I like this! I support it, and I think the marketing value these guys will offer, justifies their fee
BED is practically a crytpo meme and is a favourite with around here. DCInvestor would probably get behind it too. But, I agree with @verto0912 , crypto natives are likely to hold the tokens individually - I would. Only transaction fees, if you’re tightly managing them, might put you off, but L2’s are already making them more accessible to anyone familiar with the space. So, BED without CEX will be less attractive, unless the intrinsic value can be realised and looks good. The new BalancerV2-AAVE announcement looks exciting in that regard.
It’s a loved idea and I’m sure a powerful configuration of boosted returns and easy public access can be found. Should that be built step by step or all in one go? How long will it take to cover the implementation cost for Index Coop? Should other factors such as publicity be considered?
I think Index Coop should hard pass on this.
Focus should remain on strategies that are hard to replicate by the average joe, have strong methodology and therefore providing value to consumers. The BED index, whilst a good allocation of assets is very low effort, easily reproducable on tokensets.com (has already), and ultimately seems like a overly-complex way into getting bankless to funnel some traffic in. My advice would be to not dilute the high standards of index products with a fluff index and instead just pay for advertising if that’s the only benefit being obtained here.
I found DPI through Bankless and love your show so huge thanks!
As the strategy is fairly simple and would require little management, I agree that marketing should be paid through other means than the streaming fee or it be greatly reduced. @verto0912’s points on introducing it after CEXes and size/earnings needs working out.
Welcome @ryanseanadams and congrats on the first post! I’m a big fan of Bankless.
Though I love the BED meme and am a huge fan of this concept, I also wonder if this product makes sense i) without CEX pipes directing $ to $BED and ii) for crypto natives.
Re ii) I think I’d personally prefer to hold the BED assets myself due to allocation % preferences and avoiding the 0.35% fee.
Separately, @Tradespot makes an interesting point that this isn’t hard to replicate for the Average Joe and is already available as a Set - compared to $DPI. But then again, CGI is only 4 assets in the index.
Thanks Verto, great points.
For the fee portion, my rough understanding is the effective streaming fee with DPI underneath would be somewhere around .65, with .475 going to the Coop. At $500m, that’s $2.3m in streaming fee revenue. I agree that intrinsic productivity could eventually supersede streaming, given the opportunities with BTC and ETH. This could be fleshed out more.
I agree that the biggest blocker for wide adoption is fiat-to-BED or broad CEX listing, and that is especially significant given this is meant to be a passive product for beginners.
Thanks @ncitron… so okay, holders of BED will pay 35bps streaming fee + they’ll bleed another 0.33*95bps? Are we seriously going to charge ~66bps for people to hold this? I think this is sort of against the ethos - BED is meant to be for DeFi beginners and yet, they are going to get charged 66bps for something they could get for free in a Balancer pool.
I would support this product if we practically gave it away and generated income for the Coop through intrinsic productivity.
I also think that if were to launch this then the fee structure needs to be discussed. There’s no methodology here. None. Perhaps management fee is not the best way to compensate for branding and marketing efforts.
@DevOnDeFi CGI is actually 3 assets, not 4 The main difference here (beyond anything marketing or financial) is the methodology. CGI is backed by severaI years of academic research and it’s volatility-based rebalancing has strong track record of delivering solid risk-adjusted returns.
@verto0912 - completely on board with this line of thinking.
From a user experience, once DPI is on CEXs, one could buy all three components for cheaper than interacting with a smart contract on ethereum due to gas. The balancer pool is also a good point, as is the product already setup on SET. BED needs to be cost effective for better user experience.
In my opinion, BED has two, maybe three, primary user groups:
- New Entrants to crypto space
- Investors looking for crypto exposure in terms of asset allocation
- Simple Tax
BED appeals to new entrants seeking a very simple one holding allocation to attain exposure to the broader crypto space. Investors would have a similar use case. This leads me to conclude the market place for this product is the fiat to crypto on ramps. To AG’s point, this product will do better once DPI is on CEX and more fiat on ramps.
Crypto natives usage will be strongly correlated to incentive schemes and any productive yield. Larger holder are further incentives by the use cases of holding the individual components. eg: Having BED on Maker enabling DAI to be minted will take time and creates an opportunity cost for holding BED.
I think rebalancing BED monthly is too soon, maybe every 2nd month or quarterly would be better.
Streaming Fees - I believe this should be near zero to attract users due to the alternative ways to express the same view. Otherwise, how are we going to build a lot of liquidity ? Any larger holders are incentivised to purchase the components and seek yield. So we either make this productive, or BED is going to struggle to be a long term success as it becomes the less effective way to allocate capital.
If BED was productive asset, that generates APY, I would be more of a fan. The yield can be split between IC, methodologist and token holders as then there is more active engagement/input from the stakeholders. This product needs to attract a broad spectrum of users/investors and for that, it needs to be a more compelling investment case.
The methodologist INDEX token payments for a static allocation index seems like a very inefficient use of Index Coop’s capital. If this product was actively managed to generate yield then there is better value for Index Coop.
3 assets in CGI I mean!
Hi all, I think the streaming fee needs further discussion as some have mentioned it is a little high for a product with comparatively low maintenance. That said the potential for future intrinsic productivity is a promising idea and shouldn’t be overlooked given that brings a stronger product to market.
I think the main take away here is the decision to make over establishing a partnership with another well known and respected brand. Even if BED does not bring in a great deal of income, credibility and exposure through such symbiotic partnerships build trust for both brands overall. Hopefully this results in more users being exposed to the benefits of Index Coop’s product line up over the course of their crypto journey.
I echo the sentiments of @LemonadeAlpha that the risk/reward of this partnership and product are on balance favourable.
I am extremely in favor of this proposal because it expands Index Coop’s distribution and brand advantage, further cementing our reputation as the premier decentralized index provider.
Right now, Index Coop’s reach comes primarily from the brand recognition of DeFi Pulse, Coinshares, and the Set Protocol team among cryptoasset investors. Index Coop will compound its distribution and brand advantage further by leveraging Bankless’ reputation and distribution. This seems like a no-brainer to me.
@ryanseanadams I am curious if you and Bankless perceive this to be a big barrier to adoption? How is Bankless planning to go-to-market with the BED index? For instance, are you planning to provide tutorials, how to buy guides, etc. for Bankless’ audience? Are you planning to pursue listings on CEXes?
Curious if you guys see this as an evolving product to support any new entrant’s investing strategy into crypto holistically.
Ex. adding MVI into it, LINK maybe, cross chain protocols, etc.
This would increase the product’s longevity. Risk is that the BED meme disappears in 6 months as crypto becomes more complex.
Thanks for all the comments here! Excellent discussion!
First, I want to address critiques that BED is too simple and that the methodology is too easy to replicate. Because I think they’re right. BED is easy to replicate right now. But I think that’s exactly why Index should do this! If Index doesn’t, I believe something else will capture the opportunity…because there is demand. An BED-like index is the number #1 ask for new Bankless entrants. We’d love to have an Index Coop product to refer them to.
Second, regarding fees. Yes, an effective fee of .66 seems high. But realize almost half of this fee (.31) comes from the DPI index fee which consumers are happily paying now. To replicate the DPI exposure, they’d need to pay the same fee. When you subtract the DPI fee, what remains is a .35 fee. While we could drop this further, I don’t think a .35 for this index is unreasonable. Especially in the future if we substitute assets like ETH for productive forms of staked ETH. So yes, we could shave another .05 to .10 off, but at the end of the day I don’t think it will make a material impact on demand.
Lastly, I believe the most important thing is that we launch this product and capture the narrative energy now during the bull run. Bankless currently has 30k subscribers to the its newsletter, almost 400k podcast downloads per month, and close to 2m views on our starters guide….we’re currently growing at a rate of over 500% annualized. BED is the start of our work together, but I don’t expect it to end here. Perhaps we add more managed features down the road, a crypto version of Cathie Wood’s Ark Innovation…perhaps some of this is managed by a future Bankless DAO. We’d be excited to see how this relationship evolves after we get started on something. So let’s get started on something.
I have been monitoring how the discussion has evolved around this index. At first I was also a sceptic however after reading the replies from one of the founders @ryanseanadams and seeing the natural demand for this index through other community members and the general crypto public, I believe creating this type of index is vital.
Additionally, I have been a Bankless subscriber since the project launched their first newsletter, to see how far they are now since first launch is a testament to how committed the team is to realizing their vision. I also believe it is why the project continues to scale and will continually do so in the near future.
I encourage anyone who reads this reply, to read the article they released The Digital Culture Revolution - Bankless this is a prime example to see how committed Bankless are to playing an active role in the digital revolution happening in DEFI today.
I look forward in investing in this index and as an active community member I cannot wait to collaborate with them to make this index a success.
Bankless has a lot to offer with helping launch this product and growing AUM - that is clear and exciting opportunity. Index Coop has a lot to contribute here as well, especially when it comes to maximising the extrinsic productivity. ie: Collateral on lending platforms etc…
I do think there are other things to consider, reading over the previous post, I have a few queries. I thought BED was static, fixed allocation amongst BTC, ETH & DPI - now I am not sure, it reads like the methodology is fluid with potential to swap some of the assets with productive variations. I am a fan of utilising productive assets. But if that is the case, the methodology needs to be restructured to include some kind of qualitative component to it like DPI. Something that says why one productive asset has been selected over another.
This value add, improves the appeal of the product, adds to the complexity and leads us to rethink the streaming fee discussion. A productive BED for me has a larger AUM potential, but the methodology needs to be flushed out though before the absolute value of the streaming fee paid by client can then be agreed.
The value of the streaming fee is a product and market fit conversation. Things like how much can be charged before people seek to make their own portfolio instead of using a turn key solution. Obviously if the target client is someone investing $30k, then gas costs are a lot less significant than clients looking to invest $1k. I’d love to see a bit of target client discussion, potential AUM size and pin down the methodology.
A static passive BED for me is low 0.30% otherwise, I’ll be honest it makes more sense to do it myself. Something productive is higher, say 0.60% with an estimated APY >5%. This has be me a lot more excited as it has a huge time saving component to it for me. Ideally for be, I would like the user experience to be that the receiving APY doesn’t require a staking contract and can be something like xToken’s products where the compounding is built into the product. Although, this compounding element will increase Impermanent loss for LPs. I’d be keen to see what the methodologist is proposing for Index Coop’s / SETs engineering team is to build. So we can understand the complexity and how it fits in the market.
After agreeing the streaming fee for the product, then the conversation shifts to deciding the fee split. To assist with that conversation we are developing a framework Methodologist Fee Menu. This is still being reviewed and subject to change, but it gives a flavour for how the streaming fee are shared.
The larger the AUM, the larger the royalty stream, so let’s work together to optimise this product and bring it to market.
To echo Matthew, the value added by a BED index that has intrinsic productivity changes my perspective completely. I find a static BED index uninteresting but a productive index is offering access to something that might be too complex for a lot of investors. That requires some skills which I’m sure Ryan and Bankless have that match with the methodologist fee schedule that’s being discussed.
FYI for folks specifically watching this thread.
Happening this Friday 3/19
Always worth asking whether we can do better on fees if something is basic. This is how Vanguard won passive indexing.
Marketing is a core variable of TradFi ETF success. If BED is a brand that resonates with an addressable market, how big is that market and does that make it worth our time/resources?
A basic entry product like BED also onboards customers to our family of products. Not sure BED is the right one, but definitely has potential.
We should consider first up-leveling this discussion to a higher level question:
What will be our framework for working with marketing partners?
These are high quality partners with a well thought out concept. But all partnerships raise a higher level of questions (eg, fee splits, long term expectations, duration of deals, what to do if partners don’t promote the product well in the future, etc etc.)
Forgive me if we already have a general partnership framework.
Hey Owl Community! I’m writing to see if we can resurrect this discussion. I think there was agreement here in the past that the BED index could be a great way to involve newcomers and introduce them to some diversification in a simple way. You may be aware that Bankless just this past week launched the Bankless DAO, which is putting a ton of community firepower behind the marketing/content machine of Bankless. The number of newcomers to DeFi and awareness of DPI is bound to grow. Does the timing seem better to take advantage of the rising tide and exposure Bankless could provide?
If the largest concern is the simplicity of the index, maybe there 's a better way now to include a form of stETH, adding to the product/making it slightly less “replicable”?