IIP-22 Bankless BED Index

DPI tokens are held in the DPI Set contract regardless of where the DPI token itself is. We can vote with all DPI underlying tokens whether people are LPing on uni/sushi/balancer, deposited in cream/aave, or even move DPI to L2 on loopring. DPI is an abstraction layer on top of all the underlying tokens we can do whatever we want with the actual AUM.

By having BED on Balancer that means BED token itself is a representation of an LP position. That doesn’t change whether the BED token is intended to be traded. ETH2x-FLI is intended to be traded yet is built on Set Protocol as an example. We are concerned about asset management of the underlying tokens, whatever does that most effectively for the use case is what we should use. The actual token we issue that represents the underlying assets can be used however the holder wishes and isn’t affected by whats going on behind the senes.

My suggestion is we don’t make any fees at all on BED since it’s dead simple and has no IP as DPI does so will be highly competitive. Using Balancer I’m pretty sure we wouldn’t even be able to charge fees on BED directly, only getting fees from DPI within BED. I can deploy BED to Balancer right now with maybe $200 in gas fees and it would run more efficiently and effectively than paying bankless and IC to do it for me. So for any position >$2,000 the cost to enter an LP position on balancer will always be cheaper than the yearly fees paid on BED. As a user, whats the advantage of going with Coop’s BED for less profit and worse performance? I can get paid for better performance or i can pay for worse performance. Choice is pretty obvious

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These conversations tend to lean towards the technical aspects of launching/maintaining the index product (re the conversation around Balancer vs Set). Its important to keep the target user for this index front and center - it is your friend that just reached out to you on Twitter for the first time in a year and they are interested in crypto and they thought they could ask you because they see all of your crypto tweets… they want to know how to start investing in crypto and they say they have been keeping an eye on XRP because it is still “really cheap”. You don’t want to over-extend and overwhelm them, but you want to help them learn some basics and get some initial exposure. BED.

Best path is a direct Fiat → BED. Next best is Fiat → ETH → DEX → BED. Even the second of these options can be hard for new users. But by building a structured product (however simple it is) and partnering with one of the premier media/content creators for new crypto users we can start to imagine bringing more and more crypto newbies along this path.

If I am not mistaken, even before the BED meme the Bankless go-to-advice for new users was to get small exposure to Bitcoin and Ethereum and then keep researching and getting comfortable. This has been their path for new crypto users all along. A lot of their headspace has gone (and continues to go) to serving this very target user. I am not worried about the fee split with Bankless because, imo, we need them as a partner on this to get the marketing and distribution right - it is likely going to be even harder than DPI because once you are past crypto newbie this index might stop making sense for you… But the TAM is still huge, and creates a top-of-funnel for the rest of our Index products.

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I’m in agreement.

It’s a great product for new customers, and coming from three strong brands in DeFi.

We could use a balancer pools (others already have), but I think a set protocol fund fits our narrative against using AMM based funds and improves composability.

Yes it’s expensive compared to buying the three separately. But people are willing to pay for convenience and outsourcing the portfolio structure.

In short, it’s a good product for some customers.

We could charge less for it, but 0.8% is not bad value.

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I agree distribution is important and distribution is not affected at all by what the underlying management functionality is beneath the hood. BED will always be an ERC20 whether its built on set or balancer and will be listed on uni and purchasable with fiat in consumer apps either way. We aren’t sacrificing anything by choosing the better platform, in fact it has more benefits for everyone since it reduces fees, maintains the fixed weight of the methodology better, and increases DPI liquidity. The end product is exactly the same - an ERC20 that represents BTC/ETH/DPI - except with a balancer pool it actually maintains fixed weights instead of wildly fluctuating between monthly rebalances and pays user to hold it. How is that not a good thing for end user?

Pay Bankless referral fees or whatever incentive program, im not against that. If we really want to claim to be the best index creators then we need to practice that and not be ignorant maxis. All the anti-AMM arguments for DPI don’t apply here as i detailed in my original comment. Utilizing set and adding fees to BED is against being the best index creators.

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I want to voice that Set (as stakeholders in the coop) won’t be offended if Index Coop products aren’t built on Set Protocol. If building on Balancer (or any other protocol) results in a better final product we should do that.

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I’m noticing a lot of folks in this thread who were not on the 3/19/21 community call with Bankless, ya’ll might want to give this a watch!

Link here :movie_camera: Discord

We go into a number of the topics being discussed here.

p.s. For context, here is the forum post that came before the community call: BED Community Call - Announcement & Request for Questions

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hey @Kiba, a bunch more questions for you.

what’s your take on intrinsic productivity with Balancer via Set? Can we put ETH & BTC to use if it’s sitting in Balancer? Another question - can we change the underlying assets, if we wanted to add stETH or another type of productive ETH or BTC into BED? Basically, how much flexibility are we giving up if we launch this on Balancer?

Also, you say the end product is the same. I assume you mean that the BPT token representing the pool is the final product? Are there any current BPT-ETH pairs on Uniswap? Can that BPT token be given a name? How would wallets and other providers approach listing BPT tokens?

  • Yes the BED token is a BPT representing shares in the liquidity pool
  • Idk of BPT/ETH pairs on Uniswap but Sushiswap has all of PieDAO and CVPs tokens which are all BPTs listed on the dex and even on their onsen menu
  • Yes you can name BPT tokens whatever you want when you launch the pool
  • BPT are just ERC20s. We can get BED added to Balancer’s and CoinGecko’s tokenlists which should get viewable on most wallets
  • Intrinsic productivity has 2 options with Balancer: 1. Wait for Balancer v2 which has baked in asset management and should be out by the time BED goes through all governance stages. 2. We change token allocations in the pool from 33% ETH to 20% ETH + 13% stETH. This transition can be smoothed out if we use a smart pool (like LBPs) and it doesn’t require any action from BED holders.
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I think the intention here would be to use Set to maintain optionality for Uni LP tokens for the 3 corresponding pools.

Just wondering, if we use V3 of UniSwap, what impact does that have on LM with our existing staking contracts using ERC20 tokens. I understand UniSwap V3 uses NFTs for LP tokens.

This is premature because Bankless was very clear they don’t see any need for providing liquidity incentives. I think based on the meeting we can assume Bankless will not allocate capital to LM incentives. LM would be purely at the discretion of Index Coop.

I’d be keen to learn what the implications this has on engineering as our existing staking contract input is an ERC20 token and V3 would utilise a NFT token.

Seems like we are going with UniSwap over Balancer, I’m not sure I understand why. @LemonadeAlpha can you outline the benefits of V3 UniSwap relative to Balancer, help me understand the comment below.

Sure, maybe I’m overlooking something technically that presents itself as a challenge for Uni v3 as I’m admittedly underversed on the new design.

The goal of using Set would be to maintain the ability to do 3 Uni LP pool tokens (DPI-ETH, DPI-wBTC, wBTC-ETH) in equal weight (or maintain the ability to do this with IP), so that users or the Coop can earn trading fees while maintaining the same exposure and so that it seeds a baseline of liquidity for DPI/ETH.

I think @Kiba said this would be possible with Balancer? Would it be helpful to get on the call with some folks over at Balancer?

@LemonadeAlpha @dylan - Have we already start writing the BED Smart Contract directing us to UniSwap, or is this still early enough to have a conversation around/with Balancer.

Seems like we have a few things ^^ to consider.

We have not started any smart contract work for BED. The Balancer pool should earn trading fees, but I suppose the amount of volume going through Balancer vs. Uniswap is another consideration there.

The Balancer 3pool is way suboptimal to fortifying the DPI/ETH pool on Uni for strategic reasons, imo. I respect the arguments for using a Balancer pool but it’s not part of the plans for BED as I understand them.

Any reasonable trader goes through an aggregator there’s no reason to focus on uniswap. If it’s about integrations then they’ll use whatever dex they want anyway and that volume will attract LPs anyway.

Why is this valuable? It’s the same effect as balancer pool but higher gas fees to mint/redeem BED and we can’t configure the pool with custom swap fees (lower fees = higher volume than uni for DPI trading), yield bearing tokens (intrinsic productivity with no additional contracts), or BAL liquidity mining rewards.

The only valid argument to use Set is if putting the btc/eth/dpi to work will earn more for our users than they are paying in fees but based on how DPI is going I would not make that bet. Even then you can get the same yield with Balancer pools as I’ve mentioned.

Let’s take a step back from talking through the different technologies. EOD the difference is honestly marginal for the end user who doesn’t know what Set or Balancer or AMMs are.

To me the core issue is this point above, whether or not we are willing to tread Bankless as a methodologist or a “marketing partner” (in quotes because that is an undefined term and not something we have used before).

Technologies aside, framing within the scope of DG1, if you believe Bankless is NOT a methodologist, you should vote NO on DG1. If you believe, that isn’t the case, and they are a methodologist, you should vote YES on DG1.

If we believe Bankless is a methodologist, and especially a long term methodologist, this discussion is irrelevant as you can’t charge a management fee on Balancer and a management fee is important for a methodologist’s economics.

Let’s let this discussion run till Monday where I think we should put a stake down and take it to the DG1 vote.

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Why would we charge a fee for something that can be automated by smart contracts? That’s the entire point of smart contracts is disintermediation and business process efficiency.

We all know they’ve done a lot for DPI and the coop in general, we can partner with them regardless of BED but we’re conflating “what is the best way to run BED” with “what is the best way to partner with Bankless”. Bankless clearly has value outside of BED and BED (plus the entire IC reputation) loses value by tying BED to Bankless.

I’m not sure I understand where the idea they are not a/the methodologist comes into play. I first heard of this construction on Bankless and they produced the proposal after I mentioned to them the idea of formalizing the product with the Coop.

I would like to clarify that I am not the methodologist and not seeking to be. I have simply managed the relationship between Bankless and the Coop and I made up the acronym and meme behind it.

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Don’t think you can automate the inclusion of asset classes with >$25B in market value.

Generally appreciate this line of thinking as its customer first. Though from my perspective, distribution and education are major value adds for the end user. Potentially much more so than better rebalancing. At the end of the day, it’s how our products can deliver the most value to our end users and technology is really only a small piece of it.

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