I appreciate all the hard work that was put in by the Token Terminal team on the TTI Index, but I strongly believe that this proposal in it current form, is not a great fit for the Index Coop for the reasons I outline below:
On TTI’s product positioning:
- The TTI is very similar in it’s composition to the DPI, which is the Index Coop’s flagship product. It seems to me that it would be counterproductive for IndexCoop to launch 2 competing products when our competition is already trying to do the same for months, unsuccessfully.
- The Index Coop has spent significant effort & funds (LM & other), to establish DPI as the dominant DeFi Index in the space. It will now have to spend more funds & effort on a similar product that could cannibalize the DPI, while we reduce the incentives on the DPI itself. It doesn’t seem to make sense from a strategy point of view.
- Launching 2 competing Indices, would be wrong signaling sent to partners of the Coop, indicating lack of commitment to either DPI & TTI, which can possibly hurt the traction of both indices.
On TTI’s substance:
- The TTI proposal clearly compares DPI’s performance and TTI’s ‘ideal’ performance. It is fairly trivial to design an algo that could beat any Index in the past. It’s just a matter of tweaking numbers in hindsight. This does not guarantee that in the future this algo will continue producing those results.
- Capitalization-weighted indices already factor in all the metrics that make a project more or less valuable in the eyes of investors, thus encapsulating P/S, as well as many other factors that go into price discovery information.
- I think that although P/S is a very interesting metric, the space is still not at the state of maturity that enables using it as a foundation to evaluate projects, especially considering that LM can be used to boost P/S numbers.
- Even with the above in mind, TTI’s performance is still assuming slippage-free trades, and the 5% limit to asset allocation is in no way a guarantee of that, especially if TTI hopes to get to any meaningful size. For comparison, DPI is at $120M, and 5% trades would be $6M!
To conclude, the Index Coop succeeded creating the leading index of the decentralized finance world. There is no need for a second similar product that will cannibalize our own AUM. Let’s use the Index Coop ressource to create new indices that will tackle new market verticals (MVI h/t to @DarkForestCapital @verto0912 , BED h/t to @LemonadeAlpha, the IndexCoop & Bankless crews, FLI…) and compete with other projects’ indexes instead of harming our flagship product.
Disclaimer: I work at Defi Pulse who is the methodologist behind the DPI, and the coming FLI