Product Performance - Surfacing Gas Costs

I to tend think, we should be considering the rebalancing cost of including a token in the product more so than we currently are.

To some extent, the methodologist can go to these other teams request more liquidity on chain with the promise of being included in the product.

IMHO this is something that Index Coop can ask methodologists to do.

Index Coop can define more stringent on-chain liquidity requirements, with maintenance costs being a large influential consideration. If the methodologist is product orientated and having the new token included or illiquid token retained, is good for the product, then the methodologist is incentivised to seek additional on on-chain liquidity from the respective community.

Ultimately, gas costs should be socialised to product holders. The intermediate step is splitting revenue after gas costs are taken into consideration.

An alternative idea, is to deduct the gas costs from the methodologist rewards incentives program. MVI and DPI methodologist both receive a large number of INDEX tokens from Index Coop as part of the methodologist program.

Given MVI was an internal product only a couple months back, it should be fairly easy to just amend the INDEX distributed through the methodologist program. It can be considered an oversight of the prior IIP.

IMHO I think the methodologist should consider this a great opportunity to volunteer splits the gas costs by way of reduced INDEX incentives when Set Labs passes rebalancing costs to Index Coop. That would be a lovely gesture and speak volumes towards the value we all place on the respective partnerships.


Has there been an EWG<>PWG deep-dive on looking at using cowswap yet? Thanks


I agree. I think the DG1 IIP Template would benefit from a section on ‘Product Economics’. The section could include the anticipated monthly streaming revenue and average rebalancing and recomposition costs at launch, as well as the component liquidity needed to become profitable. Likewise, it would be good to see a product economics section in the composite index playbook being drafted.

I agree that the Methodologists are best-placed to encourage token communities to add more liquidity.

For our index products which are liquidity-weighted a financial incentive for the token holders – in addition to possible index inclusion – would be the buying pressure as the index has to rebalance into their token. However, we probably only have market-moving potential for the very illiquid tokens.

One thought I had would be for IC to create a Liquidity Leaderboard with a rank-ordering of ERC-20 tokens by liquidity. This could potentially create some competitive incentive for communities to add more liquidity in the same way communities chase market cap rankings. The closest concept I’m aware of is CoinMarketCap’s liquidity score. The IC leaderboard could be built on the liquidity tool which EWG is building.


Yes, the rebalancing cost = AUM x turnover x frequency x gas / trading_depth

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Definitely agree here. Liquidity profile, rebalancing costs, and profitability were a big factor in our methodology for GMI and we’ve seen that reflected in the profitability model.


Just tagging @verto0912 and @DarkForestCapital here to ensure this is brought to there attention.

It would be great to get feedback on the above and I welcome the dialogue that is forthcoming.

No doubt that as MVI grows the rebalancing costs of the less liquid tokens will really hurt Index Coop’s profitability. This is occurring at a time when the Methodologist Incentives allocation starts to ramp up as MVI’s growth outperforms its peers. A few months ago, these costs and incentives were aligned as Index Coop directly received the methodologist incentives and indirectly paid the on-chain gas costs. With MVI moving external, we lost this alignment. It was an oversight at the time and it is important to recognise we operate in a progressive space.

Can we restore the alignment through reimbursing Index Coop for on-chain gas costs with INDEX that would otherwise be distributed through the Methodologist Incentive program ?

To me this is a very fair ask of the MVI methodologist as the Methodologist Incentive program is not a perfect but continues to be offered as designed in good faith.