IIP: 190
Title: Strategic Realignment: Discontinuing Support for Legacy Products
Status: Draft
Authors: @MrMadila
Reviewers: @0xdunerider, @anthonyb.eth, @jordan.t, @dev, @TheYoungCrews, @Static121
Created: Jan 2025
Executive Summary
The Index Coop DAO proposes discontinuing support for several products to reallocate resources toward leverage and yield products. This strategic shift aligns with evolving market demands and is essential for the long-term growth and viability of the DAO.
The discontinuation will indefinitely pause all rebalancing, maintenance and ancillary activities for the affected products. Existing holders will maintain their current exposure, but the products will no longer rebalance or follow the original methodologies.
Proposed products to discontinue rebalancing:
- The DeFi Pulse Index (DPI)
- The Metaverse Index (MVI)
- The Bankless BED Index (BED)
- The Index Coop CoinDesk ETH Trend Index (cdETI)
Proposed products to rebalance entirely into a single asset:
- The Diversified Staked ETH Index (dsETH) → wstETH
- The Gitcoin Staked ETH Index (gtcETH) TBC from GTC → wstETH or rETH
We understand this decision impacts members of our community who hold these products. The following sections outline the rationale, further details about the discontinuation process and support for existing holders.
Rationale
Overview
Market trends in DeFi have shifted significantly since the launch of the Index Coop and the initial products. While the proposed discontinued products were critical to Index Coop’s early success, their growth prospects are insufficient to the long term sustainability of the DAO.
Each of these has one or more of the following challenges:
- Lack of net dollar flows (N$F) or negative N$F
- Lack of users
- Lack of fees generated
DPI and MVI initially gained traction but failed to sustain growth and demonstrate organic product-market fit (PMF). The initial traction was partially due to extremely heavy liquidity mining incentives in 2020 and 2021. Since these incentive programs expired, both have experienced material declines in N$F, users, and fees. Despite the DAO’s best efforts, BED, cdETI, dsETH, and gtcETH gained little traction.
In addition, DPI, MVI, and BED are built on out dated legacy infrastructure (Set Protocol v2), leading to long-term sub-par performance for users. Not only does this limit competitiveness, continually diverting attention to these products imposes a substantial opportunity costs to the DAO, as resources could be focused elsewhere on products with proven organic PMF, growth, and revenue potential.
Simple Metrics for Discontinued Products
A simple “at a glance” metric for product growth/success over time is circulating supply. As the charts below show, growth has stalled or been negative across the board for extended periods post launch.
Advanced Metrics for Discontinued Products
Quarterly flows divided by the average quarterly TVL is a good metric for determining whether a product is experiencing sustained growth. Aside from the launch of dsETH in 2023, which had two quarters of inflows before experiencing outflows, almost all of the products have experienced outflows every quarter for the last 2 years.
At launch, DPI was very heavily incentivised. However, post incentives, DPI has had 13 consecutive quarters of negative net growth. Despite recent positive sector sentiment, Q4 of 2024 has been the 3rd worst quarter for outflows recorded.
MVI was also incentivised early in its life cycle. Again, however, post-incentive quarterly growth has been mostly negative.
BED did not receive incentives; however, it did not reach meaningful traction either. Peak TVL briefly broke $5m at launch, only to fall back to ~$1m within 6 months.
cdETI failed to achieve >$100k TVL at any point in time.
Data as of December 2024 (hence q4 2024 not included)
dsETH was another product with a popular narrative at launch but failed to find meaningful PMF. TVL peaked at just over $3m before Index Coop cut fees to 0% and re-positioned the narrative as a public good, which failed to attract new users or TVL.
DPI and MVI have also seen long-term downtrends regarding the number of addresses holding greater than 0.1 ETH in value. Since its peak, DPI has lost ~54% of its users by this metric, whilst MVI is down nearly ~68%.
Data as of December 2024
dsETH and BED never gained widespread adoption, with BED peaking at 367 addresses and dsETH peaking at just 65.
Data as of December 2024
The annualised revenue based on the 30-day moving average for each product category illustrates how the proposed discontinued products (labelled “Legacy”) have trended downwards as a percentage of the total fees earned by the DAO. The leverage products gained dominance over time, and while the yield category is also a minority contributor to revenue, there is potential for growth, as evidenced by the demand for icETH and hyETH and the rapid growth of other yield products and protocols in DeFi.
Market Capture (or Market Share of Assets Under Management in TradFi speak) measures how much of the total DeFi market value is held through index products like DPI. It’s calculated by dividing DPI’s market cap by the total market cap of its underlying assets. For example, if DPI’s market cap is $1B and its component DeFi tokens totalled $100B, the Market Capture is 1%.
DPI’s Market Capture peaked at 0.5% in 2021 but has dropped to 0.11% today, suggesting investors prefer direct DeFi investments over passive products. For comparison, passive funds hold an estimated >24% of S&P 500 value.
What Index Coop Will Shift Focus To
While the proposed discontinued products have had a lacklustre performance, demand for yield and leverage products in DeFi has remained robust and continues to grow. Index Coop intends to continue to be an innovator in these large TAMs (total addressable markets).
For example, Index Coop generates 83% of its revenue from its Leverage Suite and has successfully expanded it to Arbitrum and Base. The DAO has also built contracts to enable leverage products on Morpho and Aave V3. This enables the creation of popular leverage yield (looping) strategies on various assets and new directional leverage tokens.
By focusing our resources on these high-potential products, we can engage a rapidly expanding market segment, boosting TVL, user growth, and revenue.
When comparing the proposed products’ lack of growth and high maintenance costs with our yield and much lower maintenance leverage products, it is clear that this shift is essential to ensuring the DAO’s long-term viability.
Specification
Upon a successful governance vote, the DAO will carry out the following measures:
1. Discontinue Product Support
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Cease rebalancing and maintenance for:
- The DeFi Pulse Index (DPI)
- The Metaverse Index (MVI)
- The Bankless BED Index (BED)
- The Index Coop CoinDesk ETH Trend Index (cdETI)
-
Existing holders will maintain their current exposure, but the products will not be rebalanced per the original methodologies. Components will no longer be added, removed, or rebalanced
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All Ancillary activities for example meta-governance will cease with immediate effect
2. Rebalance and Discontinue Product Support
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Rebalance into 100% Wrapped Staked ETH (wstETH) for:
- The Diversified Staked ETH Index (dsETH)
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Existing holders will be exposed to wstETH. Components will no longer be added, removed, or rebalanced
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Rebalance into 100% wstETH or rETH pending input from Gitcoin for:
- The Gitcoin Staked ETH Index (gtcETH)
-
- Existing holders will be exposed to wstETH or rETH. Components will no longer be added, removed, or rebalanced
3. Provide Paths to Redemption
- Swap and Flash Redemption will continue to be provided via the Index Coop App for 180 days to support existing holders during this period
- After 180 days, holders can access in-kind (“basic”) redemptions through the ‘Legacy Products’ interface. This function enables holders to redeem their index tokens for the underlying components and does not require continuous technical support
- Flash Redemption requires continual maintenance and is therefore not sustainable to support in perpetuity
- All products will remain redeemable onchain indefinitely without any permissions required
4. Communication and Support
- Detailed guidance and support will be available to assist holders through the transition
- Regular updates will be communicated via official channels, including email, social media, and the website
Implications for Holders
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No Immediate Action Required: Holders are not compelled to act immediately but are encouraged to consider their options
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Assets Remain Secure: Users can continue holding, selling (via supported swap routes), or redeeming their positions with unchanged security assurances
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Options Available: Rebalances will be paused, and users will be exposed to the current composition of each impacted product. Each product will remain redeemable for its underlying components indefinitely. Clear instructions and support will be provided to facilitate any actions holders wish to take
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There are also no immediate actions required for DEX LPs who wish to continue earning trading fees from other product users and DEX arbitragers
Implications for The Index Coop DAO
- TVL remaining in the products will still contribute to overall TVL
- Streaming fees will remain to cover ongoing legacy costs and re-invest in future product development, protocol innovation and growth initiatives
Conclusion
We recognise that discontinuing support for these products is significant, and we fully appreciate the impact it will have on our community and users. This proposal stems from the reality that, as of today, composite indices need more market demand to warrant the level of focus and resources our organisation currently dedicates to them. Should market conditions evolve, the Index Coop DAO remains ready to adapt and resume development.
Our ultimate goal is to strengthen Index Coop’s position as a leading DeFi platform and to ensure its longevity and adaptability in a rapidly evolving landscape. By discontinuing support for certain legacy products, we can focus on innovating and capitalising on larger, more promising opportunities, ultimately delivering more value to our community.
Please share your thoughts and feedback on this proposal, ask questions, and participate in the upcoming governance vote.
IIP Process
In light of the significance of this proposal a full week will be given for feedback on the forum before moving to snapshot.
This IIP is designed to be a blanket proposal for all specified products. If token holders wish to discontinue support for some but not all products, they should vote AGAINST. In the event this IIP fails to pass (or meet quorum), a second round of product-specific IIPs will be proposed to allow for a more granular expression of voter preferences.
Voting
FOR:
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Discontinue Support for DPI, MVI, BED and cdETI
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Rebalance dsETH to wstETH and gtcETH to wstETH / rETH
AGAINST:
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Continue Support for DPI, MVI, BED and cdETI.
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Do not rebalance dsETH to wstETH or gtcETH to wstETH / rETH
Disclaimer
You shall not purchase or otherwise acquire our restricted token products if you are: a citizen, resident (tax or otherwise), and/or green card holder, incorporated in, owned or controlled by a person or entity in, located in, or have a registered office or principal place of business in the U.S. (defined as a U.S. person), or if you are a person in any jurisdiction in which such offer, sale, and/or purchase of any of our token products is unlawful, prohibited, or unauthorised (together with U.S. persons, a “Restricted Person”). The term “Restricted Person” includes, but is not limited to, any natural person residing in, or any firm, company, partnership, trust, corporation, entity, government, state or agency of a state, or any other incorporated or unincorporated body or association, association or partnership (whether or not having separate legal personality) that is established and/or lawfully existing under the laws of, a jurisdiction in which such offer, sale, and/or purchase of any of our token products is unlawful, prohibited, or unauthorised).
None of our token products have been or will be registered under the U.S. Securities Act of 1933, as amended, or with any securities regulatory authority of any state or other jurisdiction of the U.S. Our restricted tokens may not be offered, sold, or delivered within the U.S. to, or for the account or benefit of, Restricted Persons. Our restricted tokens that may be offered on secondary markets and other platforms are not for distribution to any Restricted Person. No offers, sales, resales, or deliveries of any of our token products may be made in or from any jurisdiction (including the U.S.), except in circumstances that will result in compliance with any applicable laws and regulations and that will not impose any obligations on Index Coop. Persons who obtain our token products are required to inform themselves about and adhere to any such restrictions. Index Coop reserves the right to impose further restrictions at its sole discretion, which will be communicated through its terms of service or on its website. All website users, including U.S. Persons, must read our Terms of Service and List of Restricted Tokens. U.S. person(s) must comply with our Terms of Service and not use restricted Index Coop tokens.
Index Coop does not provide tax advice. Nothing contained in this document should be construed as tax advice, and you should consult with your own tax advisor before making any financial decisions.
Copyright
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