Add structure for making proposals to add indexes to the Coop.
Motivation
Adding indexes is a potentially costly procedure for the Coop. Some costs may include:
Index technical maintenance support
Initial liquidity provision using Coop Treasury
Potential listing coordination on Tokensets
3rd party marketing coordination
Cannibalizing market share from other Index Coop products
This IIP suggests the Coop should have a distinct vision of what market needs a proposed index fills and the likelihood of product-market fit. This IIP would increase the qualified proposal requirements for authors wishing to add a new Index into the Coop.
FOR:Agree to add Research as a required section for IIPs for Index Addition
AGAINST:Do not add a Research section requirement for IIPs proposing index additions.
Overview
We suggest that the Coop should make focused bets on the indexes that it chooses to launch. Winning the crypto index market is going to require a few of the Coop’s products becoming widely adopted among money market protocols, traders, and centralized exchanges. To do that requires a lot of community focus on marketing and BD which may be fragmented the more indexes are launched.
This IIP suggests that a new section in IIPs called Research be added for authors seeking to add a new Index to the Coop. This section will contain the following sections.
Size of opportunity: Can this index hit $100M? What is the market size? Expected revenue generation?
Liquidity commitment: Indexes will be accessed through secondary markets. Is the author willing to seed liquidity (ie. In Uniswap or Balancer)?
Differentiation: Is the index sufficiently differentiated from existing products? Will the index cannibalize an existing product?
On-chain liquidity analysis: Can existing on-chain liquidity support the proposed assets that are expected to be included in the index?
Methodology: What is the methodology for inclusion and rebalancing of the index?
Author background and commitment: Is the author the right person to create this Index? Can they support distribution and marketing for the product?
Fee split: What percentage of the fees will be kept by the author and what percentage will go to the Coop?
This should provide sufficient context for the Coop members to be able to make an educated decision on whether or not this Index is worth the backing of the Coop and whether the author is the right person or team to do it.
Thanks for posting this @puniaviision. Some additions/comments:
Farming: If an index includes a yield farming strategy (that’s possible with Set v2 right?) there should be an analysis on risks of the farm, emergency exit strategy, impermanent loss risks, etc.
Differentiation: This is a good point. I think we should try to compose our indices which allows us to target specific sub-niches and have a stable, market-wide index that can handle more volume which gives us a bigger protocol moat. If an index isn’t differentiated it should be able to be added as a sub-index into a meta -index.
No Index Author: I’m not so sure the founder should be a criteria for accepting the index. The index should be able to succeed on its own merits and the efforts of the Coop alone. It’s the Coop’s job to promote and make sure the index is successful if passed, the best market analyst might not be the best marketer or have financial capital to commit to the index.
Marketing coordination: As with the author background, I’m not sure if this is required for index proposal. It’s hard to market something when you don’t know if it will exist and pushing an index that eventually never passes looks bad for the Coop. Of course it’s better if they have something lined up but the financial value of the index should be the only consideration for adding an index (in my opinion)
Fees: Is the fee % set on a per index basis or protocol wide? If it is per index, the fee structure (entry, performance, exit, etc.) should also be included with fee split.
Farming: Totally agree here, that is something that should be added. Will edit the post to include.
Differentiation: Do you have an example of what you mean by meta-index? Not sure I understand index composability, but it sounds interesting.
Going to lump No Index Author and Marketing Coordination into one. What was attractive when it came to working with DFP is that they were such a big brand name in DeFi. With a big brand name came trust, distribution on their media properties, and ongoing marketing with their team. It feels like in finance, the biggest moats are capital and distribution so when we think about index providers we want to work with, its important to consider them holistically outside of just the methodology. Methodology/ideas seem pretty cheap and easily forkable, while brand and distribution are irreplaceable. Maybe its not a marketing plan that needs to be submitted, but rather the capacity of the author to help with marketing/distribution? This is an important boundary for the Coop to understand and draw though so appreciate you bringing it up.
Fees: A good point. Assumed each index would negotiate a different split for fees shared between the Coop and the author. What do you think is the right move? Agree that those other parameters should be considered with the fee split if we don’t do something standardized.
In regards to Marketing Coordination I think you make a valid point about distribution channels and brand name. But I also think people who make good brand names might not be the best to make an Index product. Personally I’d rather lean on solid brand of the Index Coop to promote products with top-tier methodology vs to have an influencer create and endorse a specific index.
Fees: I think we should keep it open so an index has the flexibility to structure fees for their particular strategy. Ideally we could experiment over time with the same index, is it possible to change fees once the contracts are deployed? Maybe we have a default setting but I don’t know what that would be.
I wrote a proposal for a NFT index that covers both meta-index and marketing coordination. Before anyone reads this I want to be very clear:
The contents of this document do not reflect the thoughts and opinions of MetaFactory. We did not finish writing this proposal and it was not approved by our community. We do not endorse any of the tokens mentioned nor the methodology described.
Ok that being said - we had a dank proposal. We just couldn’t come to an agreement on tokens and didn’t want the distraction of managing the index taking away from building other products. If you read the proposal I think it explains how a meta-index works and how to go about marketing coordination.
I assume since DPI is an ERC-20 that all indices will be ERC20s. Since an index is composed of ERC20s, you can create an index (the meta) that contains ERC20s of other indices (the subs). Each sub-index can be have various strategies and the meta-index composes those strategies for a more generalized and stable approach, in this case the NFT market.
To your point @puniaviision we were focused on highlighting our brand’s power to promote the index and provide value beyond just the tokens inside. Again we did not finish writing the proposal since the DAO community was against it but I definitely think it’s way better than NFT Pulse proposal. @Lauracroft213 brands have immense value and they definitely can manage an index. We shouldn’t rely on an ‘influencer’ individual but a brand is an established entity with strong command of the market .