# An Analysis of Methodologist Incentive Dynamics **URL:** \ **Category:** Product\ **Created:** [15 September 2021 14:57 UTC](https://gov.indexcoop.com/t/an-analysis-of-methodologist-incentive-dynamics/2675 "2021-09-15T14:57:37Z")\ **Posts on this page:** 1\ **Showing post:** 3
**Author:** ![Thomas\_Hepner](https://yyz1.discourse-cdn.com/flex027/user_avatar/gov.indexcoop.com/thomas_hepner/32/111_2.png) [@Thomas\_Hepner](https://gov.indexcoop.com/u/Thomas_Hepner)\ **Post date:** [15 September 2021 19:15 UTC](https://gov.indexcoop.com/t/an-analysis-of-methodologist-incentive-dynamics/2675/3 "2021-09-15T19:15:49Z")
@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. > [@setoshi](#): > > Index Coop needs to set boundaries and define the methodologist relationship better and how decisions are made. Index Coop should rightly act in its own interests … 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: > [@Democracy, Governance & Attack Vectors Workshop Pre-Reading](https://gov.indexcoop.com/t/democracy-governance-attack-vectors-workshop-pre-reading/2556/2): > > 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](https://vitalik.ca/general/2019/05/09/control_as_liability.html)):** _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](https://twitter.com/hasufl/status/1432329852347158529) 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? > [@Index 2.0: Autonomy Next Steps](https://gov.indexcoop.com/t/index-2-0-autonomy-next-steps/2475/1): > > | 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 --- _[View the full topic](https://gov.indexcoop.com/t/an-analysis-of-methodologist-incentive-dynamics/2675)._