This post presents the “new deal terms [that] are agreed upon and laid out to the community in a public forum” for any newly released products in the Flexible Leverage Index series (“FLI”) as contemplated in the Methodologist Negotiation Process proposed by @scott_lew_is, @setoshi, and @BigSky7 . In addition, it provides an explanation for tools used or produced throughout the process by @scott_lew_is , @BigSky7 , @setoshi, and myself. The tools seek to aid negotiation and to improve fairness and clarity for the ongoing relationship between Index Coop and Methodologists. As presented, they will be filled out for FLI, but the intention is for the tools to be adjustable and serve as guides for other Coop product negotiations (or future frameworks for such). For the avoidance of doubt, this is not intended to be a legally binding agreement, but rather a statement of intent for upcoming products in the FLI series (which will still individually undergo IIPs).
FLI Fee Split, Ongoing Responsibilities, and Other Terms Summary
|Fee Split||The revenue generated will first be applied to gas costs applicable to product maintenance, and then, split 40% to DeFi Pulse and 60% to Index Coop.|
|Ongoing Responsibilities||Responsibilities for various functional areas will be split between DeFi Pulse and Index Coop. DeFi Pulse will take the lead on ongoing Product work. Index Coop will take the lead on Engineering and Business Development. Marketing will be a roughly evenly shared responsibility. For further details, please see the Ongoing Responsibilities sheet. These responsibilities will be evaluated on a monthly basis at a leadership meeting between DFP, IC, and Set to ensure they track with the assumptions of this negotiation.|
|Other Terms||These terms will be revisited periodically to see if adjustments are required, responsibilities need to be updated, or any other terms need to be added (e.g. exclusivity, noncompetition, or a product wind-down mechanic). This will occur 12 months from IIP approval. In addition, DeFi Pulse will only disclose certain proprietary information with Index Coop contributors who sign a non-disclosure agreement with Pulse, Inc.|
Tools Used And Applied to FLI
Two primary tools were developed to describe the arrangement for FLI going forward and also serve as an aide to negotiation. They were:
- [Fee Split and Responsibilities Worksheet] - This is a sheet that breaks down responsibilities and contributions that compose a fee split into five categories: Intangibles, Product, Engineering, Marketing, and Business Development. Each of these categories has weights that can be adapted to fit a product (e.g. FLI has greater ongoing engineering requirements than sector indices) and each category has granular components that roll up to the category weights.
- Ongoing Responsibilities [Forthcoming]: The Ongoing Responsibilities sheet serves as a companion piece to the worksheet above to describe meeting cadences for coordination by functional area and expected workflow that matches the granular responsibility splits from the worksheet above.
In addition, we discussed concepts of noncompetition by the Coop and exclusivity guarantees by the Methodologist. In general, these should be reflexive commitments and can alter how each party views the economics of an arrangement. For FLI, there was difficulty in landing on a scope of products for non-competition that made sense or would have general buy-in from the community. All were comfortable with leaving these concepts to be addressed (or not) in coming months and committing to the above deal terms without guarantees on this front.
Taken together, these tools provide a framework for discussion between the Index Coop and Methodologists on how to share responsibilities and value contributions to both produce a fee split and optimize coordination for product success.
The Ongoing Responsibilities sheet filled out for FLI will be shared next week. We’d like to spend a little more time on it and get more feedback from subject matter experts at the Coop and DFP to more closely represent how the workflow will look versus our recommendation.
We wanted to share these materials for community feedback as a part of the Methodologist Negotiation Process. The proposed fee split and responsibility arrangement for FLI going forward will be subject to and voted upon via IIP once feedback has been shared.