Index Coop will maintain wallets used to pay gas costs for Index Coop product launches & product maintenance. Set Labs will utilize these wallets in the interim to perform product launch & maintenance work until the Index Coop is ready to own these operations.
Set Labs currently pays for most of Index Coop’s product launch & maintenance gas costs. As Index Coop transitions towards becoming an autonomous DAO, product launch costs, rebalancing and code base upgrades shall be passed from Set Labs to Index Coop. This proposal represents progression towards autonomy with Index Coop taking over financial responsibility for on-chain product costs.
This IIP follows the forum post Product Performance - Surfacing Gas Costs.
During the early months of Index Coop, there was no clear agreement on who would be liable for gas costs, and as the performers of rebalances and in the spirit of a startup, Set Labs bore those costs. In the months since, AUM and product maintenance costs have grown considerably, and Set wishes to pass these costs to Index Coop.
It is important to move these costs to the Index Coop. Set cannot pay for gas costs indefinitely and not having product maintenance costs borne by methodologists or Index Coop is distorting the profitability for Index Coop products.
Average monthly gas costs are expected to be around 60k - 80k USDC, with 20k - 30k USDC in Automated Index rebalancing expenses and 30k - 50k in Composite Index rebalancing expenses. In a month of high gas and price volatility, Automated Index rebalances can increase to 80k-90k on its own.
For a more detailed breakdown on the kinds of transactions incurring these gas costs and their susceptibility to low liquidity/high price volatility environments see the Product Performance - Surfacing Gas Costs forum post.
Gas costs in ETH terms for the previous 4 months
Gas costs in USDC terms for the previous 4 months
The above tables have been pulled from a more detailed analysis on total product gas costs. You can read that here.
To launch Index Coop products, an EOA will be shared between Set & Index Coop. This EOA will be used for contract deployments of all Index Coop products.
To rebalance Index Coop products, multiple EOAs (eventually, one for each product) will be shared between Set & Index Coop. These wallets will be used strictly for conducting Index Coop product rebalances.
It will be the responsibility of EWG in conjunction with the Finance Nest Operations Account to ensure each wallet is sufficiently funded & ensure smooth launch & maintenance operations.
Finance Nest will be responsible for auditing the costs & making these costs known to INDEX holders via it’s monthly Operations Account and Financial reports.
The primary reason for managing one wallet per product is to prevent multiple products from being blocked by a single unmined transaction. If ETH2x-FLI submits a rebalance transaction with too low of a gas cost, it will block all subsequent rebalance transactions. Getting a single transaction unblocked alone requires some coordination. Having multiple product rebalances potentially blocked because they are all waiting for a single transaction to mine quickly multiplies complexity.
Work has already been completed to separate ETH2x-FLI/BTC2x-FLI keeper rebalance wallets. Extending this wallet setup to Simple Indices infrastructure will help further scale the product rebalancing system.
In addition, managing one wallet per product simplifies accounting. Each product’s cost center is divided by wallet and easily auditable.
DO adopt the above wallet system for Index Coop product launch & maintenance.
DO NOT adopt the above wallet system for Index Coop product launch & maintenance.