Thanks @DarkForestCapital, glad you enjoyed the article. Apologise for the long response in advance. Here goes.
Technically, yes, the methodologists are the ones defining the opportunity and so-called token selection. Index Coop then does the rest. However, there’s nothing preventing the Index Coop community from delivering a methodology that we can execute on. That’s goes to the point of self-indexing that I mentioned in the article.
I think there are several things we can do if we were to pursue the vision of Index Coop as the premier provider of universally recognised, broad market indices that can be used as information aggregates, benchmarks for financial instruments and reference values for the health of the crypto market.
The first, and the most important, is the product and how we approach launching new products. Think of a benchmark index as essential infrastructure for asset management in crypto. It provides a crucial reference point. It allows us to analyse the performance and risk of all other products in the space. For example, an active DeFi fund on Enzyme could use DPI a benchmark. We could assess their performance, how much risk they are taking to deliver that performance, their drawdown profile – all against a trusted benchmark like DPI. This would give investors sufficient information to decide if a performance fee is worth paying for that particular fund. Obviously, it seems less important now as the data set is limited. But the value of a benchmark index will only grow as more products enter the space and we have longer performance history.
That being said, we don’t need 2 or 3 DeFi indices, we only need one. Our priority, from the product perspective, should be on covering broad swaths of the crypto universe, based on demand for a particular area of the market. I think we have to proactive. The community could vote on which area of the market presents the biggest opportunity – NFTs, supply chain & industrial applications (VET, FIL, etc), hardware-based tokens (Helium, SpiderDAO, etc), L1s outside of Ethereum, data infrastructure layer (LINK, Graph, etc.), web3 (HNS). Once the vote is in, we can actively solicit proposals from methodologists and community for an index covering that area. The goal should be to roll out an index fund within 30 days of the vote. I also think we should be building relationships with investors who could help seed these indices because they want holistic exposure to the sector.
Once the above index fund is launched, we can actually incentivise teams to build other products benchmarked to the index itself. These could be different methodologies, seeking to outperform the benchmark through a more active token selection, and charging a performance fee. We could partner with Enzyme on this, for example. Maybe this is where the Token Terminal product fits in. If benchmarked against DPI, it can help established DPI as the primary benchmark for the DeFi space.
Product aside, I would love us to start publishing a monthly factsheet for DPI. Factsheets are very common in TradFi asset management. It’s a 1-2 pager that cover stats for the product + provides commentary on product performance. For DPI, it could include portfolio allocation at the end of the month vs. end of previous month, performance (1mo, 3mo, 6mo, etc), performance against Bitcoin, Ethereum and maybe a 50-50% Bitcoin/Ethereum blend, volatility (relative to ETH or BTC), downside capture, etc. On the second page, we could go through the performance for each individual token and highlight if there were any major events/votes/news for the underlying projects. This would be published monthly and live on the Index Coop website. As we launch other sector indices, we would do factsheets for them as well.
The way we market Index Coop would change as well. We need to be the trusted benchmark provider for the crypto universe. It’s not about an individual product and not about generating alpha. Instead, we should be in the middle of everything, partnering with every other project that launches an index and getting their product benchmarked against ours. And like you said, this would go hand in hand with the push to broaden our educational content. Which is why a podcast, for example, focused on Index Coop as the premier index provider, not any particular product, would be beneficial.