Index Coop Open Letter

Authors: @setoshi (Set), @heychristopher (1kx), @gregdocter (Set), @nic (Set), @AcceleratedCapital (1kx)

Index Coop is at a turning point in its evolution. A lack of clear direction has led to a culture of zero-sum games, and our operational runway is not keeping pace with our spending. This is an open call to action to the Index Coop community, which we are all a part of, to address these issues within six months.

This post reflects our viewpoint based on the data accessible to us - we welcome questions and additional information to sharpen these views.

Our current situation

According to the February financial report, in the past six months revenue has fallen 52% while contributor expenses have increased by 19%. Since the start of the year, we have spent $1.2mm on contributors but have only generated $600k in streaming fees.

Comparatively, our spending is far in excess of most leading protocol DAOs relative to TVL and on-chain revenue flows (note in particular the monthly revenue over total compensation expenses ratio is 6x worse than the nearest comparable) :

Source: Reference spreadsheet

In addition to the above expenses, Set currently bears the gas cost for our products and software costs for our operations, but this is something Index Coop will likely be taking over in the future. This will bring an additional large monthly outflow into the equation on top of any liquidity mining incentives we intend to provide, potentially contributing another $110k/month or more to the costs of the Coop.

Contrary to this spending, the pace of our innovation has been slow (although we recognize some great products are being launched/built like icETH, BASIS, and FIXED) due primarily to long and convoluted process, and our collective focus has shifted to complex side projects and issues unrelated to our core strategy (e.g. DSM, investment initiatives, Governance House, etc.). Contributor ownership is a noble goal that seeks to address some core issues as laid out by the Index 2.0 initiatives, but this can’t come about by putting Index Coop’s future at stake.


In order to move forward as an organization, we collectively encourage the following actions are taken within the next six months to improve the Coop:

1: Define who we are as Index Coop

We need to find a way to properly align incentives for both in-house product development and external methodologists. We succeed as an organization when we provide the most innovative products from both types of providers and can distribute those products in an expansive and cost-effective manner.

By clearly defining a strategy for in-house and external product distribution, we will have a guide to our strategic decision-making (e.g. talent curation, customer procurement, internal processes, etc) going forward.

Specific Actions:

  • Create and vote on a document that identifies how we intend to move forward with methodologists, in-house products, and distribution.
    • This should identify who our customer is, what specifically we offer them, and how we will address things the IC is doing today that doesn’t support and/or distracts from that. We should also identify a differentiated strategy to effectively compete with emerging protocols and DAOs building in the structured product space.
    • Incentives need to be aligned along the organization. This is especially critical in answering these questions:
      • How are we prioritizing growth of one index vs another?
      • Will in-house indices be favored over external indices in growth activities?
      • Why would an in-house product builder launch their product as an in-house builder vs leaving the coop and build it as an outside builder (e.g. the revenue split is higher)?
      • How do we prevent in-house builders from using politics/comradery to influence the growth pod to prioritize pushing their index?
      • How do we make sure we are not only pushing our biggest indices, but also balance promotion of our smaller indices?
      • What could be second and third order effects of any new introduced incentives?

We recognize that some version of this conversation is happening today via Do we want to become a Product DAO, partnership platform or both?.

2: Double-down on financial sustainability

As noted above, the rate of our spending is not in line with our growth. While we often defer to start-up culture financials which tend to operate at a loss, we have seemingly divorced ourselves from a lean approach that performs many experiments with small and highly specialized teams.

We recognize that the Finance Nest states that part of their mandate is “safeguarding the sustainability of the DAO.” To us, there seems to be a disconnect between that statement and some actions. For example, our Finance Nest has moved into investment related activities, which could significantly reduce our operational runway if a single misstep or exploit were to occur. This would inevitably result in selling pressure on the INDEX token to fund expenses at a time when it is already significantly depressed. We worry that risk is not appropriately accounted for here: $6.7mm of our stablecoin position (which is the entire stablecoin balance after Season 1 budgeting expenses) is earmarked for yield generation across 3 primary protocols - a single exploit could reduce our runway by months. The Coop does not have this margin for error.

While income generation does tend to make sense, this is detracting focus, time, and resources away from our core goals and may not be properly accounting for expenses: the February investment account report has an annualized yield of 5.19% (~$350k a year assuming all ~$6.7mm was invested and there were no additional outflows) yet we pay the Finance Nest $626k annualized from the Season 1 budget. This is only 2.21% of relative outperformance vs the Aave/Compound benchmark. Some of this compensation of course goes to financial report preparation and Operations Account management, but we may not be receiving much of a net benefit relative to risk at the end of the day.

The Finance Nest has spent a considerable amount of time on financial reporting and likely understands our sustainability situation the best - many in the Finance Nest have even highlighted these issues in the past. Here, we are relying on the information available to us, so if there is a mistake or missing context, please do let us know.

Specific Actions:

  • Improve our monthly revenue over total compensation ratio by 100%, improving it from 6x worse than our nearest comparable to 3x. This will likely require some Pod consolidation, a reduction in flexible rewards, and disbanding initiatives that lack clear value.
    • An initial suggestion is to reduce the size of the Growth, Governance and Community Nests, and limit fixed stipends in favor of defined bounties and grants.
  • Disband the Investment Account and consolidate assets into the Operations Account with its much stricter mandate.

3: Incentivize our top leaders and talent

Effective strategic decision-making ultimately starts with curating and hiring top talent. A tightening of our financial spending should not preclude properly incentivizing our community leaders. Both proper incentivization and empowerment of those leaders in the community is how we will be able to grow sustainably as an organization.

We worry that compensation today is too focused on the short-term. Contributors are compensated on their monthly or quarterly workstreams which conflicts with long-term goal and strategy setting. In addition, mismatches in performance and pay have led to turnover at the Coop. This was sought to be remediated by the core hire program, but we think there are better options than just token vesting incentives available to us today. Most notably, we believe KPI options that directly reflect core Index Coop strategy goals could incentivize the kind of collective effort we need to achieve our goals. We are aware that a version of this idea was previously floated in the community but did not take hold.

In addition to incentives around compensation, we recognize the need for key contributors to receive larger amounts of influence in the DAO’s decision-making, something noted throughout the Index 2.0 process. 1kx and Set intend to delegate significant amounts of INDEX to community members we feel best imbue the DAO with leadership and reflect the values necessary to collectively thrive.

Specific Actions:

  • Create a program that more properly aligns long-term focus and objectives with compensation (e.g. KPI options).
  • 1kx and Set will delegate significant amounts of INDEX to product and growth leaders within the community that are best aligned with this vision to empower them.
  • Provide clarity as to who leads core create/grow/maintain functions in the Index Coop: growth/bd, product, and engineering.
  • Each nest should vote in its own Nest Lead to ensure there are accountable individuals for decision making.

4: Improve our relationships

Not having a clear mandate has led us to creating antagonistic relationships with our external methodologists and other partners. We have developed a win-lose mentality on certain issues that doesn’t need to exist at all. This space has so many win-win opportunities, but we tend to focus on playing zero-sum games that push potential partners away from the Index Coop. This harms the Coop both short-term (not launching products) and long-term (bad reputation/brand will repel potential partners).

Paraphrasing an anonymous potential partner:

The amount of governance we would need to go through and the time to launch a product with Index Coop has us looking at other providers as an option for our product.

And from a second anonymous potential partner:

We asked other methodologists whether we should launch an index with Index Coop, and everyone we spoke to recommended against it.

We need a cohesive plan to tackle this head on. In our opinion, our ecosystem will flourish if we work with our stakeholders instead of against them.

Specific Actions:

  • Create a new process for product decision-making that is methodologist friendly, follows software development best practices, and addresses the underlying causes of late stage blowups.
  • Create and pass a specific framework for negotiations with external methodologists. This should address streaming fee splits, the methodologist bounty program, the renegotiation process, and ideally has quantifiable metrics for offering more favorable terms to a provider.
  • Evaluate the introduction of a Partnership Pod that solely focuses on building and maintaining positive relationships with our partners and providers. We need a dedicated team of specialists helping secure and engage with stakeholders.
    • Note: we are seeing the early stages of this development here as highlighted by Joseph Knecht: "We’ve started to take operational steps by appointing relationship managers for our existing external methodologists and have Growth do the partner identification for our upcoming thematic indices.”

5: Bring building back

Looking at the forum, less than 30% of all recent posts are actually product-related. This shifts a significant amount of attention away from our core functionality: building the best products. How do we expect our product leaders to operate at their best when so much time and energy is placed in non-product related queries and proposals?

When we do create products, we rely too heavily on others to engineer solutions in order to launch them. When we create or decide to onboard a product, we should be in charge of building the necessary infrastructure to ensure it can be executed. By relying on Set for adaptors, contract maintenance, and rebalancing, we create a bottleneck for both of our organizations.

Specific Actions:

  • Bring rebalancing and contract upgrades/maintenance in-house to avoid bottlenecks with Set. Index Coop should formulate a plan and be ready to execute its own rebalances for simple indices (aka composite indices) by May 31st, 2022.
  • Take control of the Keeper network, such that all leverage products are maintained by the Index Coop May 27th, 2022. The Index Coop should be prepared to own the operation of the Basis Trading Keeper by June 15th, 2022.
  • Evaluate other complementary technology platforms to launch products where the technology stack aligns with the product architecture.

If Index Coop is unable to successfully incorporate these actions within six months, we plan to begin drafting and proposing changes to more quickly shift the organization to meet these needs. This would likely require a reorganization to effect substantial change. In addition, we hope to see the financial sustainability goals implemented by the time we vote on the Season 2 budget if that proposal is to receive our support.

As a note, the burden should not fully rest with the newly-elected Wise Owl council, but they can help guide these issues. Ultimately, the burden rests on all of us to engineer solutions as a fully functional DAO. We prefer bottom-up innovation philosophically, so we would like to see the DAO accomplish this together.

The future is bright

The Coop is considered by many in our industry to be a model DAO, operating as one of the flattest hierarchical organizational structures to ever exist. We are frequently used as an example to showcase how to successfully structure and operate one of these new organizational forms. In a way, we collectively represent the entire DAO ecosystem.

Unsustainability, a return to tribalism and politics, and a reduction of our efficiencies into bureaucracy and bloat could be used by critics to highlight how DAOs are unable to succeed in the long-run. Let’s silence these critics and show that DAOs improve upon all other forms of human coordination. We bear a responsibility to this industry to become a shining example of success.



This really resonates and I absolutely love this method of open communication with the DAO on what’s working/not working for others in our cooperative. We’re all Index Coop and we need to keep this conversation going. I’ll drop in with some specific comments but I love this open and well-considered feedback; thank you.


To the authors: Thank you for this letter and for highlighting the importance of relationships in direct correlation to immediate and future success. Gentlemen, you are clearly our #1 enabling and functional stakeholders and supporting partners, and your guidance is of immense value to our next six months. Thank you for your patience. I do not doubt our Council and community will find the path to best implement these recommendations.


Though many of these objectives/corrections will be contentious, I believe they are worth pursuing for the greater good of the cooperative. I would like to comment on a few things and raise a few questions as well.

This comparison is particularly shocking. This alone could warrant a full retrospective, but at the most fundamental level, I think there is a question around organizational identify - are we a lean startup that empowers a smaller number of high impact people to move the organization forward, or are we an ultra-flat web3 org with a highly flexible workforce that requires community consensus for progress to be made? I don’t mean to present a false dichotomy here - our collective success can contain elements of both - but I do want to point out that metrics as bad as ours can only be addressed by making some difficult decisions and empowering leaders within the community to make those decisions.

Though I personally disagree with disbanding the investment account, I am curious to know what Set / 1kx would consider to be “safe” destinations for idle stablecoin capital. A few alternatives could be…

  • providing Protocol Owned Liquidity (POL) for stablecoin yield products like PINT, FIXED, MNY, etc. This would support product growth and capture yield for the treasury at the same time. Exploit risks are then largely limited to Set infrastructure.
  • selecting protocols/products that are entirely removed from the Set ecosystem. The argument could be made that we ought to diversify outside of Set / Aave / Compound / other integrations because we don’t want to put all of our eggs in one basket.

I would like to understand your collective risk preferences because, in my opinion, the opportunity cost of doing nothing with our capital is too high.

I completely agree with this sentiment, and there are already several efforts underway to better manage external relationships (whether they be with methodologies, protocol partners, or others). I must confess that I have expressed skepticism in the past about the true utility of external methodologists, but there are absolutely ways for everyone to win with the right partnerships in place. Moving forward, we must treat external methodologists and other product partners as customers, with the same level of engagement and intentionality as we do the customers of our products.


Thanks to all of the authors of this post for initiating this difficult conversation. Index Council welcomes the opportunity to work through these challenges with our key stakeholders in Set and 1kx. A vision for the organisation, financial sustainability, fair incentives, partner engagement and building great products are core pillars to what we plan to achieve over the next 6 months.

As a next step, a direct engagement between ICC, Set and 1kx in the coming days would be an opportunity to align on a common understanding of the circumstances we are in, and a shared set of goals and targets for success. We request that this does happen on a reasonable timeline.

Index Coop has made massive strides in recent months towards achieving many of these goals - especially with regard to financial sustainability where we would like the opportunity to share some more recent financial numbers which show a more reassuring current situation and trend. Now is the time to double down and ensure we create a world beating organisation that is built to last.

@afromac, @catjam, @anthonyb.eth, @DevOnDeFi, @Matthew_Graham, @Metfanmike, @edwardk


In our brief history we have been through a number of cycles of crisis, growth and transformation. As we we have done before, we must now all rise to this occasion now - or we will look back and regret what Index Coop could have been.

Index Coop was launched to provide marketing support and a token to support aggressive LM on DPI. But DAOs take on a life of their own, and since then we have grown into a multifaceted organization.

To me, Index Coop is a Product (Supply) DAO that works symbiotically with a Growth (Demand) DAO to build market-leading products and drive adoption through a network of distribution channels. This is all enabled by support teams (Governance, Finance, People) which should scale multiply the impact of these two primary functions.

Our relationships with methodologists should focus on “pulling” key methodologists to sponsor and co-brand Coop-designed products. Whilst we should not entirely close the door on new ideas, we have the knowledge and expertise in-house to know what good products look like - and we should lean into this capability.

Right now we are spending too much money. Rectifying this in an open and transparent way will not be easy.

Given the similarities in our origin, structure and products, I would like to see Index Coop adopt Yearn’s new framework for compensation. This specifies a contributor reward budget based on a ratio of spend:revenue - with contributors then setting their own salaries and readjusting these through several rounds of feedback in order to meet the specified cap.

This approach would allow us to come together as a DAO to have a healthy, open discussion on how we best ensure financial sustainability.

I would be in favor of more KPI based options that could complement the model proposed above. I have been disappointed that, despite being allocated 28% of total supply, over the last year Set has significantly stepped back from Index Coop. I hope this trend can be reversed, and I would like to see Set use some of this token allocation to directly fund a new KPI options program.

We have never quite figured out how to work well with external partners - and frequently seem to have taken an adversial, zero-sum mindset with both competitors and partners.

Going forward, I would like to see a much more collaborative approach embodied by our Partnership Pod. Our little pond of DeFi is about to be connected to the big ocean of traditional finance - our survival and success will be dependent on whether we are good at making the whole pie bigger.

Our Product and Engineering teams have come on in leaps and bound over the last 6 months and we have rapidly increased our technical capability in areas vacated by Set. I hope Set will commit to working proactively with us to strengthen this capability further (i.e. through secondments), whilst in parallel should seek to diversify its tech stack to better and achieve product and engineering autonomy.

The future is bright. We are respected across the ecosystem, build kick-ass products and have an organizational sophistication that eclipses most other DAOs. If we can recognize and address these challenges, there is no limit to what Index Coop can achieve.


Thank you for the letter, Set and 1kx.

I appreciate your external and insightful perspective on the current status of IC. I think the hardest parts in strategy are figuring out what your core competencies are and deciding which opportunities to say no to. This will help us narrow our focus and lean into what we excel at.

We have learned a lot in the last year and a half, trying different growth tactics and experimenting with product launches. Index Coop started as a marketing and distribution DAO and has gained incredible experience curating and building DeFi products. By leveraging the vast network of protocols in our ecosystem we can get back on the path to exponential growth.

Index Coop has recently started acting on many of the suggestions so it’s great to hear we have a general alignment on the best steps forward for the coop. Having 1kx and Set’s support and guidance will help us level up in 2022.

I look forward to working with the Index Council to focus our efforts and continue IC’s path to becoming the next leader of DeFi.


Thank you to all the authors of this post for the clear communication, distillation of the challenges Index Coop faces, and well-considered feedback.

I’m strongly in favor of KPI based options to apply clear economic incentives to unite parties across a flat org to collaborate towards specific longer-term goals.

If we are to achieve our vision of creating decentralized financial products that unlock prosperity for everyone, we must maintain strong partnerships with all methodologists & partners as we look after our brand & reputation.

We must position ourselves as a positive-sum ally to all in our ecosystem & ensure that protocols are eager to have their tokens included in our products for our ability to package the innovation happening on-chain into structured products that reach new investors & grow the crypto market.

The long game is to be the leader in on-chain structured products as this market segment grows exponentially. We should act aggressively to build products that appeal to the new cohort of investors, that are not crypto-native, that we can access with a centralized exchange listing.



Thanks for this post. Always good to see our biggest stakeholders still engaged and invested in the success and sustainability of Index Coop.

I think this post highlights that we do need to increase our stakeholders communication and engagement. Our current efforts have not been sufficient. I do know we have monthly investor calls and have weekly engagements with Set team as well. Not sure how productive these engagements have been however on Index Coops side we have been taking in feedback and made attempts to change. The some of the issues brought up here are currently being prioritized. Namely financial stability and partnership relations.

The consern around the management of our balance sheet is new to me. I personally do not see an issue with how finance nest has conducted themselves thus far. I would advocate for more transparency but I do think Finance nest has acted in the best interest of our DAO. I believe the proposals surrounding our finances were voted in. So if there is a feeling that there needs to be changes I would encourage that stakeholders do create proposals to make the appropriate changes.

Regarding our financial stability we have a run way of 30 months according to the latest Index Coop Council meeting notes. Not sure if that changes the general perspective on our financial stability because it seems that it was not communicated. I am glad that @afromac and other members of the Council will be in touch to verify this figure.

I do believe that financial stability is important but I think it is important to highlight that we are still a start-up so we should be prioritising holders growth and AUM in general. Focusing on profitability is short sighted and we raised funds to scale and grow our products. Regarding product innovation I think we have definately impoved from our previous situation icETH has shown very strong iniatial traction and was able to be launched within a short period of time. We have also been able to launch FLI’s really quickly. However I do share similar view regarding the need for Index Coop to biuld adaptors or find alternative platforms for products we want to create. Our complex relationship with Set has made it difficult to launch products the way we would like. So more autonomy there is most welcome.

On product prioritization it is important to understand that liquidity of our products and price oracle’s are factors that effect how well we can distribute our products. In the past we have always tried to get all products supported at once but if third parties raise these sorts of conserns it can mean that only some products can be supported.

In terms of our Identity the previous council did create a vision that we broadly agreed on:

“Decentralized Financial products that create financial prosperity for everyone”

Another principle that the community and I still resonate with:

“Making crypto investing simple and accessible for everyone”

These two statements sum up the culture and mindset that I feel is present in the community from the contributors I interact with.

Regarding Partnerships, I agree we need a consolidated partnership pod. Partnerships are complex and to identify the value you drivers and how to accurue that value efficiently is difficult. Each partnerships is unique and requires special attention to get the most out of the relationship. We also need to shield the community from partnerships that will be harmful in the long run. Having a clear idea of what we want and how achieving that can benefit our partners can create mutually beneficial relationships.

Index Coop does have a bright future. But only because of the people and community behind it. We have the most passionate, capable and smartess people in the industry and it is why we find ourselves in the position we are in today even after all the challenges we have had to overcome.

We are creating new financial primitives that are only possible on the blockchain, products that traditional finance has never seen and will not be able to re-create in the traditional financial markets. This level of innovation is difficult to get right but once we do, it has the potential to truely change the world.


This is a great letter and lays out the core issues very clearly. Judging by the resoundingly positive response these are broad changes that the community as a whole believes in and supports.

Some feedback / general thoughts

When I think about the problems faced by IC, they fall into three broad buckets. First, there are operational problems with clear solutions - such as organizational bloat and the need to control burn rates. Second, there are cross-organizational problems. I used to think of IC engineering as an operational problem, but increasingly I see it as a cross-organizational problem that needs to be solved by both IC and Set. Finally, there are mechanism design problems.

The mechanism design problems are deeply interrelated and cannot be solved in isolation. Specifically, IC’s Mission, Contributor Compensation, and Methodologist Partnerships are three deeply linked problems that need to be solved holistically.

The core commonality across all three problems is the incentive structure of the protocol. Without clear alignment between technology providers, contributors, and external partners all three entities are in essence striving in separate directions

I agree with essentially all the steps laid out in the letter. But until we solve the underlying mechanisms that drive this protocol we will continue to face significant friction as we scale.


Thanks for putting this together! the five points you made do resonate quite a bit, and reflects really important things that need to be improved.

My own personal bias and take on this is that I really want to dig into point 3. The rest feel to me like symptoms of this broader organizational issue, namely that we are expecting startup-like performance from Index Coop when it’s not set up anything like a startup. You mention this briefly, in “defining who we are” and “delegating significant amounts of INDEX”, but I think this organizational issue cuts to the core of what’s going on here, and deserves its own dedicated conversation. Put another way, a lot of this doc talks about what we do but we also need to talk about how we do.

At core, it seems like a lot of the tension comes from the fact that the core organizational power of ratifying legitimate decisions and setting budgets is granted to the INDEX holders, but the contributors who execute these decisions and have the most context do not have significant amounts of INDEX to make their own decisions. As a result, contributors have been attempting to create a parallel decision making system and a parallel legitimacy system in order to gain some of the autonomy that’s required to a) do actual work and b) drive consensus, absent token ownership.

This is addressed here:

But I actually think this already vastly oversimplifies the situation. The question of “who do we delegate to, what is their mandate, and what checks do we have on their power” is the most important question to answer, and requires an entirely separate and foundational discussion. These lines cover the entirety of how budgetary power and decision making should flow within Index Coop’s organization.

For example, let’s say the goal is to build out a first class engineering team. In a startup, the CTO would negotiate with the rest of the execs to lay out a headcount and then figure out some sort of recruiting strategy. Given a CTO, SMART goals like “Bring rebalancing and contract upgrades/maintenance in-house by May 2022” to evaluate subsequent performance is entirely sensible. But does Edward have the mandate and the power to make that happen? How does he know how many people to hire? Should he alone have the say on who gets full time employment offers? Does he have a budget to run AWS instances to create our own keeper network? What happens if the goal isn’t met?

My point isn’t to pick on Edward, but just to point out that responsible individuals don’t necessarily have the commensurate delegated power to execute on what they’re supposed to be responsible for.

Each of the important questions described, such as “in house methodologists or external?”, “deploy capital or keep it safe?” requires not only leads to make judgment calls amidst the complexity, but a direct line of accountability and context to someone who has the power to dedicate resources to solving those problems. So long as resourcing is determined by some abstract body like “The INDEX Holders”, accountability and responsibility for good outcomes is similarly abstracted.

My proposal, as always, is to steal from existing patterns of solving the principal-agent problem, namely corporate governance:

  • Designate a trusted executive team, with a clear and legitimate process for selecting the executive team. (Can use KPI options for this team)
  • Create an explicit, opt-in board whose purpose is to delegate votes to the executive team to make them fully autonomous and responsible for budgeting. The board then keeps them accountable to the token holders, with a clear and legitimate conditions for removal of their mandate

Now, one might argue, “this is centralizing power!” Yes, but I would argue power is already centralized in the hands of more or less absentee INDEX holders who have to put in extra work to learn what’s going on if they want to make educated decisions on how to vote. Given this situation, the best thing to do is to add transparency, make this power dynamic explicit, and directly align responsibility for outcomes with those who actually have the power, and I haven’t really seen a better way to do that than to create some kind of board & exec structure.

Anyway, that’s my gut reaction, curious to hear what others think.


Thanks Felix. The goals are very clear. October 11th 2022 is noted in the calendar.



Thank you to everyone who has commented so far. It is great to see the community rallying support over these action items, and we are excited to see continued progress on these initiatives.

To address some of the comments thus far:

@LemonadeAlpha : My ask would be that the authors of this become more open to lines of communication and collaboration to get ahead of and help to repair some of these things that are seen as issues, e.g. opinions on what a more proper burn / rev figure is and a number of other strategic considerations.

@afromac : As a next step, a direct engagement between ICC, Set and 1kx in the coming days would be an opportunity to align on a common understanding of the circumstances we are in, and a shared set of goals and targets for success. We request that this does happen on a reasonable timeline.

We agree. We imagine engaging in both public and private where we publicly post our opinions while working with leadership on various issues. We do welcome input in terms of how we specifically engage to maximize effectiveness.

Of note, 1kx is also holding monthly catch-up calls with the Growth and Product Nests to become more directionally aligned. We are also open to working closer with the ICC over the next few weeks as well.

@Mringz : The consern around the management of our balance sheet is new to me. I personally do not see an issue with how finance nest has conducted themselves thus far. I would advocate for more transparency but I do think Finance nest has acted in the best interest of our DAO.

To be clear, we do agree that the Finance Nest has conducted themselves fairly and have kept the best interest of the DAO in mind when navigating treasury management. This is a complex topic, and Index Coop has always been on the forefront of innovation in DAO treasury design, thanks in large part to the efforts of @prairiefi, @ElliottWatts, and others on the team. We do not mean to disparage the remarkable work they’ve done.

I’d also like to take a moment to acknowledge an error in the yield calculation of the original post that was brought to my attention - the quoted yield is inclusive of the unallocated capital, so the real yield for the strategies is closer to 8-16% at all times. Thanks again @ahuja for notifying me. I would still like to state, however, that the return itself is tangential to the actual purpose of the post: safety, security, and focus should be our top concerns.

From a finance perspective, it is perfectly reasonable to put assets to work if they aren’t going to be tapped in 18 months and many mature companies do that. However, a startup that still needs to figure out PMF should 100% be focused on product / engineering / customers. Most early stage startups that raise money usually don’t focus on financial engineering of their capital (even if it’s a minority amount of time).

It feels like resources are misallocated when the DAO has to think about this topic - the scarcest resource afterall in a DAO is ultimately attention. Instead, product, customers, and identity should be getting 150% of Index Coop’s collective attention right now.

@allan.g : Though I personally disagree with disbanding the investment account, I am curious to know what Set / 1kx would consider to be “safe” destinations for idle stablecoin capital. […] I would like to understand your collective risk preferences because, in my opinion, the opportunity cost of doing nothing with our capital is too high.

Thinking from a more DeFi-native perspective, we understand DeFi enables extreme amounts of capital efficiency, but no protocol is actually safe, and we are currently putting a significant majority of the stablecoin allocation at risk. As one of the primary architects behind the Investment Account before joining 1kx, I imagined the Investment Account to only hold stables in excess of 12-18 months of runway - currently, it holds the vast majority with only enough stables in the Operations Account to fund a small part of the operational budget.

If we were to still actively invest in stablecoin strategies, they should be insured and they should be minimized. Over-engineering is counter-productive as I mentioned above in response to @allan.g. Considering the remaining amount of stables after 12-18 months of runway, the cost of insurance, the cost to pay contributors to manage these strategies, the mindshare dedicated to active management, gas expenses, and the relatively low yield of more conservative protocols like Aave and Compound, I would disagree about having a high opportunity cost here.

On @jackiepoo’s post

We will be posting another thread early next week discussing the suggestions you laid out and how we are thinking about the delegation process. Here, I want to acknowledge the work you’ve done raising this issue in the past, and note that we are thinking deeply on how to best approach this.

Generally speaking, we are all for delegating to trusted governance contributors and open to well thought out alternative models that have a clear path to execution.

More to come from our end on this topic.

@Mringz : I think this post highlights that we do need to increase our stakeholders communication and engagement. Our current efforts have not been sufficient. […] some of the issues brought up here are currently being prioritized. Namely financial stability and partnership relations.

We definitely understand that some of these initiatives have been prioritized and there have been efforts to begin these conversations. By publishing this open letter, we wanted to voice support for this prioritization and provide some color on how we are also thinking about these issues. This is not intended to diminish the Coop’s existing efforts, but to embolden the community to collectively engineer solutions.

This is on all of us to execute.

Looking forward to continued progress! :owl:


Hi everyone, Evgeny here from Wintermute.

I’ll start by saying that despite somewhat gloomy vibe of this post I see it as a very positive development. I came to appretiate this bear market as it has a promise of washing away projects build on hype (and nothing else). It also forces even the best protocols to reassess what it wants to spend money on and trim fat.

Of all the points listed above I would primarily concentrate on the burn. With ~$6 mil in stables your runway (before you start tapping into $INDEX reserves) is 10-12 months. Biggest spend item (based on numbers in Feb) is Contributor Rewards, which as far as I can guess is salaries. 500K in contributor rewards per month is equivalent to paying 100K per year to over 50 ppl (or 200K to over 25).

Halving contributor rewards would pretty much double your current runway, giving a much higher chance of surviving bear market (in case it continues way past 2022). I have no visibility on salaries and number of contributors IC currently has, but it does seem the most crucial issue to address.

Another soltion would be to substitute big part of current contrinutor rewards with $INDEX, which has an obvious benefit of creating better alignment in the long run. I apologize if that is already the case, but I couldnt easily locate rewards breakdown. I think it should be part of the financial report in general, not necessarily naming contributors but at least providing a clear split (i.e. per department, mentioning number of contributors, split between INDEX and USDC, etc)

Wintermute specific stuff:

  • We are very keen to invest at current prices to provide IC with longer runway (part of the price spike last week was us :upside_down_face:). We see big potential in IC and have not yet achieved our target ownership. I appretiate, however, the price makes it a hard decision for IC

  • Wintermute is seriosuly considering to become a methodologist to expand our business lines and create (even more) alignment with IC. Stay tuned on this:)

  • We are keen to help out on rebalancing front and are already in conversation with IC on different ways we can help facilitate (and do it more efficiently cost wise)