The Automated Indices Pod (formerly FLI Pod) was created in late April to assist with the day to day management of the recently launched FLI products. At the time it was just three people - Allan, Eric and I. Within weeks, the entire crypto market experienced an exceptionally volatile period which placed extreme stress on ETH2x-FLI and BTC2x-FLI, exposing vulnerabilities in both products. The most visible of these issues was the dislocation from NAV that occurred.
This period led to a shifting of priorities for the Set team to focus on upgrading the infrastructure for these products so that they can scale safely. This had the added effect of placing more responsibility on our team for day-to-day management so that Set and IC engineering resources could be entirely focused on solving technical challenges of the products. An early decision was taken to hand over risk management from Set to our team, and delegation of authority for us to act in setting risk parameters. This began with IIP-45 and was continued with IIP-56.
Since that time we have continued to grow the team, and it has been expanded significantly in recent weeks, while also working closely with several AWG members.
- @afromac: Team Lead
- @allan.g: Operations & Communications
- @emault: Developer & Communications
- @tgreco: Developer & TheGraph Specialist
- @Mringz: Business Development & Strategy
- @sidhemraj: Analytics & Dune Specialist
- @jackiepoo: Analytics & Financial Modelling
- @ahuja: Quantitative Finance & Product Design
The Pod’s mission is focused on three core functions to support Index Coop products:
To date, we have effectively supported functions 2 and 3 - Grow and Maintain products. However, we have been less effective at the primary function - Launch new products. At the inception of the group, our workflow and responsibilities were primarily reactive. We focused on supporting the products and responding to events. Over time the function of the group has become more proactive. We have built out tools and resources, and recruited team members that enable us to focus less on day-to-day maintenance of existing products. Instead our focus has shifted onto developing a strategy that best enables us to support Index Coop - designing and launching new products…
The primary risk management function of the Pod has been the monitoring of the products and the updating of parameters through various IIPs and later Parameter Updates:
- ETH2x-FLI Parameter Update #8
- BTC2x-FLI Parameter Update #5
- BTC2X-FLI Parameter Update #4
- ETH2x-FLI Parameter Update #7
- ETH2x-FLI Parameter Update #9
- BTC2x-FLI Parameter Update #6
- IIP-40 ETH2x-FLI Parameter Update #5
- IIP-44: BTC2x-FLI Parameter Update #3
- IIP-42: ETH2x-FLI Parameter Update #6
This risk management function has been achieved by using models developed by Set Labs and updated by the Pod to enable us to predict how quickly the products will be able to delever in any market conditions based on:
- Available liquidity
- Tokens in circulation
- Current leverage ratio
- Asset prices
Using this information we are able to set appropriate thresholds for Supply Cap and Max Trade Size that ensure the products can continue to grow AUM safely.
An early realisation for the team was that a large number of our customers were unaware of the kind of challenges and risks associated with using leveraged products. This led to the creation and improvement of a number of resources.
Medium Articles on FLI:
- A Beginners Guide to Using Flexible Leverage Tokens
- Understanding the Risk of Owning FLI Tokens
- Understanding How FLI Products Perform
- How Volatility Decay Affects FLI Products
- Understanding the ETH2x-FLI Premium
- Everything You Need to Know About FLI Product Parameters
- How Composability Powers FLI Tokens
Overhaul of the Gitbook / Community Handbook
- Created: Flexible Leverage Indices (FLI) header page, FLI Product Parameters page
- Redesigned & refreshed: ETH 2x Flexible Leverage Index page, BTC 2x Flexible Leverage Index page, FLI Parameter Updates page
Automated Communication Tools:
- Discord bot posting daily parameter updates
- Twitter bot posting daily about parameters, change in parameters, and NAV
The Pod developed a number of tools and resources available to the community and our customers for monitoring and understanding the products.
- Developed a tool for calculating price impact on Uniswap v2 and Sushiswap
- Supported FLI calculator design and development
- Updated FLI One Pagers for Index Coop website (monthly recurring)
- Created and maintain an IIP Library in Notion for FLI-related proposals
- Created and maintain a current FLI Parameter Tracking page in Notion
- Built user-facing web application which takes into account volatility decay in order to calculate an approximate ROI of ETH2x-FLI and BTC2x-FLI.
- Worked with BD as the Coop’s technical liaison to Chainlink Labs.
The Pod has collaborated with the AWG to design and refine a
- Designed and developed the ETH2x-FLI and BTC2x-FLI Dune dashboards with AWG
- Maintaining/Updating ETH2x-FLI, BTC2x FLI Dashboards based on Community curiosity and feedback.
- Key Focus areas for improvement -
- User Analytics - Tracking how, when, and how frequently FLI users are interacting with the products.
- Costs - Providing feedback around costs incurred in various market conditions to help improve design of future products.
- Price Impact - Measuring Price Impact for FLI products at various trading volumes/scenarios.
- Assessed COMP rewards Accrued/Claimed by FLI products. Dune Analytics & more.
- Designed initial schema for an official subgraph database for the index coop, which is currently in development.
The primary goal of the team is to increase our output in terms of our first function, launching new products. To that end we have been developing tools that we can use to scale the product line efficiently by minimizing manual processes. This enables us to expand the leveraged product line to its full potential, and creates opportunities for us to innovate and focus on more novel designs as new technologies become available to us.
One labour intensive process we are working to eliminate is the manual process of doing the analysis required to monitor risk and update safety parameters. This is laid out in our roadmap - Automating FLI Parameter Updates.
Version 1 of this process is nearing a beta level of functionality, and will be completed and provided to the community soon. This will live as a real time risk monitoring tool that is publicly available, but that also allows us to quickly and easily monitor the products, make projections, and determine safe parameter updates when required.
The long term goal of this process is to remove as much human input as possible, and move much of the current risk management process on-chain.
The long-term optimization of the products, and design of future ones, will require greater access to data. As such, the team is working closely with the AWG to create an Index Coop Subgraph. This will live as a decentralized API that will be available publicly, and that can provide constant live and historical data. This will enable us to apply machine learning and other quantitative methods to our current and future products.