OK, some more thoughts.
Initially I was twitchy about the centralised nature of the wDGLD, and "2) The sidechain provides enhanced control over KYC and AML: The DGLD sidechain has whitelists and blacklists permissions, providing greater control over**KYC and AML;" on page 8 of the white paper. https://dgld.ch/assets/documents/dgld-whitepaper.pdf
However, I don’t think there is anyway that gold can be incorporated into DeFi without some form of centralisation and I suspect come form of AML / KYC. What I don’t know is if, by the time if has been tokenised on the bitcoin sidechain and then wrapped into ERC20 if it’s still controlled (I suspect so, based on analogy to USDT…).
So for INDEXcoop, if we go with ANY gold containing index, we are likely to have some people say "xxx from INDEXcoop is just centralised [as per wBTC, USDT and many others]. So that is something we need to consider.
I see a huge liquidity problem, my understanding of the set protocol is that for an efficient market we will need DefI native protocols for liquidity:
- Set protocol issue and redemption
- secondary market for the new token (xxx:ETH uniswap pair).
- secondary market for the individual tokens in the index (i.e. ETH, BTC and wDGLD), I would suspect that most arbitrage would prefer ETH pairs.
The current w-DGLD DeFi liquidity looks too low to support large traders (~$38 k https://info.uniswap.org/pair/0x65bc62d64f2cdca65dd8abe56265609524a25804). So there would need to be some market makers for both wDGLD and the new index. Market makers willing to accept divergence loss.
It’s possible that the main market for this INDEX fund will be retail acting through brokers who issue and redeem the tokens as needed so DeFI liquidity isn’t essential to grow AUM. However, I think that there may be some DeFi potential customers who will avoid anything with such low DeFI liquidity.
Looking at the other two gold tokens mentioned:
https://www.coingecko.com/en/coins/pax-gold 72 M market cap, 1.6 M daily volume
https://www.paxos.com/paxgold/ ~23 k volume on Uniswap, 190 k deep pool
https://www.coingecko.com/en/coins/tether-gold 92 M market cap, 70 K volume.
https://gold.tether.to/ %22 k deep pool on Uniswap
So, I’m certainly interested in this proposal as a second INDEXcoop product.
I think at the moment the Coops focus should remaining on promoting DPI and building it’s AUV within our core market of crypto natives. But I don’t see that preventing a second fund being launched alongside CoinShares with there commitment to (on chain) liquidity and a presumed marketing push by coinshares as they promote DGLG and wDGLD.
@mcgpetch Two questions:
- How quickly do you see you launching the DGLD initiatives?
- What kind of fee structure would you propose for the $CGCI-LV fund?