# Intrinsic DPI Productivity w/ $INDEX as Risk Backstop

**URL:** <https://gov.indexcoop.com/t/intrinsic-dpi-productivity-w-index-as-risk-backstop/274>\
**Category:** Products\
**Tags:** dpi\
**Created:** [6 November 2020 04:29 UTC](https://gov.indexcoop.com/t/intrinsic-dpi-productivity-w-index-as-risk-backstop/274 "2020-11-06T04:29:13Z")\
**Posts on this page:** 1\
**Showing post:** 6

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**Author:** ![richard](https://avatars.discourse-cdn.com/v4/letter/r/f0a364/32.png) [@richard](https://gov.indexcoop.com/u/richard)\
**Post date:** [6 November 2020 22:36 UTC](https://gov.indexcoop.com/t/intrinsic-dpi-productivity-w-index-as-risk-backstop/274/6 "2020-11-06T22:36:22Z")

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> [@setoshi](#):
>
> **Staked DPI to address Redemption Liquidity Risk** : DPI owners who lock / stake their DPI for a defined period of time can earn a specified yield in $INDEX tokens. This has the effect of ensuring that a certain % of DPI will never be redeemed, which represents the floor of the assets that can be made productive. The more that is locked, the higher the % of constituents that can be made productive. Obviously, the economics need to make sense for $INDEX, where the fees earned from productivity need to exceed the APY paid to stakers.

I do think this idea is worth pursuing further on the DPI product side. Redemption risk is the biggest barrier / concern to adding intrinsically productivity. Having a program in place first that locks staked DPI for 6 months / 1 year in place can reduce redemption risk to 0 given that the % AUV pursuing yield is always less than % locked in the contract. It also adds the ability for DPI constituents to be staked in native programs that lock up tokens for a period of time such as SNX, stAAVE, KNC etc, as long as the modules return the underlying to the DPI before the locking period expires.

Previously, the concern around @overanalyser 's 2% cash grab is that all DPI holders are exposed to the same redemption / liquidity risk through lending constituents and without a proper economic analysis, there wouldn’t be an optimal way to price what % of DPI assets should be staked elsewhere. By having an opt in locking mechanism, this segregates the risk of those who want a vanilla / redeemable DPI vs those who are in DPI for the long term (and of course there should be INDEX incentives associated to incentivize locking DPI to start).

Compared to the [DPI yield farm](https://gov.indexcoop.com/t/ongoing-draft-current-state-of-discussions-around-dpi-product-upgrades/234), which is **2** separate products to segregate risk for customers, this is basically **one** DPI split into “sub-accounts” that segregate risk for customers.

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