IIP-188: Launch the Real World Asset Index (RWA) Presale

[allan.g]

IIP: 188
Title: Launch the Real World Asset Index (RWA) Presale
Status: Final
Authors: @fortunafi
Reviewers: @allan.g @jordan.t @anthonyb.eth @0x_Dev
Created: 15 May 2024

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Elevator Pitch

The Fortunafi Real World Assets Index (RWA) allows token holders to gain diversified exposure to the RWA sector. RWA will be composed of tokens from projects and protocols that concentrate on tokenizing offchain assets.

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Composition

Composition is subject to change based on methodology output before the official launch.

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Methodology

The goal of the RWA index is to allow investors to gain diversified exposure to the Real World Assets sector. While tokenizing real world assets is a nascent category, it has more near-term potential than most other cryptoasset sectors at the time of writing.

Reconstitution and rebalancing will occur quarterly and assets must also meet the following criteria to be eligible:

• The underlying protocol must be listed on DefiLlama
• The 90-day moving average of the protocol’s Total Value Locked (TVL) must exceed $30M
• The 90-day moving average of the token’s daily trading volume must exceed $500K
• The protocol must be RWA-centric as determined by the methodologist
• The protocol and tokens must pass a manual review process to determine whether or not it is a good fit
• The protocol must have publicized audit(s)
• The token must be available on Ethereum mainnet; wrapped or bridged tokens may be considered for inclusion

The RWA Index will have weightings proportional to the underlying token’s market capitalization. Individual components will be capped at a maximum weight of 25%; excess weighting is evenly distributed amongst tokens with weights < 25%. The methodologist, Fortunafi, has the discretion to add or remove components based on subjective factors, including, but not limited to, a project’s active development, its stated commitment to the RWA space, etc. Commentary on the index’s monthly and quarterly performance can be viewed in our monthly RWA & Stablecoin Recap reports, as well as our quarterly State of the Industry reports.

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Description

Value Proposition

For years, many have claimed that crypto has yet to find a “killer app” or “product market fit.” Over the past year, the RWA sector has witnessed a resurgence in interest, unprecedented adoption, and newfound innovation that has even turned TradFi bullish - as evidenced by a plethora of multi-trillion dollar market opportunity estimates. With RWA TVL exceeding $5.3B, TradFi institutions like Blackrock and CitiBank dipping their toe into the sector, and governments from all around the world establish accommodative tokenization legislation, this index will allow for anyone to benefit from the rise of RWA as the sector continues to mature and hit escape velocity. More importantly, because the sector is rather nascent, the index’s diverse array of tokens will ensure market participants can have meaningful upside to the sector’s rise to prominence while simultaneously diversifying away idiosyncratic risks specific to one particular RWA-focused protocol.

Target Users

The beauty of RWA is that its total addressable market is vast in the crypto world, as the narrative surrounding “tokenization” and “real world assets” has permeated across all corners of crypto, and virtually every crypto native conceptually understands the value proposition of asset tokenization. Although this index will likely appeal to the “less degen” market participant, the case could be made that, like most other sectors in crypto, market participants ought to at least have a sliver of exposure in the portfolio. Accordingly, a basket of RWA-based protocol tokens is the perfect fit.

As it relates to non-crypto natives, those familiar with BTC and/or crypto who also understand the value proposition of tokenization are part of RWA’s target market. Although it stands to reason that crypto natives will make up the lion’s share of users, emerging trends indicates that the TradFi world will continue to make-up an increasingly greater share.

Competition

There is no way to get exposure to a diverse set of RWA-related protocol tokens besides individual purchases. Manually reconstructing the same composition would therefore incur gas costs as well as potential swap fees, price impact, and slippage for each additional component; manually and independently rebalancing would also incur additional gas costs and value decay over time compared to the RWA index which will use auction rebalancing.

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Distribution

Channel	Additional Details	Priority
Index Coop	Users of the Index Coop App can swap or issue and redeem units of the RWA index permissionlessly.	High
Fortunafi TAP App	Users of Fortunafi’s TAP app can mint and/or redeem, at any hour, tokenized treasury bills and soon various other tokenized products. The RWA Index will be supported as a mintable asset.	High
Reservoir	Reservoir is a decentralized stablecoin protocol with a balance sheet backed by high quality yielding assets, creating srUSD (liquid yield stablecoin) and brUSD (coupon bond 3-12 month durations). The RWA Index will be supported as collateral within the Reservoir platform.	Medium

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Operation

The RWA Index should have flash mint support at launch, enabling seamless issuance and redemption.

Auction rebalancing should occur quarterly with updated weights provided by the FortunaFi team. If feasible, decentralized reweighting powered by UMA will be enabled for the RWA index post-launch.

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Economics

Streaming Fee (annualized):	1.95%
Issuance Fee:	0.10%
Redemption Fee:	0.10%
Operational Gas Cost:	Covered by Index Coop

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Presale Details

Presale Goal:	500 wstETH
Incentives:	10% of PRTs *
Presale Dates:	June 19 - July 19 (30 day duration)
Pre-launch Dates:	July 20 - August 4 (14 day duration)
Post-launch Start:	August 6 - December 6 (120 day duration) **

(*) an additional 15% of PRTs will be distributed for growth activities beyond presale participation
(**) PRTs will be made available periodically during the post-launch period, with a quarter of the 10% allocation unlocking each month starting in September

Participants may deposit wstETH once the Presale period begins. If the presale goal is met, deposits will be rebalanced into the initial composition during the Pre-launch period. The formal product launch will occur once the pre-launch period is completed, at which point anyone may issue, redeem, or swap for the product.

If the presale goal is not met by the end of the Presale period, depositors are free to withdraw their funds. Presale participants are always free to withdraw their assets during or after the presale, though withdrawing before the end of the Post-launch period may result in forfeiture of incentives. More presale-specific information will be made available if $INDEX holders choose to advance this product to the presale stage.

[0x_Dev]

gm @fortunafi frens

Thanks for all your work on this with @allan.g and @jordan.t.

I am a big fan of the proposal other than the current proposed composition - which has 91% in three tokens and almost 50% in Maker. I would suggest less exposure to the big names and more diversification. We have found that index products from IC with little diversification - which a focus on three tokens seems to be - have struggled (for this and also other reasons). Could the composition have a rule that there can be a max. 25% allocation to a component, like DPI? If so, what would a v2 composition look like? Or, have you found market signal that this is the composition people want? If so, would be happy to learn more.

W/o much data other than personal preference, I would like to see more % to Maple too

[FracSandmonkey]

$Mpl weight should be equal if not higher than $ondo. They own and control almost the entire onchain credit/lending market and that’s only going to increase especially as they continue to bring new products to market.

[MrMadila]

Thanks @fortunafi

I agree with @0x_Dev. I would like to see less dominance of MKR and avoid components that create inefficiencies for issuance and redemption for very little influence over the product (CANTO and MPL)

I would strongly recommend a square root market cap that would still allow MKR to keep it’s position as the leader, allow for fair relative representation within the Index, provide stability of other majors as well as bringing tangible performance effects from the lower end of the basket.

Using the same mcap data as above, sqrt mcap would look something like this.

[TheYoungCrews]

These weights are looking more attractive to me. I agree that ~50% in MKR & < 2% in the bottom 2 components is far too concentrated to provide meaningful diversification.

[fortunafi]

Thank you everyone for the feedback!

Taking in community feedback and meditating on our originally proposed weights, we’ve decided to adjust the weighting methodology. In the interest of diversification, consistency across similar indexes, ensuring additions to the index get a meaningful weight, and broader adoption of the index, we believe it would be more appropriate to set a weighting cap to 25%. Excess weighting will be evenly distributed across remaining components.

Accordingly, below is an update of the index’s weights under this new methodology.

[Baltachi]

1. I think more diversification may attract more depositors.
2. Have you considered adding INDEX token , at least some symbolic % ?

[0x_Dev]

Just tagging @fortunafi team in this question, Baltachi. Thanks

[fortunafi]

We’re totally open to the idea of adding INDEX in the future, but for now believe it is best to launch with projects that align with the current methodology. We will be evaluating it constantly and looking to add more projects as we expand the methodology.

[allan.g]

The proposal has been updated to reflect the amended composition and methodology.

The snapshot vote for advancing the RWA Index to presale has been scheduled for 28 May 2024 and voting will open at 12:00 UTC.

[allan.g]

The snapshot vote passed in favor of launching the RWA Presale. After additional consideration and discussion with @fortunafi , the Index Coop core team would like to amend the presale timeline and adjust the reward schedule; these changes will require a subsequent vote to ratify new presale details.

Initial dates and rewards outlined in the proposal:

Final dates and rewards outlined in the proposal:

@allan.g

Presale Details

Presale Goal:	500 wstETH
Incentives:	10% of PRTs *
Presale Dates:	June 19 - July 19 (30 day duration)
Pre-launch Dates:	July 20 - August 4 (14 day duration)
Post-launch Start:	August 6 - December 6 (120 day duration) **

(*) an additional 15% of PRTs will be distributed for growth activities beyond presale participation
(**) PRTs will be made available periodically during the post-launch period, with a quarter of the 10% allocation unlocking each month starting in September

The most notable changes are:

• the Presale period will last 30 days instead of 14 days
• the Pre-launch period will last 14 days instead of 30 days
• the Post-launch period will be extended to 120 days instead of 30 days, with PRT rewards “unlocking” every 30 days after the formal launch on August 5th

After a brief comment period, a second snapshot vote will be scheduled in the coming days to implement these changes to the RWA presale.

[jordan.t]

I’ll reiterate that while presale deposit and hold incentives have dropped from 20% to 10%, we will unlock an additional 15% to encourage key activities crucial for product success. These activities include creating strong secondary markets on L2s, adding utility through borrowing and lending, and supporting distribution. We believe that this combination of activities will give the product the best chance to succeed.

[allan.g]

A snapshot vote to ratify these changes and update the RWA presale details has been scheduled to start at 12:00 UTC on 11 June 2024.

[allan.g]

The snapshot has closed in favor of launching the RWA Presale, with the updated dates and incentive structure!

The presale will be set to open on June 19th.

[chetty]

Hey there, I agree that core DeFi tokens should be excluded as they’re already in DPI, instead this should be replaced with those projects with decent fees and loans issued as per rwa.xyz, from what I can see GFI and TrueFi are missing, and if you take the “market cap” approach then OM, PENDLE, POLYX and RBN are also missing. Would be good to make it a list of 10 to keep it diversified enough.

[allan.g]

Hey @chetty - thank you for the feedback here! As it stands, the methodology is set for the $RWA token, but amendments could be made in the future if @fortunafi chooses to.

That said, the $RWA product will not launch unless the presale target of 500 wstETH is met, and it is currently short of that threshold. There are five days remaining in the presale though, so a final determination will not be made regarding the product’s future until then.