The Index Coop’s mission is to make it easy to access risks and returns in crypto. We do this by creating a diverse range of tokens that offer exposure to various themes and strategies in the crypto market.
The purpose of this Q4 2023 report is to foster transparency and accountability within the Index Coop and to ensure that token holders are well-informed and engaged stakeholders.
This report will provide INDEX holders with a comprehensive update on the Coop’s performance, including financial metrics, product development updates, protocol upgrades, community engagement activities, and partnership updates. It addresses some things we’ve been quietly working on, upcoming plans and initiatives, and obstacles we faced during the quarter.
This update also allows token holders to ask questions, offer feedback, and participate in the Coop’s decision-making process.
At the end of Q4, Index Coop’s treasury held $4.8m, composed mainly of stablecoins. In the beginning of 2024, Index Coop will simplify its treasury, moving it to new Safes with identical signing structures. The goal is for the treasury to remain in a mix of non-yielding, unencumbered stablecoins and conservative productive stablecoin positions. The Index Coop plans to rely less on protocol-owned liquidity positions by using a novel system to provide liquidity using debt. We’ve been testing this out with Credit Coop for several months now and we’re looking to expand our efforts in this area which will make treasury management easier and the Index Coop less reliant on working capital for product liquidity.
Revenue & Costs
Index Coop averaged $42,011 per month in net revenue across Q4, representing an increase of 3.3% from the prior quarter. Payroll costs averaged $199,768 per month, representing a decrease of 10%. Revenue-to-labor in Q4 stood at 21%. As of the end of Q4, Index Coop’s base case for runway stands at approximately 32 months.
At the end of Q4, Index Coop had $71.3m in TVL, an increase of 44.6% throughout the quarter.
During the quarter, Index Coop experienced net outflows of $6.7m. This is primarily due to the market’s decreased interest in the leverage liquid staking strategy strategies—which are currently unprofitable—and that is negatively impacting icETH flows.
Throughout the quarter the price of INDEX increased from $0.96 to $3.43. This represents an increase of 257.3% in USD terms and 172% in ETH terms.
In Q4, we launched the Index Coop CoinDesk ETH Trend Indicator (cdETI) token. It is the first Index Coop product to feature a momentum trading strategy, using a quantitative methodology developed by CoinDesk Indices. The token also utilizes several new pieces of infrastructure, such as the Delegated Manager system and the first Tenderly-native rebalance bot.
The Product team also focused heavily on new leverage token research through Q4. This workstream coincides with the gradual deprecation of Compound V2, and therefore, the necessary deprecation of the FLI products on mainnet. Deeper research into perps has revealed an opportunity to position our collateralized leverage tokens as a simpler and significantly cheaper alternative on L2s. New leverage tokens on either main net or an L2 will be built on Index Protocol using the new Aave V3 Leverage Module in Q1 2024 and also employ an improved methodology.
In December, the first production auction rebalance was completed for dsETH and gtcETH. This one-off rebalance was specific to the StakeWise components, which needed to be migrated to the new StakeWise V3 liquid staking token (osETH). Public auctions for regularly scheduled rebalancing will also take place in early January 2024 for dsETH and gtcETH, where we will debut a dedicated Auctions app as well as decentralized reweighting.
In Q4 of 2023, the Index Coop established a dedicated App team to handle the growing needs of our app’s design and development. This team has been focused on standing up processes and ensuring efficient management of our increasingly complex requirements.
Q4 saw the delivery of our Auctions Interface, which allows users to interact with Index Protocol auction rebalances. The interface is split into two flows: manager and market maker. The manager function allows a user to parameterize and initiate rebalances, while the market maker function enables users to bid on ongoing auctions.
Another primary focus in Q4 was the cosmetic and functional refinement of our core app experience. Historically, users of the Index App have had to manually select whether to execute their trade using Flash Mint or DEX liquidity. Our upgraded trade interface automatically selects the most cost effective route for a user’s trade with the option to manually alter the selection if desired.
Additionally the App team placed a heavy emphasis on market and user research, resulting in a 12 month roadmap prioritizing core experience upgrades, data visualization, and management and tracking of a user’s positions. In 2024, our roadmap aims to deliver on the promise of ‘one-click’ access to the most important themes in crypto.
Q4 saw significant progress in the protocol upgrades, with a particular focus on two key initiatives. The first initiative was Decentralized Reweighting, which aimed to introduce UMA’s Optimistic Oracle to the rebalancing process. This innovation introduces independent verification and enforcement of methodology rules for Index Coop products as well as the triggering of rebalance auctions. The result is reduced centralization risks in rebalancing operations and greater trustlessness for token holders. Development progressed steadily through Q4, culminating in a production deployment in early January. The first successful rebalance proposal was verified by the Optimistic Oracle system on January 12th, triggering a full auction rebalance for dsETH.
Additional documentation for Auction Rebalancing was also created in Q4 in anticipation of the first public Dutch auctions in January 2024. “Introducing Auction Rebalancing” provides a non-technical overview of Index Protocol’s new auction capabilities and this dedicated Dune dashboard tracks all auction-related data over time. The Auctions app was also designed and developed in Q4 in preparation for product rebalancing in early 2024.
The second major initiative focused on consolidating offchain automation such as rebalancing, arbitrage, and market-making bots to ensure more efficient and scalable operations across the Coop. This initiative concluded in December, marking Tenderly as the primary platform for automation and general bot activities for the Coop moving forward.
Q4 built upon the strong foundation laid in Q3 with key partnerships, including those with 21.co, CoinDesk Indices, and eToro. Our team dedicated efforts to improving product integrations, achieving a notable success with a prominent institutional grade custody provider. Additionally, we focused on improving our brand awareness and deepening our existing partnerships as we advanced into 2024.
Copper and ic21: Institutional Access to Cross-Chain Diversification
In the realm of institutional digital asset management, trust and reliability are foundational. Many institutions depend on third-party custodians to safeguard their assets and facilitate trading strategies. In Q4, we achieved a significant milestone by integrating with Copper, a renowned institutional grade custodian. This integration introduced $ic21, our cross-chain large cap index, to Copper’s platform. This means that Copper’s clients now have streamlined access to the most influential crypto assets in the market, complete with features like automated rebalancing, diversification, and heightened security. This development marks a significant progression for institutions seeking innovative on-chain structured products.
Early Stages of New Partnerships
Our partnership with eToro, which went live in Q4, began with a targeted marketing campaign on their platform. The response has been quite positive, with the Index Coop strategy attracting 1,400 followers and 169 copiers on eToro, showing a solid interest for our core strategies. We anticipate further expansion of this partnership, bringing new products and opportunities to eToro users.
Moreover, our team secured a contract with a new market maker to support the $INDEX token and our structured products on approved centralized markets. This partnership is already showing benefits, and we are in the process of enhancing support for DPI and MVI on Mercado Bitcoin, a leading exchange in Brazil. Our new partner was quite active, in particular at the tail end of Q4, where there was an uptick in volume on both the $INDEX token and our structured products.
Increasing Brand Awareness
In Q4, our partnerships team participated in various events, including a notable panel hosted by CoinDesk. This panel, featuring experts from 21.co, Wisdomtree, and Decentral Park Capital, focused on the impact of the Bitcoin ETF and the future role of on-chain structured products for capital allocators. CoinDesk reported this panel as one of their top five most-viewed sessions of the year, highlighting the growing interest and recognition of our initiatives.
In Q4, the Index Coop launched the Index Coop CoinDesk ETH Trend Index, a tokenization of CoinDesk Indices Ether Trend Indicator. We also published thought leadership articles in Coindesk’s Crypto Long & Short and Crypto for Advisors newsletter. Coindesk also published a Q&A with Index Coop head of product, Allan Gulley. We also held a joint webinar event with our partners at CoinDesk Indices, as well as an X spaces event featuring structured product industry leaders (including 21.co CEO Hany Rashwan).
In Q4 we announced and promoted our new partnership with eToro, migrated all of our marketing operations to Hubspot, and conducted a localization experiment in 6 languages.
Finally, we developed a new KPI framework in Q4 for measuring the performance of our whole funnel. These KPIs will inform marketing strategy throughout 2024.