The CoinShares Gold and Cryptoassets Index Lite Version (CGCI-LV) is an adaptation of the original EU Benchmark Regulated index launched by the CoinShares Group in 2020 (see here: https://coinshares.com/products-services/index-strategies 15) that only includes ERC-20 tokens in order to be compatible in a tokenized index smart contract.
Since the original CGCI is constructed using physical gold and 5 individual cryptoassets some re-engineering of the initial structure was required, whilst ensuring that the core theory and value proposition was preserved. The CGCI-LV therefore deploys the same theory but instead limits the index to 3 ERC-20 token constituents; a gold stablecoin and 2 cryptoassets.
For the gold basket, wrapped-DGLD (wDGLD) was chosen as the ERC-20 gold stablecoin. For the cryptoasset basket wrapped-bitcoin (wBTC) and wrapped-Ether (wETH) were selected based on being the largest and most established cryptoassets.
Business Analysis Team
Marketing Benefit
Score: High
There are two main marketing benefits here: legitimacy, and Coinshare’s resources.
CoinShares is one of the biggest asset managers in crypto, second only to Grayscale in assets under management. The marketing benefits and legitimacy given to Index Coop by working with a brand of their stature cannot be understated. Onboarding brands like Coinshares is a key domino piece in getting all the other best brands in crypto to work with the Index Coop to launch innovative products.
Regarding CoinShares’ marketing resources, our chief liaison, Michael Petch, is working on putting together an extensive marketing plan and allocation resources from the larger Coinshare’s organization to push distribution. Their existing relationships with wallets and exchanges will prove useful in growing the product.
Market Size
Score: Medium
While there is evidence that an index like the CGCI-LV can be useful for people that are new to crypto, and especially those that are using crypto as an inflationary hedge, the market size potential within DeFi is estimated to be small.
However, CoinShares as an organization has the capacity and connections to further distribution of the CGCI-LV product well past traditional DeFi bounds which must be accounted for as well.
Methodologist Capacity
Score: Extremely High
There are very few other organizations in crypto, especially other asset managers, that have the same brand equity, balance sheet, and resources as CoinShares’. As it stands today, the Coop is not committing any organized resources to helping market or sell the Index - it is all currently being driven by the CoinShare’s team.
Unique
Score: High
The wDGLD token, representing tokenized gold, is actually being brought to market by CoinShares’ and several other consortium members. The CGCI-LV will likely be the first structured product ever to incorporate tokenized gold. It currently has a totally different asset composition than the DPI and the Token Terminal Smart Beta. It is also targeted at a totally different persona and brings diversity to Index Cooperative’s current offerings.
Fees Generated
Score: Low
The fee is set at 60bps with 40% of that going towards the Index Coop. With 24 bips going towards the Index Coop, it’s likely our main revenue stream for such a product will be by implementing intrinsic productivity. Because of the uncertainty surrounding CoinShares’ ability to drive this product to personas outside of the DeFi sphere, we need to stay conservative with our fee estimations
Product Development Team
Risk
Score: Low
All of the assets included in the index are extremely liquid, except for wDGLD. CoinShares will be committing to improving wDGLD liquidity on Uniswap prior to launch. They have already begun to seed the wDGLD Uniswap pool and are onboarding a few market makers to be able to supply liquidity as needed. We are confident in CoinShares’ ability to follow up with their promises here.
Difficulty
Score: Low
Because Set Protocol has already built the infrastructure to launch indices and the CGCI-LV is only holding 3 assets, we do not expect it to take long to set up the index. The engineering efforts will be minimal.
Recommendation
Through the reasons outlined above, the Work Teams recommend voting YES. The CGCI-LV adds a diversified product to Index Coop’s current portfolio and being aligned with an organization like CoinShares is incredibly strategic over the long run.
You can look at the rubric and grading here: Product Prioritization Chart - Google Sheets