TL;DR
- Currently, the Index Coop is constrained by its engineering resources - we cannot simultaneously launch and operate new products, as well as improve existing ones.
- Black Wednesday made clear that the existing highest priority for engineering is to improve the safety, profitability, and robustness of our existing product base [namely, the FLI suite].
- This means that new product launches need to be pushed back and timelines readjusted.
- The product and engineering teams are working on setting new timelines with methodologists, developing systems to proactively inform stakeholders, and creating risk models to improve FLI operations.
Situation
Index Coop now has had a few massively successful products. We have accomplished much over these past 6 months and should be proud of where we are today. This success has led to tremendous AUM growth, brand recognition, and community strength.
With this increasing success, we have more individuals, both external methodologists, and internal community members, that are interested in launching more products with us. It’s clear that launching new products is very important and definitely something we need to keep doing.
At the same time, it is critical to maintain and improve our existing products. Black Wednesday exposed some severe technical and non-technical weaknesses that have cost some of our customers millions of dollars. On top of that, we have seen the profitability of our products significantly decline, with periods of high volatility often causing $50K+ in operating expenses per day. If we don’t maintain and improve our core product base, we risk building the future of our organization on shaky ground and exposing ourselves to brand-destroying, catastrophic events.
Currently, the bottleneck is our engineering resources - we do not have enough engineering resources to simultaneously launch and operate new products, as well as improve existing ones. Launching new products right now risks the development team getting stuck putting out fires all day on a large suite of products, without having time to invest in longer-term, high-impact, improvements.
It has become a priority among the product and development teams to shift focus from fielding new products, launching new products, and operating them to focusing on making deep improvements to our existing products that increase their profitability, safety, and robustness.
Complication
There are products that we have committed to launching with high-profile methodologists that we are incredibly enthusiastic about launching. Additionally, there are several other products in the pipeline that the community is very excited about that we will likely not be able to launch in the near term.
Some to highlight are the Stable Yield Index and the Synthetix Debt Mirror Index. In order to increase the shared knowledge base within the community, we will go over some of the existing blockers with each of these products.
Stable Yield Index:
- Requires integrations to several protocols to access the yield those contain.
- Such integrations take significant development effort that we don’t have yet.
- Rebalancing assets that are currently deposited in other products [ex. USDC in a Yearn Vault] is operationally complex as it requires pulling the asset out of the protocol, rebalancing, and then depositing back into the protocol.
- Currently that wrapping/unwrapping process is very centralized and requires significantly more operational effort as we have to do a multisig transaction for each wrap/unwrap.
- Smart contract multi-sig interactions are complex to execute and require incredible precision.
- With 9 assets, that would be 18 multi-sig transactions for each rebalance which, by itself, would be hours of time for our engineering team.
Synthetix Debt Mirror:
- The main issue with the Synthetix Debt Mirror is that it requires a weekly rebalancing pace.
- Similar to SYI, the way we make money from the SMI is by farming it on other protocols and extracting those revenues.
- Thus it faces the similar operational process described above.
- Furthermore, that process now occurs at a weekly pace instead of a monthly pace which also massively increases the amount of operational overhead.
Our relationship with methodologists, both internal and external, is critical to our success and thus such situations need to be managed with extreme empathy and care.
Question
How can we:
- Give our engineering team the space to work on mission-critical, high effort, and longer-term product improvements.
- Maintain our relationships with the top methodologists that have passed DG2 or are in the Product Onboarding Process.
- Set the proper expectations with methodologists proposing new products that we are excited about and want to do eventually.
Answer
Giving our engineering team space:
- We need to protect our smart contract engineering resources and make sure they have the time and energy to focus on long-term, high-leverage product improvements.
- This means:
- Halting the launch of new products till we get our existing products to be more profitable, safe, and robust.
- Communicating with existing methodologists clearly our existing problems, our reprioritization, and a new timeline for launch.
- Building the capacity within the Coop to handle more product operations like rebalancing [Dylan with the engineering working group] and maintenance [FLI team] so our smart contracts team can focus on building.
Maintaining our relationship with existing methodologists
- Try to scope down requirements as much as possible:
- For example, if with the SMI, we can agree with a monthly rebalance to start with, and only farming half the assets on Compound [an existing Set Protocol integration], we have dramatically reduced the launch and operational costs to something the Coop has developed the capacity to take care of independently.
- That would be something we could support today.
- In the future, we can invest more into developing the product to make it fully featured.
- Empathize with our methodologists, communicate our situation, and provide a clear guideline for when they could expect a product launch.
Expectation setting for new products:
- Though we can not immediately launch new products today, that does not mean we need to switch off our product onboarding process.
- We should still form relationships with methodologists, develop the expertise within the Index Coop to be able to vet and spec out new products and guide them through our governance process.
- The key is setting expectations early on in the process so there are no misalignments that lead to frustration later down the line.
Next Steps
Most internal methodologists going through the product onboarding process are aware of the existing resource constraints and new timelines. Product leaders at the Index Coop will have calls with external methodologists over the following weeks to explain our situation and preserve our relationship.
Dylan and the Engineering Working Group are gaining more proficiency in managing operational processes like rebalances to significantly reduce the workload on the smart contract team.
The FLI Team within the Product Working Group is collaborating with the Smart Contract team to manage the parameters for the FLI and building a risk model that makes managing the parameters more rigorous. As community stakeholders, you can expect transparency and more information on such models as we develop them. Along with maintaining the parameters of the FLI suite, we will also be working on educational content to make sure our investors are fully informed about the product.
There is plenty of work to do outside of launching new products. Outside of maintaining and operating existing products, the Product Working Group has realized we have significant weaknesses in stakeholder management and will be focusing on how to improve there. We need to empathize deeply with our investors, methodologists, community, and team members to make sure we are all fully informed and in sync. Hopefully, this forum post serves as the first step in that direction.
