@setoshi Thank you for this extremely well-thought out post! You clearly and articulately lay out the misaligned Methodologist incentive dynamics. I wholeheartedly agree with the points you make here:
setoshi:
Incentives are powerful mechanisms that spur behaviors between parties. Analysis of incentives can be used to explain and predict the behavior of various parties.
The current set of incentives (which include zero-sum games) causes misalignment between parties, stifling product progress from being made
Removing misalignment of incentives and creating new aligned incentives will help generate collaborative and positive-sum behaviors
I know this was in the Crazy Ideas section, but I’d to push back against this a bit.
This line of thinking appears to think of Methodologists as External Parties or Partners rather than as economic agents that make up a cooperative. In my view, thinking of Methodologists as external parties or partners makes Index Coop more like a profit-seeking corporation than a cooperative.
I outlined my view for what the Index Cooperative should aspire to be in this comment:
In my view, one of the primary reasons Index Coop is the market leader for decentralized indices/ETFs is because of governance minimization . Unlike Indexed.Finance, PieDAO, PowerPool, etc. the token weights within our products are determined by a single accountable entity, a Methodologist, rather than a democratic vote of tokenholders.
Overall View on Index Cooperative Governance: When I first joined Index Cooperative, and sought to become a Methodologist, I viewed it as a true cooperative of methodologists.
I have learned in the past 10 months that this is an aspirational goal, not a present reality.
Index Cooperative succeeds or fails by the quantity and quality of the methodologists it attracts and retains to build the best decentralized indices/ETFs in crypto.
As a Methodologist, why do I choose to build and launch a product with Index Cooperative instead of somewhere else? Why is a Methodologist willing to give up some portion of their product’s revenue instead of keeping 100% for themselves?
From my perspective, it boils down to the just 3 reasons:
1. Distribution from Community: Get preliminary data on product-market-fit from contributors and direct distribution to a large community of crypto index investors.
2. Rebalancing-as-a-Service (i.e. Control as Liability ): Methodologists are solely data providers. They determine which tokens are included or excluded as well as the token weights for their product, but do not have custody or access control so are not liable for product failure (i.e. funds being drained) or regulatory risk (i.e. methodologist is not a custodian).
3. Protocol-level Engineering Enhancements: Engineering work on various feature enhancements (i.e mint & redeem fees, intrinsic productivity, etc.) benefit more than just a single Methodologist’s product. Cost and benefits of engineering enhancements are spread across Methodologists and their products.
TL;DR: Index Cooperative mechanism design should seek to minimize and delegate governance decisions to facilitate onboarding and retaining Methodologists and their products.
@setoshi Would you be willing to attend the Methodologist Workshop as part of the Index 2.0 conversations?
Date*
Workshop
Theme
Running workshop
[9th October]
Methodologist - Partnering with Index Coop
Third Parties / Methodologists
DFP / Titans of Data / Product
Specific workshop agendas will evolve and so the scheduled agenda is likely to be subject to change
cc: @Mringz @fallow8 @Jo_K @snasps @oneski22 @TheYoungCrews
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