IIP: 185
Title: Launch the High Yield ETH Index (hyETH) Pre-sale
Status: Proposed
Authors: @anthonyb.eth
Reviewers: @allan.g @MrMadila @0x_Dev
Created: 28 March 2024
Elevator Pitch
The Index Coop High Yield ETH Index (hyETH) is designed to track the performance of the largest high-yield opportunities for ETH on Ethereum that meet minimum APY and TVL criteria verified by data from DeFi Llama (more below). The index weights all eligible strategies equally and rebalances monthly to include the most relevant strategies.
Composition
| Strategies | APY | TVL ($M) | Strategy Category | Weight |
|---|---|---|---|---|
| Pendle eETH PT (2024-06-27) | 40.01% | $300 | Fixed Rate Liquid Restaking | 20% |
| Pendle rsETH PT (2024-06-27) | 37.32% | $154 | Fixed Rate Liquid Restaking | 20% |
| Instadapp ETH V2 | 8.41% | $97 | Leveraged Liquid Staking | 20% |
| Pendle rswETH PT (2024-06-27) | 57.85% | $55 | Fixed Rate Liquid Restaking | 20% |
| Across WETH | 12.51% | $53 | Cross Chain Liquidity Providing | 20% |
| Index Coop High Yield ETH | 31.22% | - | 100% |
Methodology
HyETH targets ETH yield opportunities greater than 4.00% higher than the staking rate, as defined by 30d APY from dsETH. To be included, strategies must have the following attributes:
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Strategies must be listed on DeFi Llama Yield Rankings denominated in ETH, available on Ethereum, and have the attribute of “no IL.”
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Strategies must have at least 5,000 ETH in TVL.
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Strategies must have a 30d APY at least 400 bp higher than the backward-looking APR of dsETH.
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Strategies must not have locking mechanisms or caps.
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Strategies with fixed terms must mature at least three months from the rebalance date; the initial composition may have a shorter duration due to the timing of the formal product launch.
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Strategies must be compatible with Index Protocol and not require additional engineering work to make it compatible with the SetToken. Index Coop may take on additional engineering work to make a strategy compatible, but it is not obligated to do so.
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Strategies must be separate from aggregators or actively managed.
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No protocol can account for more than three strategies or 60% of the composition.
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Protocols underpinning these strategies must be open-source and have publicised audits.
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All airdrops and rewards will be absorbed into the token and realised as yield by token holders.
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All fixed yield positions will be held to maturity, and yield will be based on the current APY, not the 30-day average APY.
The composition will consist of the top five strategies ordered by TVL that meet these criteria; the included strategies will be weighted equally. A maximum of five strategies will be included at any given time. hyETH will be rebalanced monthly to reflect the most current strategies in the composition. The product will not be rebalanced if there is no necessary recomposition (i.e., added or removed component). If any components are added or removed, the resulting rebalance will be executed via auction. If a component remains in the composition and its weight is between 17.5% and 22.5% of the index, it will not be reweighted.
Description
Value Proposition
The staking rate for ETH is often called the “risk-free rate” in DeFi, but opportunities often offer higher returns with higher risk, which is appealing to many users. Most of these opportunities exist on Ethereum, and much research and capital are required to diversify and maintain these strategies. A structured product that allocates to the best-performing yield strategies with the highest TVL is valuable because it allows users on Ethereum mainnet and L2s to efficiently access a repricing token via a swap. hyETH will offer diversification, high yield, and low entry/exit costs. As an ERC20 token, it will be composable within DeFi and portable across the L2 ecosystem.
Target Users
Agile Crypto Funds: Input from DeFi fund allocators points to potential enthusiasm for an automatically rebalancing high-yield ETH product. This product can be held for an extended period and will accrue value and rebalance monthly, providing administrative simplicity.
Small To Medium-Sized On-Chain Users: This product is designed for small on-chain users who are long ETH and want to earn yield. Like icETH, which was very popular with modest-size ETH bulls, this product will make the high-yield, gas-intensive strategies accessible to the everyday DeFi user.
Large On-Chain Users (Whales and Treasuries): While some DAO Treasuries hold only USD-denominated assets, many also have ETH and are looking for productive ways to allocate that ETH. Due to the slow governance process, allocating to a single token that provides diversity and monthly rebalancing is easier. A token also allows whales to allocate to multiple strategies via a single token without needing to constantly research and update their positions, which in many cases is gas-intensive even for high net-worth individuals.
Differentiation
| Alternative | TVL | APY | Differentiation |
|---|---|---|---|
| Origin Ether | $159m | 4.11% | Higher APY, more protocol/strategy diversity |
| Sommelier ETH vault | $46m | 14.44% | Higher APY, more protocol/strategy diversity/more defined rules-based methodology |
| Yearn yvWETH | $128.8m | 7.63% | Higher APY, more protocol/strategy diversity |
Distribution
Index Coop App
- Support Flash Mint/Reedem at launch
- Support 0x swaps at launch
- Support cross-chain swaps post-launch
DeFi
- Ethereum Uniswap V3 0.05% pool at launch
- Arbitrum Uniswap V3 0.05% pool at launch
Intermediaries
- Zerion support post-launch
Partnerships
- Engage DAOs and agile funds with pre-sale opportunity
Operation
hyETH should have flash mint support at launch, enabling seamless issuance and redemption of hyETH in exchange for ETH, WETH, wstETH, and USDC.
Auction rebalancing should occur monthly with decentralised reweighting powered by UMA’s optimistic oracle; however, this may not be in place at launch. In the interim, Index Coop will assume responsibility for reweighting.
Economics
Streaming Fee (annualised): 0.95%
Issuance Fee: n/a
Redemption Fee: n/a
Operational Gas Costs: covered by Index Coop
Pre-sale Details
Target Threshold: 500 wstETH
Incentives: 30% of hyETH PRTs (successful pre-sale)
Pre-sale Start Date: 2024-04-10 16:00 UTC
Pre-sale End Date: 2024-05-10 16:00 UTC
Pre-sale Period: 30 days
Pre-launch Period: 30 days
Post-launch Period: 30 days
Pre-launch Withdrawal Penalty: 0%
Once the pre-sale period begins, participants may deposit wstETH into the hyETH pre-sale token. If the target threshold is met, deposits will be rebalanced into the initial composition defined for the product; as a result, pre-sale participants receive early access to the product before the formal launch. The formal product launch will occur 30 days after the pre-sale successfully closes; at this point, anyone can issue, redeem, or swap for the product. After the formal product launch, hyETH PRTs will be distributed to pre-sale participants.
If the target threshold is not met at the end of the pre-sale period, participants will not receive PRTs. Depositors can withdraw at all times during and after the pre-sale period to reclaim their wstETH; however, early withdrawals before the pre-sale ends forfeit PRT rewards. Depositors who sell or redeem their hyETH before the end of the post-launch period will also forfeit their accrued PRT rewards.
Voting
For: Do move forward with the presale
Against: Do not move forward with the presale
