Meta-Index for Broad Crypto Exposure and DPI Liquidity

Product Products
1

Hi INDEX community!

I’ve been lurking in the forum and discord for a sec, and am super excited about what you’re doing! With the DPI/ETH pool incentives ending soon, I came up this idea to incentivize DPI liquidity while building out Index Coop’s product line. Let me know what you think!

Summary:

Create a Balancer pool with DPI, ETH, BTC, and USD. This pool will provide trading liquidity between DPI and key assets, while also giving holders exposure to a broad and diversified index of the cryptocurrency space that earns passive yield from trading fees.

Abstract:

The proposed meta-index would use Balancer as a rebalancing mechanism, which also allows for on demand trading liquidity between all index components. A potential index composition could look like 30% DPI, 30% ETH, 20% WBTC, and 20% USDC/yUSD. This would give holders broad exposure to the crypto space, while providing liquidity between DPI and ETH, BTC and USD.

Note that USDC could be used for easiest convertibility, but Yearn recently removed vault withdrawal fees so depending on gas cost considerations perhaps yUSD would be a better asset to use for the USD component. Index may be able to partner with a dex aggregator or even implement the wrapping/unwrapping logic natively for stablecoin<>yUSD<>DPI swaps. This would give the pool passive yield, at the expense of making DPI slightly more expensive to access from USDC.

Index Coop could assess streaming fees from the new meta index to cover the overhead of providing management services. Considering that the DPI component already pays 0.95% streaming fees, the meta index would be charged 0.665% annualized streaming fee (equating to 0.95% fee on 70% of index not already paying DPI streaming fee).

Motivation:

The current DPI/ETH Uniswap pool incentives are scheduled to expire in early/mid December. Upon expiration of rewards, liquidity for DPI is likely to decline substantially, which will increase friction for DPI users. This meta index provides liquidity for Index Coop’s core DPI product, while also giving LPs an attractive “set and forget” exposure to the broader crypto space beyond Defi.

Specification:

Still mainly TBD. This could be structured as either a static Balancer pool with fixed weights and fees, or a Balancer smart pool with weights/fees determined by Index governance.

I think the most important assets to represent in the meta-index are BTC, ETH, DPI, and USD, but there may be arguments for other assets (eg. tokenized gold?). The specific weights of assets in the meta index are also open for debate.

The community could choose to incentivize this index/liquidity venue through INDEX distribution/farming. Potentially lockups or vesting of LP tokens could be used to ensure long term alignment with farmers and sustainable liquidity. The staking contract would receive some BAL liquidity rewards, which could be used to partly offset the cost of INDEX distribution.

For:

  • Creates a broad based index, which may appeal to new clients who are not interested in investing directly in DPI
  • Provides liquidity for DPI buyers and sellers, decreasing friction and costs for users

Against:

  • If community decides to incentivize meta-index, this would cause dilution of INDEX token
  • The community is primarily focused on helping DPI reach mass adoption, and this meta index might become a distraction

Poll:

Should we create a meta-index with DPI, ETH, BTC, and USD?
  • Yes, we should look into it
  • No, not a good idea
0 voters

Appreciate any feedback on this idea! Thanks :handshake:

2 Likes
2

I love this, clearly (team BED). My only criticism would be around the necessity for USD exposure.

EDIT: supportive of BED Set, under INDEX Coop control. Don’t know that we need to incentivize a balancer pool.

3

Interesting, but for this to have the same liquidity depth as a Uniswap:ETH pool, would it require 3x the incentives?

Wondering also how we should treat products like this from a process perspective since actually building this is trivially easy and its mostly just a question of if we want to incentivize it.

4

Thanks for sharing the proposal @monet-supply

I don’t understand the need for USD exposure here. If you want USD exposure, just hold USD. No need to get exposure to impermanent loss in the Balancer pool.

Also, we don’t really use Balancer pools for index management, do we? That’s our differentiating feature, that we hold the underlying assets. Correct me if I’m wrong here.

PieDAO already created a meta-index with BTC, ETH and their DEFI++ product.

I also don’t really get the idea of an index with 3 tokens - people can just buy 3 tokens themselves, especially if there’s enough liquidity. not much efficiency there.

5

I have a theory that a one-click crypto portfolio option could be attractive to a lot of folk, especially new entrants to crypto. People LOVE simple.

The idea, maybe not necessarily a Set (tho I don’t think that’s a bad idea) is a sales page that allows people to buy BED in different flavors: 60/30/10, 33/33/33, 80/15/5, etc with one click and just uses a DEX underneath.

6

theoretically I agree with you.

however, I think that people who just want to HODL will buy their own tokens and store them offline.

most of the people who would be interested in a one-click option, would want a yield. i don’t know how big the market is for holding something that is not generating yield?

that’s just my view. would love to see any data points either supporting or disproving it.