement.

Score: 7/10

■Question 15 of 19

Is documentation or reporting planned?

The section on reporting and transparency mechanisms announces regular progress reports at key milestones, immediate incident and resolution protocols, and clear documentation of fund usage for community review.

Justification

The planning of comprehensive reporting and transparency instruments meets the requirements for evidence-based traceability and ensures accountability. The detailed plans for milestone updates, incident reports, and financial overviews provide a solid foundation for tracking project success. However, a final assessment of implementation can only be made after the project begins.

Score: 8/10

■Result category 4

Total score: 30/40 | Average: 7.50/10 (75%)

■Question 16 of 19

Have the proposers or involved organizations made verifiable, traceable contributions to the ecosystem?

Volmex Labs, as the first organization to establish the BVIV and EVIV indices as standardized, on-chain crypto volatility benchmarks, has operated them for over three years with 99.999% uptime and integrated them as perpetual markets into five of the highest-volume decentralized exchanges. The core smart contracts and methodologies are publicly available on GitHub, particularly in the “volmex-core” repository and the volmex-wiki, enabling full traceability of development.

Justification

The combination of long-term operation of the indices, multiple integrations into leading DeFi platforms, and the disclosure of all source code and methodologies on GitHub and in blog posts creates a clear, verifiable history.

Score: 8/10

■Question 17 of 19

What projects have been successfully implemented so far?

Volmex Labs has introduced tokenized volatility products (BVIV and EVIV) on Ethereum and other blockchains with the v1 protocol, which are traded on decentralized exchanges like Uniswap and Sushiswap. Additionally, BVIV and EVIV perpetual markets have been integrated into five of the highest-volume DeFi DEXs, confirming the practical viability of the smart contracts. Furthermore, a central listing on North America’s largest CEX is in preparation, underscoring the market maturity and adoption of the indices. Volmex also operates a live charting platform for all indices, providing users with real-time data and analysis tools.

Justification

The implementation of volatility indices across multiple blockchains, their integration into leading DeFi DEXs, and availability on centralized exchanges demonstrate the successful and reproducible execution of the technology. The accompanying charting platform highlights the project’s user and analysis focus.

Score: 8/10

■Question 18 of 19

Are there publicly accessible references (e.g., code repositories, publications) or community feedback supporting the proposers’ credibility?

Volmex Labs’ entire codebase is publicly accessible on GitHub, with repositories such as “volmex-core,” “assets,” and “volmex-wiki” containing all smart contracts, asset definitions, and documentation. Volmex publishes detailed blog articles on methodologies and research series on its company blog and collaborates with Moody’s Ratings for external analyses. Community feedback from the initial proposal (#1421) was transparently documented on Subsquare and addressed in this submission, demonstrating an iterative, community-driven improvement process.

Justification

The publication of all development artifacts and continuous engagement in the community review cycle demonstrate openness and trust from external stakeholders. Collaborations with established financial institutions and an active social media presence further strengthen public confidence.

Score: 9/10

■Question 19 of 19

Is the team capable of delivering the promised outcomes?

The project leads have demonstrable experience in developing and operating on-chain volatility indices and deep expertise in the areas necessary for implementation. The core team at Volmex Labs, led by founder and CEO Cole Kennelly, has stably and securely operated the Bitcoin and Ethereum volatility indices (BVIV and EVIV) with 99.999% uptime for over three years and integrated them into five of the highest-volume DeFi DEXs. The smart contract codebase is publicly available on GitHub, ensuring transparency.

Justification

The proven stable operation of the volatility indices over several years and their integration into leading DeFi platforms demonstrate the team’s operational maturity. The disclosure of all core smart contracts and documentation, along with multiple audits, confirms rigorous quality assurance. The professional backgrounds of team members, particularly founder Cole Kennelly, are publicly accessible and substantiate their technical suitability.

Score: 8/10

■Result category 5

Total score: 33/40 | Average: 8.25/10 (83%)