Official FLI Fee Split Offer

Official FLI Fee Split Offer

Business Development: @BigSky7 @Mringz
Product: @puniaviision @afromac @allan.g @verto0912


Over the past two months, the BD Working Group and the Product Working Group have been working together to negotiate a new fee split for FLI products. The current fee split between the Index Coop and DeFi Pulse is not economically sustainable and does not accurately reflect the work done by each party in launching, growing, and maintaining these products. This post proposes the official fee split offer for future Flexible Leverage Tokens (FLI).


Before diving into the offer and the reasoning behind it, we would like to reiterate the principles upon which the offer is based.

  1. We strive for value-accretive, successful, long-term relationships with our methodologists and other partners.
  2. In our negotiations, we strive to be more than generous.
  3. With whatever terms we produce, we understand that the market changes rapidly, our organization is changing rapidly, and we are more than willing to rediscuss previous terms in light of new information.


Borrowing heavily from @setoshi’s Methodologist Economic Agreement Principles we have three frameworks from DeFi and traditional business contexts which we can use to shape our thinking about a fair fee split for the FLI Suite.

  • Yearn Strategists
  • Index Licensing Deals
  • Traditional Licensing Deals

Yearn Strategists (reference: YIP-52)

“Yearn charges a 2% management fee and a 20% performance fee for its vaults. From YIP-52, strategists earn 50% of ONLY the performance fee. Yearn does not split the management fee as: “There are a lot of constant costs on the protocol side. Operations, Development, maintenance, and R&D. These require a stable source of funding and should not be affected by Strategists.”

That said, strategists are expected to cover their own development, testing, gas, and monitoring costs. Note that development costs are one of the most rare/expensive commodities in this industry.”

Index Licensing Deals (reference: SPDR S&P 500 Index License Deal)

“When looking at the SPDR S&P 500 agreement, S&P Global receives an annual fee of $600k + 0.03% of AUM for the right to “use the S&P500 name and duplicate the index with its ETF”. In this case, SPDR’s take-rate is 0.065% - in which the total fee is 0.095% (awfully similar to the arrangement with the DeFi Pulse Index!). S&P does not need to do any of the heavy lifting, which includes fund management, marketing, and other expenses.”

Traditional Licensing Deals (reference: Patent Licensing Royalty Rates, Product Licensing 101)

“There are a number of approaches one could take, but the most common rule of thumb for licensor take-rate is the 25% of income (revenue less costs). Typically, this arrangement requires a clear understanding of the product’s revenue and costs. That said, fair market royalty rates of an invention are typically based on: uniqueness of invention, profit margins, risk, strength of IP protection, exclusivity rights, and availability of competing technologies.”

Common licensing fees:

  • Aerospace, 4%
  • Apparel, 6.8%
  • Automotive, 3.3%
  • Computers, 4.6%
  • Consumer goods, 4.8%
  • Electronics, 5.1%
  • Industrial goods, 6.4%
  • Pharma and biotech, 6%
  • Software, 9.6%

Data For Fee Split

Using the framework described above, we believe the FLI Suite resembles these Traditional Licensing Deals. Simply stated, DFP developed the equation that dictates the behavior of the leveraged product during rebalancing. Everything else - implementing the equation, creating additional security parameters, auditing, maintaining, scaling, etc. - has fallen to the Coop.

This work has consumed significant R&D resources related to developing and implementing a full-stack solution, as well as a 2-month product and engineering moratorium where all efforts were directed towards improving the safety and scalability of the products. Such engineering resources are the most scarce and expensive resources in the entire DeFi space.

That said, we believe that an 80/20 revenue fee split is a more-than-generous offer that amounts to a 75/25 profit share once expenses are taken into account; this mirrors the licensor take-rate of 25% outlined in the Traditional Licensing Deals example above. We conducted the following analysis using pre-split, historical data for existing FLI products and modeled out the implied profit share based on a series of revenue splits.

We believe this offer is more than fair as it does not include the R&D expenses related to scalability and safety improvements; only gas costs and maintenance costs are factored in. Borrowing / lending protocol rewards (ex. COMP, stAAVE) are also excluded from this analysis because they are temporary, but these rewards will also be split 80/20 between Index Coop and DFP. It is also worth noting that ETH2x-FLI will most likely be the largest and most profitable FLI product, while the performance of other FLI products will more likely resemble BTC2x-FLI.

Official Offer

80/20 revenue fee split on future FLI products, including borrowing / lending protocol rewards.

Related Links


A few questions.

  1. What makes this “official?” That gives the impression that it has the blessing of the entire community. As far as I can tell this is a proposal by five community members. Am I missing something?

  2. Last I heard (on the Leadership Forum call), we were going to redouble efforts to engage with DFP on this topic. And it seemed to me (open to other views) that this was the general preference from all involved. Did this happen? Was this shared with DFP prior to posting? Does it reflect any feedback from them? Some of the framing sounds one-sided. For example:

I’m under the impression that some of the “everything else” falls on Set here. Also I think “developed the equation” is a bit reductive of the methodologist role overall. Do we give no credit for initial product design and parameters?

It’s hard to evaluate the analysis with just a screenshot, but this seems like an enormous assumption (and also unclear why this would also be subject to 80/20 while also ignored in the analysis). I think we all project a future where some of these products are on L2s and have a wildly different cost structure. Are we renegotiating fee split then as well? That seems to undermine the long-term nature of this proposal.

  1. This post feels like a starting point. A few more questions that reflect that:
    -Do we know if DFP has ongoing costs related to FLI and their relationship with the Coop generally?
    -Have we indicated what we expected DFP to do to earn 40% under the original proposal that they do not do?
    -It actually seems like revenue-splitting versus profit-splitting is one of the culprits that led us to an unexpected result, why not attack that vector?

As a community member, I want to see our interactions with external partners and methodologists reflect collaborative efforts and long-term thinking. All of my questions are directed with that in mind.


as stated repeatedly privately, we will not be negotiating, considering or otherwise responding to any fee split discussions relating to future FLI products until underlying blocking problems are addressed and solved.

there are incredibly easy to solutions to all of the problems faced, and the continued ramming forward of zero sum nonsense is continuing to create a toxic environment for all who must engage with the coop.

you personally, @BigSky7, are a member of the chat group where real solutions are being discussed, but have chosen to not engage seriously. your last engagement was 10 days ago, before any serious collaboration started, and you seemed to have ignored all of the productive conversations around the actual real product challenges the FLI Pod has so far been unable to find solutions for.

The reason Index Coop might succeed is because we can actually find better solutions that don’t involve zero sum infighting, but failure is 100% on the table if index coop does not see creative problem solving as the first option when faced with challenges.

I would like to thank @afromac @allan.g and @Pepperoni_Joe for all making serious contributions in the right direction. We really can do this, but it takes a different approach.

@scott_lew_is a couple quick elaborations would be helpful!

What are these?

What are these?



Hey @scott_lew_is - thank you for the feedback.

I want to emphasize that DeFi Pulse is our single most trusted partner. The entire DFP team has worked tirelessly on behalf of Index Coop for the better part of a year. Without DFP our community would not be where it is today. Not only is DFP a trusted partner, but also a truly valued part of our community. The guidance, mentorship, and support from members like @snasps, @Jo_K, @Etienne, and yourself is tremendously valuable. Like many members of our community, I have learned a tremendous amount from the DFP team. I want this partnership to continue for years and hopefully decades.

Working with a DAO, especially an organization that has grown as quickly as IC can be frustrating. Frustrating for external methodologists, Set Labs, and community members. We are growing at an incredibly fast pace and still ironing out many of our most important processes. Everyone at IC is working on improving these processes and we are laser-focused on becoming the most professional and well-run organization in this space.

Important questions remain around the economic feasibility of the FLI-suite of products for IC. These questions have been laid out in a number of forum posts and everyone in the community has context. The fee split laid out above represents the cumulation of over a month of research and work from the IC Product and BD working groups. At this point, the relevant information has been outlined and shared. I feel confident that any decisions our community makes, will be made with full context and a deep understanding of the issues at hand.

The single most important priority for Index Coop is launching groundbreaking products. Discussions around the fee split for the FLI series must take place with this firmly in mind. Over the coming months, we will launch a large suite of innovative Indexes. Many of these will be in partnership with DFP. Everyone is in this together. Success for Index Coop is success for DFP, for Set, and for our community members. The cumulative value of our collective tripod, of all three groups working together, far exceeds that of any one party.

I firmly believe that we will reach an equitable resolution to these discussions and appreciate the open lines of communication everyone has spent months building.