IIP-78: Launch The Yield Hunter Index ($YHI)

[Thomas_Hepner]

@overanalyser Here are my initial thoughts and questions about the product proposal:

@overanalyser

With the creation of Set protocol adaptors for Compound and AAVE there is an opportunity to build products that capture some income from a wide range of tokens. By forking the current adaptors for different tokens, and developing wrap adaptors for the Cream protocol, we now have the opportunity to quickly launch a product that captures yield for our users.

Do these adaptors exist today? Would launching this product be as straightforward as launching a simple index product or would it require additional EWG and/or Set Labs resources?

@overanalyser

In order to ensure new income generation for holders, an income threshold for each component has been set to 1.25%.

Does this make sense given the variable APY? It has been only 2 weeks since you posted this proposal and LINK (the token with the largest weight in the index) no longer meets this hurdle as it has ~0.01% APY on Aave (0.67% if including stAAVE rewards) and 0.47% APY on Compound.

In addition, Aave, Maker, Compound, BAT, and 0x all fall below the 1.25% APY threshold. Please correct me if I am misunderstanding, but if this product existed and rebalancing were being executed today, would we not be potentially selling ~63% of the index?

@overanalyser

Many potential users of our products have stated that lack of income generation is a negative when considering a purchase.

I completely agree with this - it is one of the key reasons I was so excited about @Kiba 's Activate DPI Intrinsic Productivity proposal and why Titans of Data is so keen on intrinsic productivity for DATA.

I think it’s worth noting that launching a new product focused solely on generating yield does not solve this problem for our current users who want to invest in the growth of a particular sector (i.e. DPI, DATA, MVI, etc.) AND capture income from the underlying tokens.

As an investor, I hold DPI and plan to hold DATA post-launch, but would strongly prefer to hold intrinsically productive versions of these products. I personally would not hold YHI in the current iteration largely because of (1) the overlap with existing index products, and (2) instability in portfolio composition due to variable APYs of the underlying tokens (i.e. I’m going to have LINK exposure in some months and not in other months).

@overanalyser

Community methodology to empower INDEXcoop contributors and remove friction from the launch and maintenance process.

I’m not sure how the product being a community methodology removes friction from the launch and maintenance process? If anything, this highlights to me that Index Coop needs better processes for working with methodologists regardless if they are “community” or “external” methodologists (@DarkForestCapital’s comment largely mirrors my own thinking on this subject). Index Coop should be launching the most compelling methodologies/products regardless of whether they originate from the IC community or not.

@snasps

Does it make good use of coop ressources to create a new product that has a very similar composition to DPI + DATA?
Don’t you think that we should strengthen our existing (leading) indices by implementing a generalised solution, and activate intrinsic productivity across all Coop products?

I think these are very important questions to answer, especially given that 84% of the weights in the initial proposal are covered by existing products (i.e. DPI, DATA), and that this would be even higher if MVI tokens like MANA or ENJ, both listed on Aave, were included.