# DPI Index Rule Change - Capped **URL:** \ **Category:** Products\ **Tags:** dpi\ **Created:** [6 March 2021 23:41 UTC](https://gov.indexcoop.com/t/dpi-index-rule-change-capped/956 "2021-03-06T23:41:52Z")\ **Posts on this page:** 7\ **Page:** 1
**Author:** ![jiecut](https://avatars.discourse-cdn.com/v4/letter/j/db5fbb/32.png) [@jiecut](https://gov.indexcoop.com/u/jiecut)\ **Post date:** [6 March 2021 23:41 UTC](https://gov.indexcoop.com/t/dpi-index-rule-change-capped/956/1 "2021-03-06T23:41:52Z")
Opening up discussion on the possibility of tweaking the DPI index rules to be a capped Index. The Index would still be market-capitalization weighted but there would also be a cap so that individual tokens don’t exceed a certain percentage of the portfolio during rebalancing. I think a weight cap anywhere from 25%-40% could be reasonable. Benefits: - Diversification/Concentration Risk - Keeps the Index diversified and from being dominated by a single name. - Volatility Harvesting - Some benefit to DPI holders during monthly rebalances, selling when a token has high weight, buying back when the price is lower. Downside: - DPI won’t be 100% market cap weighted. DPI could underperform if DeFi megacaps outperform. Why is this relevant? - Uniswap - Lots of Uniswap tokens have recently been vested. While Uniswap has a current weight of 32%, Uniswap would have a weight of 45% if DPI was rebalanced today. Some polls to gauge sentiment. _Poll ([view on site](https://gov.indexcoop.com/t/dpi-index-rule-change-capped/956/1))_ _Poll ([view on site](https://gov.indexcoop.com/t/dpi-index-rule-change-capped/956/1))_ * * * MARCH DPI Methodology Refinement > [@March Rebalance DeFi Pulse Index & Methodology refinement](https://gov.indexcoop.com/t/march-rebalance-defi-pulse-index-methodology-refinement/1127): > > March 2021 sees the first rebalance under methodology v0.3 which includes an allocation cap of 25% for any single project, in accordance with DeFi Pulse’s vision for $DPI to provide a diversified exposure to the DeFi market. This allocation cap of 25% has modified the $UNI allocation in $DPI reallocating the remaining funds to other $DPI components on a weighted basis. In the month of March, the DeFi Pulse Index has crossed 13,000 holders! Along with cu… ---
**Author:** ![verto0912](https://yyz1.discourse-cdn.com/flex027/user_avatar/gov.indexcoop.com/verto0912/32/2105_2.png) [@verto0912](https://gov.indexcoop.com/u/verto0912)\ **Post date:** [7 March 2021 05:31 UTC](https://gov.indexcoop.com/t/dpi-index-rule-change-capped/956/2 "2021-03-07T05:31:06Z")
Hey @jiecut, thanks for bringing this up. One thing we should consider first is whether INDEX tokenholders can actually tweak the parameters for DPI. I don’t know the answer, but in my opinion, we can’t. This goes to the point about our index methodologies being managed by an external party and not subject to the whims of the community. That said, I think you are making a valid point. My initial reaction would be to vote against the change. As more tokens get added to the index, the concentration will decline. I think Uniswap picked up roughly $6bn in market and even though it will be hard to add $6bn of other assets, it will happen over time. So this parameter change would address a short-term concern, potentially at the expense of the credibility of the index methodology. There’s also an argument that the space (DeFi) might re-rate on the back of Uniswap’s new valuation or Uniswap might be re-priced closer to the rest of the market. So I’d rather let the market do its thing. Curious to hear your thoughts. ---
**Author:** ![jiecut](https://avatars.discourse-cdn.com/v4/letter/j/db5fbb/32.png) [@jiecut](https://gov.indexcoop.com/u/jiecut)\ **Post date:** [7 March 2021 06:11 UTC](https://gov.indexcoop.com/t/dpi-index-rule-change-capped/956/3 "2021-03-07T06:11:06Z")
@verto0912 This is a suggestion for a product upgrade. While it might not be possible to force a rule change, I think it’s important to start this discussion. Index token holders and DPI holders are key stakeholders. Polls are just suggestions and not binding. This is also about the attractiveness of this product. An index with 45% Uniswap may have less product market fit. Maybe Uniswap price will go down, or the price goes up. Either way we’d be be increasing our Uniswap holdings by 40% on rebalance. I don’t see there being any credibility being loss if there was an index rule change. Capped Indexes are a real thing in traditional finance. DPI as a capped index could offer more product-market fit. It may be more in line with what DPI holders expect. > **[Capped Index Definition](https://www.investopedia.com/terms/c/capped-index.asp)** > > Capped index is an equity index that has a limit on the weight of any single security. And that’s sort of important for Index token holders. DPI is the main index currently, and INDEX is investing in it’s growth with liquidity mining. Anyways just my opinion. Opening up the discussion. I don’t speak for Pulse Inc, INDEX governance, or all DPI holders. ---
**Author:** ![verto0912](https://yyz1.discourse-cdn.com/flex027/user_avatar/gov.indexcoop.com/verto0912/32/2105_2.png) [@verto0912](https://gov.indexcoop.com/u/verto0912)\ **Post date:** [7 March 2021 15:59 UTC](https://gov.indexcoop.com/t/dpi-index-rule-change-capped/956/4 "2021-03-07T15:59:40Z")
Yeah, I get your point. I still think that this is a short-term development that doesn’t necessarily justify a fundamental change to the methodology. Just my two cents. ---
**Author:** ![Kiba](https://yyz1.discourse-cdn.com/flex027/user_avatar/gov.indexcoop.com/kiba/32/1436_2.png) [@Kiba](https://gov.indexcoop.com/u/Kiba)\ **Post date:** [7 March 2021 16:30 UTC](https://gov.indexcoop.com/t/dpi-index-rule-change-capped/956/5 "2021-03-07T16:30:48Z")
Index Coop has no control of the methodology as detailed in the [Methodologist role docs](https://docs.indexcoop.com/launching-new-products/what-is-the-methodologists-role#relationship-to-the-index-coop). You can bring it up with @Celey or @scott_lew_is directly but this is not subject to governance ---
**Author:** ![dylan](https://avatars.discourse-cdn.com/v4/letter/d/e95f7d/32.png) [@dylan](https://gov.indexcoop.com/u/dylan)\ **Post date:** [8 March 2021 00:27 UTC](https://gov.indexcoop.com/t/dpi-index-rule-change-capped/956/6 "2021-03-08T00:27:23Z")
+1 this is correct. DPI methodology is not subject to governance ---
**Author:** ![Jo\_K](https://yyz1.discourse-cdn.com/flex027/user_avatar/gov.indexcoop.com/jo_k/32/627_2.png) [@Jo\_K](https://gov.indexcoop.com/u/Jo_K)\ **Post date:** [3 April 2021 07:32 UTC](https://gov.indexcoop.com/t/dpi-index-rule-change-capped/956/7 "2021-04-03T07:32:12Z")
Hi Kiba, thanks for posting these links in here for anyone that would need them although @Celey was taking care of forum posts in the past, I have joined the team as lead for all things Indexes and structured products.