Let me explain this at length in what we were trying to achieve here. We collectively re-wrote this section many times, a lot ideas were discussed and we settled on the logic above. The Base Score is 1 of 4 main pillars to assessing how to determine the streaming fee structure. Lets explore the logic at depth:
No Methodology - This is something static which does not change over time. The composition of the product periodically resets. The litmus paper test is, what is the composition of the Index rebalanced to this month and say 12 months from now. If the answer is the same, the methodologist has zero ongoing upkeep. There is zero ongoing qualitative or quantitive input from the methodologist.
Simple Methodology - This is a basic product where there is either/or some level of quantitative ongoing up keep. A top 5 index for example, the 5 tokens included can change over time, the amount each token makes up of the index changes over time. This are measurable features which differ the no methodology, yet the logic is simple and very easy to understand.
Complex methodology - This category captures products that exhibit more complexity than Simple methodologies. Take DPI for instance, DPI has a qualitative component that is not simple, a lot of research and ongoing work is needed to asses the qualitative inclusion criteria. FLI & CGI both have a mathematically derived rebalancing mechanism that is a lot more involved that checking CoinGecko’s circulating supply rankings. Simply put, periodic rebalancing require significantly more input from the methodologist that both other alternatives. Sometimes this can be automated, other times it is research based.
Let’s discuss BED
With BED, my understanding is the three components BTC, ETH & DPI. These three components are fixed and are not subject to change over time, thus the naming convention applied. The allocation between BTC, ETH & DPI is fixed over time. So with respect to the litmus paper check mentioned above, each time this index rebalances it reverts to the exact same composition each time. Index Coop doesn’t need to ask the methodologist what the new composition is. This assessment hinges on the static nature of BED. If BED is not static like I have detailed, then it would be reclassified as it fails to meet to the No Methodology criteria.
This is the criteria that has been proposed to start the conversation as a community, and we can discuss the criteria, and we can improve upon it as we see fit.
Moving On
We did consider a 5th pillar in this discussion, which was engineering. Something that captures upfront engineering and/or ongoing engineering up keep. This is a difficult topic to summaries, in its simplest form it is engineering hours for launch and/or up keep. Take an example where the methodology of an index is incredibly engineering time heavy to launch but has near zero on going input or vice versa. Difficult to quantify and different to isolate independent of the complexity input detailed above.
One thing I feel that is over looked here, is this framework does not say the absolute value of the streaming fee. It only discusses how it is divided up between IC and the methodologist. This is heavily market sensitive.
Thank you for bringing this up and I really like this thinking. If I understand what Index Coop is trying to achieve, I think we have this already. Let me explain… To be considered eligible for DG1, before even discussing the fee menu the proposed product must be aligned with the below link.
Each product to be considered must fundamental be able to move the dial, have the ability to capture $100M plus and drive Index Coop beyond $1B AUM. To get to the table where the fee discussion takes place, the above must be met in my opinion. I draw inspiration from the above link and I completely agree all products show be consider products that help Index Coop level up. I think @LemonadeAlpha you nailed the type of product we want to bring on board as a precursor to discussing the fee structure.