Authors: @afromac @anthonyb.eth @0x_Dev @edwardk @ElliottWatts @Hammad1412 @marshmellow
On April 11th 2022, @Setoshi, @HeyChristopher and several co-authors posted an open letter to Index Coop expressing concerns about the direction of the DAO. The authors made five key recommendations including that we:
- Define who we are as Index Coop
- Double-down on financial sustainability
- Incentivize our top contributors and talent
- Improve our relationships
- Bring building back
The open letter served as a rallying point for the team, and the Index Coop has enacted many substantial changes since it was published. We would like to take this opportunity to update INDEX holders and community members on our progress.
We’ve clarified who we are and what we do
The Index Coop is a decentralized autonomous organization (DAO) and the world’s largest provider of on-chain structured finance (DeFi) products. We build structured sector, yield and leverage products. And we work with high-value distributors to make our products readily available.
We’ve taken steps to improve financial sustainability
In June 2022, Index Council reduced contributor spend by 40%. This involved a large reduction of flexible contributor rewards, as well as consolidation of several nests into what are now three core functions - Product, Growth and Services. This reduction in spend provides Index Coop with a multi year cash runway, and the budget to hire smart contract engineers. Further information is available in the Season 2 Budget.
We’ve closed down investment risks
The finance function, a part of the Service Network, has implemented a more conservative investment strategy to secure Index Coop’s runway and alleviate investors’ concerns about risk. Currently, about 58% of stablecoins in the treasury are held unproductively (see detailed breakdown below). This is an increase from ~12% previously. In addition, 32% of the stablecoins have been deployed in ‘low risk’ and ‘very low risk’ strategies in long-standing, highly-reputable lending market protocols such as Aave and Compound. The final 10% of stablecoins are deployed to Balancer’s Aave Boosted USD Pool.
We’re taking steps to incentivize top talent and high-value contributors
Index Council has been engaged in a negotiation with Set for several months to redirect a portion of Set’s original INDEX allocation to the community Treasury. An agreement has been reached in recent days and 9.5% of the Set allocation will be returned to the community. This will be paired with INDEX already within the treasury to create a 20% pool that will be vested over several years and used to incentivize current and future contributors.
We’ve established clear DRIs and improved accountability
Index Coop is committed to establishing the organizational framework that best supports our model and community. The creation of an incorporated legal entity was a step in this direction. Further investigation into the benefits and tradeoffs of centralization vs decentralization will enable us to continue defining what aspects of Index Coop are best executed within a DAO framework, and which aspects are better achieved in a more formal corporate structure. This will be an ongoing process and we don’t have all of the answers today. Examples such as Uniswap Labs give us an indication of what kind of frameworks are emerging across DeFi for similar purposes.
Within Index Coop, great strides have been made in enhancing communications and operational efficiency in recent months, and we are committed to achieving further progress along this dimension.
We’ve created a new Partnerships Pod
A Partnership Pod has been established within the Growth Network that focuses on managing communications between IC and key partners and stakeholders.
We formed this Pod as we believe that:
- We are a primarily a product DAO, not a distribution DAO
- Partnerships and working with intermediaries represents one of the fastest ways to 10x TVL, brand and awareness
The Partnerships Pod has partnerships conversations live with an large range of potential partners, ranging from top tier index brands, CEXs, tradfi asset managers, hedge funds, endowments, pension funds, IBDs, family offices, and DeFi apps and protocols.
We’ve established a partnerships framework
Our Partnerships Team has established a v1 partnerships framework, where product partners can choose from one of three partnership models, with their different alignments of interests and economic rewards. These models, crudely, range from: the partner paying most of the upfront costs, in exchange for most of the fee revenue; to us paying most of the upfront costs, in return for a sizable share in the fee revenue. This was a value adding first step, but after socializing these three models in the market we will be making some optimizations to them - primarily reducing our up front costs to extremely high value partners.
We have taken over rebalancing
Index Coop’s engineers have taken over rebalancing of all thematic products. Testing is currently underway and the execution of a rebalance for DPI is scheduled to take place this week. Methodologists have been encouraged to reduce their rebalancing schedule to assist with this handover, as well as to reduce internal economic decay due to rebalancing
We have taken over the keeper network
Index Coop is currently maintaining keeper bots for all Polygon and Mainnet FLI products. The handover of this function took place in May.
We better understand other platforms for building on
In an effort to reduce Index Coop’s reliance on Set to launch future products, several of Index Coop’s future products will use Balancer Managed Pools as the underlying infrastructure. IC and Balancer’s product and engineering teams have been collaborating on this initiative for several months, and both teams’ future roadmaps are designed to complement and integrate with each other in an effort to expedite this process.
