IIP XX: DAO Revolution Index (DAOs)

Oh interesting, can you tell me more about this? (as well as your thoughts on the token list)

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There’s a pretty significant intersection between DeFi and DAO’s, given the fact that these two worlds intersect not only in the crypto-economic environment, but also in the proposed products provided by Index Coop, how will you manage the categorization?

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This is a wonderful initiative from the DAOist. (These guys also have awesome events)

I think there can be a lot of ways and methodologies to include or exclude DAOs, this one specifically focuses on Infrastructure, Developer, and creator DAOs. Personally would like to support this one + see more being proposed in the future, Each with their own focus and methodology.

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I think this is a fantastic idea. Looking forward to seeing this develop into an actual investment product over the coming weeks. Its the perfect index to get ‘economic’ exposure to the overall DAO ecosystem. Kudos to Luuk and Stefen for leading the effort.

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This reminds me of the proposed DAO Jones Index

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DAOs need more long-term commitments to work together rather than just compete or waste time. Many of the teams that gave away these DAO treasury funds work every day to create an infrastructure for Web3. This index will hedge volatility, tighten the bonds between some very important projects, and I’m confident this is the middleground solution that is sometimes lacking in 1:1 token swap proposals.

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Some thoughts:

Generally

It’s a good time to start the planning on launch a DAO index, as the entire DAO ecosystem will only keep growing in scope and interest. That said, projects in the DAO sector are still very nascent but evolving and growing quickly. As a small cap growth index, the index should aim to aggressively add tokens (as well as rebalance current allocations) as each ecosystem and DAO expands in utility and liquidity. For example, NFT DAOs, community token DAOs, and gaming DAOs are rapidly increasing in member count and interest, and should be likely be considered over time for inclusion as a separate category (examples of DAOs in these categories include FingerprintsDAO, $DOG, YGG, etc.), which can help increase the index’s exposure and reach to the DAO ecosystem.

Creator DAOs are likely underrepresented.

Only 18% of the total index allocation represents creator DAOs. This is less than the allocation to other single tokens (i.e., Mask at 20%), and is less than the total allocation for the other two categories (Developer DAOs: 57%, and Infrastructure: 25%). Overall, for an index to accurately cover the broad range of DAOs and categories, the total allocation between each category should likely be more balanced and not so skewed towards a single DAO (Mask makes up 1/5 of the index). My reasoning being that, for example, developer DAOs and creator DAOs are focused on two almost entirely separate areas in the ecosystem (in terms of value accrual, member participation, etc.). Because of this, growth of DAOs from these categories will have different adoption curves and different growth trajectories. The index’s methodology should aim to capture this varied focus and try to include that exposure for the index’s tokenholders.

I reviewed the Token Checklist and DAO Scorecard, and understand the metrics used to determine the ultimate distribution, but I caution using solely objective metrics to judge token inclusion. Things like current market cap, size of the treasury, and voter participation won’t reveal the full focus and potential growth of each DAO, and these metrics may not translate well across DAO categories. There should be some smaller-weighted subjective analysis included in the methodology to account for differences in newer vs. older DAOs as well as DAOs across categories (i.e., whether the DAO is focused on a unique service or focus that doesn’t yet exist elsewhere in the ecosystem). Also, some additional objective data could help DAO token analysis (tokenomics of these projects, circulating vs. total supply, monthly or quarterly revenues, total votes vs. # of tokenholders/DAO members, etc.).

Liquidity Score re. HAUS and ROBOT.

As a member of LP DAOs for HAUS and ROBOT, PoolHAUS and iROBOT, I can say that there’s been discussion around improving L1 liquidity for both tokens.

iROBOT is currently in the voting process to create a new mainnet Balancer V2 pool that will add significant ETH and ROBOT liquidity. Given ROBOT’s current liquidity, trading volume, and market cap, this new pool should significantly change the current analysis done on ROBOT/Metafactory in the Asset Checklist. The pool should be live within the next 7-10 days, so if this index isn’t voted on by then, I suggest a reanalysis of ROBOT.

PoolHAUS’ liquidity is currently focused on xDAI (with around $10k +2% depth), but there’s been several discussions over the past couple months to bridge at least a portion of the DAO treasury to mainnet. So, if there’s a minimum liquidity threshold for HAUS to be included as an infrastructure token, and if there’s still time to be included in the index, inform us, because the DAO can organize and move more swiftly toward L1.

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Great question! And as you can imagine, we definitely want to reduce overlap as much as possible - this is why we focus specifically on infrastructure DAOs, developer DAOs, and creator DAOs, as opposed to Defi DAOs and Metaverse DAOs

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Thank you for the support!

Would holding this index provide governance liquidity, such that the underlying assets can also be used to vote with? I believe this index would then be of significant interest to all represented tokens and as mentioned above facilitate closer and collaborative partnerships.

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Thanks for sharing! Great choices (and name) too.
We also definitely want to reduce overlap with DPI and MVI as much as possible - so we’re focusing specifically on infrastructure DAOs, developer DAOs, and creator DAOs, as opposed to Defi DAOs and Metaverse DAOs

Yes 1000%! Deeper interaction and collaboration between DAOs is absolutely the goal here.

Thank you so much for this great feedback! Pretty much agree with all of this. Some thoughts:

  • Definitely agree we’ll probably be changing/rebalancing quite often, as liquidity levels in some of the DAOs have shifted quite a bit even from the time we posted this proposal, up til now. Agree on potentially expanding the categories later on as well.

  • We’re already trying to add one or two more creator DAOs to the list currently, and are definitely open to increasing the allocation for them in general.

  • Given the difficulties with liquidity, we’re putting a lot more focus on making that work - so definitely expect a few changes based on that as well. Re: Haus, we started a dialogue based on exactly what you said - porting liquidity over to mainnet. We’ll know shortly what minimum threshold we need for liquidity, so can keep posted. Definitely keep us posted on Metafactory’s moves as well!

We think so as well! Still much to work through there, but there’s definitely potential for meta-governance and closer collaboration.

Currently if I hold INDEX ANT GTC I have the right to vote or delegate my voting, this is a primary utility of DAO governance tokens, yes?

Are you saying that the right to vote is no longer inherent in the under lying assets when purchased as DAO Revolution index?

Without governance utility - which directly facilitates decentralisation - can you clarify please the “powerful offering” or value proposition here.

In terms of “potential for meta-governance” what is the process, time and cost to re-establish governance utility?

Hey @lee0007 I can jump in here to help clarify.

Meta-Governance can theoretically be enabled for most non-staking tokens in an underlying index via the MetaGovernance Module, as well as for tokens that use Snapshot and have delegation enabled.

In order for this to go into effect for the DAO Revolution Index, the community could create an IIP calling to enable Meta Governance, as done for DPI with IIP-8 and IIP-33. These two proposals accepted the MetaGovernance Module to allow votes for UNI, COMP and AAVE, and enabled Snapshot for voting on tokens within DPI that have delegation enabled.

In summary, enabling meta-governance for the DAO Revolution Index is possible, but it depends on the underlying tokens.

One thought I’d like to add is that while meta-governance is an important feature, it’s only one piece of the greater value proposition of our products and essentially not part of our north stars or KPIs. I appreciate your commitment for MetaGov a lot, at the same time I wouldn’t put too much emphasis on this feature right now, primarily since this product is still in a very early stage. Imo, meta-gov is something that comes at a later stage, once the product has established itself and the community sees benefits in enhancing the meta governance reach to additional protocols.

I hope this helps to clarify your questions.

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THE community call has been scheduled for tomorrow (Weds 3rd Nov) at 17:00 UTC and is in the coop calendar.

DAO Revolution Community call
Wednesday, November 3 · 5:00 – 6:00pm (UTC)
Google Meet joining info
Video call link: https://meet.google.com/fev-knmy-vwp
Or dial: ‪(GB) +44 20 3956 2868‬ PIN: ‪934 767 693‬#
More phone numbers: https://tel.meet/fev-knmy-vwp?pin=2027377515442

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Recording can be found here:

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Hi Everyone, we’re kicking off the initial WTA for this project next Tuesday and will allow the methodologist some time to review and make adjustments. We’ll announce when we prepare for DG1.

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Posting the Work Team Analysis results for the DAO Revolution Index (DRI). Work team analysis was done by @Abel, @DocHabanero, @jdcook, and myself.

Link: DRI_Product Scoring Chart - Google Sheets

Thank you for your proposal to the Index Cooperative community! Ahead of a Decision Gate 1 (DG1) vote for a proposed methodology, the Work Team scores the product based on a rubric put in place during Q2 2021. The team met and compiled the feedback below. The pre-DG1 scoring/feedback aims to help improve product proposals.

Overall Scoring: 1.41*

Market Opportunity: 2.88

  • The proposed product is sufficiently differentiated from other index products in the market. DAO token exposure would be a worthwhile addition to one’s portfolio. It was judged to be a nice-to-have today.
  • Note: there is meaningful overlap with another product proposal in the Index Coop pipeline (Forefront Social Token Index), with close to 40% of the same tokens. We assess differentiation relative to competing products in the market, but this is something the community should be aware of.
  • The market opportunity today (and we score products on the market opportunity today, not on an expected future state) was not deemed to be large.
    • In the post, the DAOist states: “The biggest opportunity here is having DAOs actually hold this index product in their treasury - this would give them easy financial exposure to some of their collaborators (easy = without needing to engage in direct token swaps, shared pools etc) as well as financial exposure to infrastructure that many DAOs use. There is a growing focus on treasury diversification for DAOs, and this would be a compelling opportunity.”
      • We would like to see more validation for such a claim.
    • Further, the post states, “This product will also appeal to retail investors who have no exposure to any DAOs but desire access to the sector, as well as DAOists who are active in a few DAOs but would like broader exposure to the entire sector without having to join new DAOs and add to their workload.”
      • One suggestion during our discussion was for the DAOist to survey retail users (we’d like to weigh in on the questions) to better assess latent demand.
    • Also: “The initial ten components of (DAOs) represent approximately $1.3 billion in market value. Given that MVI, DPI, and DATA each represent multiple billions in market value, (DAOs) can be seen as the “small cap growth index” offering, similar to Vanguard’s VBK or iShares’ IWO.”
      • Agreed that this space may represent a higher growth opportunity but the size of the market today (especially when weighed against the penetration rate of MVI, DPI, and DATA in much larger markets), gave us pause that the product would be able to achieve an attract TVL within Year 1. This doesn’t rule out launching the product, but we did not (yet) have enough reason to assess this as a large market opportunity today.

Revenue Structure: 2.75

  • The 50bps streaming fee is paired with a 10bps mint and a 20bps redeem fee. The split would be 70/30 Index Coop/DAOist. Without data to show the impact of mint/redeem activity, we ballparked the fee as being in the vicinity of DPI (the default for a 3).

Methodologist: 2.75

  • The DAOist plans to use its relationships with the component DAOs to bootstrap some of the initial tokens, with each project contributing to an initial Gnosis safe. Further, they plan on marketing initiatives with these projects. The working team appreciated the effort so gave partial credit on the marketing front. Assuming the product passes DG1 and goes up for another WTA scoring, to receive full credit, the Work Team would like to see some actual hard commitments from the DAOs and fuller plans on how the marketing coordination will function. In particular, the concept of all protocols contributing makes sense but is operationally difficult to achieve.
  • Relative to existing methodologists DeFi Pulse and Bankless, the DAOist is newer and less well known in the market and has a smaller follower base. As a result, while we did give credit for competence in the vertical, we didn’t provide a point for reputation:
    • DeFi Pulse: 147k
    • Bankless: 138k
    • DAOist: 4k
  • The proposed methodology shows a willingness to partner with the Index Cooperative. The methodologist team has taken feedback from the IC Product Working Group. We were, however, concerned that the liquidity aspects of the methodology were not stringent enough, particularly if the product to become $50mm TVL in Year 1 (a rough guidepost for a successful product), so a more in-depth analysis with support from the IC Liquidity Pod would be informative to ensure the envisioned product can be rebalanced effectively at relatively attractive TVL levels.

Financial Costs: 3.00

  • Our understanding is that the pool will require liquidity provided primarily by the IC.
  • No liquidity mining incentives were stated in the proposal.

Operational Costs: 2.25

  • Our understanding is that the product will require no more than monthly rebalancing.

Technical Costs: 1.00

  • This product is a simple composite that will utilize existing infrastructure.

*Scoring ranges from a minimum score of -0.80 to a maximum score of 3.20.

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