PROPOSED: IIP-134: Index Coop Retrospective Airdrop

@Matthew_Graham Please provide the link to the spreadsheet. My expectation based of off previous communications was that the airdrop was part of a comprehensive compensation package. I was not aware until recently that this was not the case.

I’ve made decisions based off of these assumptions that affect how I approach the DSM and build meaningful ownership which I now need to re-evaluate. Thanks


Great ask/point re this spreadsheet. The last airdrop communication to the community had an open G Sheet for review - to see personal and wider community impact.

This should be open like DSM levels mostly have been.


Just for clarity, are you saying the decisions IC made around the recent compensation packages were made on the assumption there would not be an airdrop?

I politely disagree in the specific sense that there is always a trade-off between building long term ownership with $index vs realising that value today. Each individual’s preferences and circumstances will differ when deciding which to sacrifice. An airdrop changes the dynamics in this decision (at least for me).


I appreciate the frank, honest communication. However, I have to say I am confused by the sentiment expressed as I believe the turnaround is happening. The last 2-3 months have seen a drastic re-focusing within the community on tackling inefficiencies, improving profitability and sustainable resource allocation. In q4 21 we launched zero products, we all shared similar frustrations at that time. In the last 6 weeks, together we have released 4 products and the pipeline is flowing.

A corner has been turned. The co-operative is executing again. We are aware of the fundamental issues, they are being considered and aggressively addressed.

In terms of hiring, the council has just completed a comprehensive hiring program. Index Coop has never been as well equipped in terms of talented key personnel in the core areas you mentioned as it is today. Do you believe that this did not go far enough, was not done correctly, or are you expressing that you do not have sufficient faith in the current cohort?

I am speaking for myself but I’m sure I also speak for many that no one is more frustrated by internal bureaucracy, operational burden, politics, indecision and lack of direction more than we are. It is 100% right to call these problems out. We would all much rather be an Autonomous DAO but that is extremely hard in the current set-up where the community contributors have little to no material governance in the future success story we collectively want to see. I believe a 1.5% distribution is a strong start on the way to help remedy this and in combination with the DSM is a way to incentivise long term holding and alignment of incentives and values.


Thanks for the reply @MrMadila

From my a compensation scheme perspective, I cannot see how doing a 1.5% distribution would increase the equity value of $INDEX. From looking at many other DeFi projects, pure distributions simply result in additional tokens that get sold onto the market - further depressing prices.

A potentially better schema that aligns incentives would be to do KPI options where community members are initially DELEGATED voting power, but only receive tokens if $INDEX sustains $40 for 3 months. This would incentivize massive change to happen that improve the enterprise value of $INDEX.

Re: change, I appreciate and do note that significant work is being done to try to improve things across the board. From my vantage point, the community doesn’t have the talent in some of the areas that matter (e.g. leadership, product, eng) and dramatic-enough changes are not happening [sorry to be vague, but I can go on and on in terms of what needs to be done and some of it has been shared w/ the council].

In my humble opinion - to achieve the end state of an Autonomous DAO, I’d avocate for a CEO DAO model to make those massive changes required before going to Autonomous. Having been a big part of the INDEX 2.0 efforts, it’s hard to say that there have been meaningful-enough changes via the Bureaucratic DAO perspective (as INDEX has just been going down since and it doesn’t seem like deep problems have been solved since).

So something like Bureacratic DAO (today) → CEO DAO (interim) → Autonomous DAO (end state).


Hi @setoshi,

To provide context here, there is another forum post that details the relationship between the DSM program and the Airdrop.

Early this quarter the Index Council put forward a proposal to hire a core team, the details can be found here. The Core Team’s package is Salary + DSM. The DSM emissions are based solely on how many INDEX are held within a specified wallet address. In many ways, this is Salary + Equity with the caveat that the Equity component is influenced by INDEX retention and the persons time served at Index Coop.

The DSM emissions are based on the INDEX holdings within a specified wallet. As @MrMadila wrote, people developed expectations that an Airdrop would occur and made decisions based on this. Others @mel.eth’s point would like to implement an accrual type accounting system whereby the entire Airdrop amount is included in the DSM from day 1 without the recipient having received the INDEX tokens to a later date. To @Pepperoni_Joe point the conversation is a sensitive one and it is unlikely all parties will converge to the same conclusion.

During Wednesday’s leadership call a range of views were expressed. It became clear this was a contentious topic and it risked growing into a largely unproductive time sink diverting effort from some of the areas mentioned in your earlier posts. With the intent to move quickly and bring the discussion to a head, @Metfanmike and I took an action to lead this initiative. With the help of @Hammad1412, @ElliottWatts and @prairiefi we quickly dusted off what prior work that was done, updated the model and presented the findings here on the forum. Collectively, this group believes the parameters selected above are the best combination and this proposal was drafted in a professional manner independent of individual’s views.

With the intent to move quickly, we will progress to a vote this coming week. INDEX holders will determine the outcome and the implications will be final. Recognising the INDEX token is for governance, it should be used for its intended purpose. I encourage everyone to vote on the Airdrop, express their views and accept the outcome whatever it may be.

Regarding the comments around what the Organisation structure of the Index Coop DAO should look like. This is not the thread, perhaps an open public internet forum is not the right medium for such a discussion. I will echo @MrMadila, many changes have been made across the DAO since the Index Council was formed. The creation of the Index Council moves the DAO closer to the top down structure which I believe you are supportive of. I hope the Index Council continues and we can continue to refine our business model and operations. We have a mandate to be more prudent with spend going forward and the new seasonal budget model reduces cadence whilst receiving a far more in depth review than past proposals.


I think a DAO-level financial forecast would help clarify the discussion on the best structure. (I don’t have enough context to comment on the airdrop debate.)

If the DAO can achieve profitability before runway-end then that’s an argument that the current model is at the very least sustainable despite all its foibles and inefficiencies. I know sustainability is not an ambitious goal in itself but it’s a minimal requirement.

If the DAO can’t achieve profitability before runway-end (assuming we don’t raise more VC funding) then that’s a strong argument for a turnaround program and the sooner the better.

@ElliottWatts I know you’re working on a financial forecast. I would suggest sharing that with the organization when it’s complete. Everyone will appreciate that there will be a lot of assumptions, particularly on the product launch dates and revenue. Once we know whether the current model is sustainable or not, then we can have a grounded discussion on alternatives.


Hey @Matthew_Graham appreciate you shepherding this effort and hitting my comments.

Re the 6-month distribution, you covered the distribution methodology but not the logic; why will it be spread out if the result is that all tokens will be distributed and that INDEX could be earning in the DSM for contributors? I’d rather see this implementation changed to:

  • Airdop INDEX will be retroactively counted toward DSM accrual for ACTIVE contributors starting 01FEB22, disbursed with the first 6-month vest or fully disbursed upon a change from ACTIVE status (keeps INDEX in DSM);
  • INACTIVE contributors will receive their retroactive airdrop distribution over 6-months in equal amounts (prevents dumping).

My intent here is to maximize DSM participation at genesis given that my understanding is that the relative allocation by contributor matters and contributors that haven’t been able to accrue due to living expenses fare worse in this model on a forward basis, and that’s not the intent (please clarify re how rewards are calculated, I know you said it can be reverse-intuited from a spreadsheet but I was unable over the course of hours and it’s not fair to put that on every contributor). Given we’re still in draft I believe providing a guarantee against dumping by active contributors and incentivizing further alignment (when the desired outcome initially was greater protocol ownership by contributors) should be considered.

NOTE: As I understand it, the implementation I’m recommending would have me faring worse (again, absent further clarification I can’t confirm and that’s causing frustration); but I do think it’s more fair. I’ll not let FAIR be the enemy of GOOD, so I’ll vote FOR either way, but I think proposers would get a better result if you made this more clear and inclusive in terms of access to the DSM reward at genesis.

Please don’t forget to call for GovRep review when ready to get an IIP number assigned; thanks again.


I have updated my first comment with a fuller rationale for why I am FOR.


I’ll be voting in favor of this proposal.

The key motivation for an airdrop has been to increase team ownership of the project. The initial airdrop construct and subsequent iterations were well socialized across the community for feedback in 2021, including with investors and with Set. The Compensation Committee took in the feedback received and incorporated changes to the construct:

  • The airdrop was reduced from an initial target of 7% down to 1.5%.
  • The initial iteration of the airdrop had a large % available to sell on Day 1. Now the airdrop becomes available to a recipient over the course of six months, to reduce sell pressure.
  • This construct is also now more heavily weighted towards the active core and flexible contributors.

Now, my understanding of the construct has been the same as @mel.eth’s as to whether the full airdrop counts towards the DSM. It was intended to all count on Day 1, regardless of whether or not a contributor is able to sell any of it. Many contributors made personal financial decisions based on that same understanding, to @MrMadila’s point. I was very supportive of adding the 6-month time release when that was recommended, but I don’t believe that design should act to further reduce how much of the airdrop is eligible for the DSM. It’s a fine compromise to force a staggered, six-month release but to then also allow the full amount to count towards the DSM benefits (which, I’ll add, won’t even be realized unless the contributor stays active for an additional six months).

The counterargument being made by those against this proposal is that most community members will en masse sell the airdrop the moment once they receive it (even with the 6-month staggered time release). Why do they assume this? To date, the Index Coop compensation construct has been to reward contributors with INDEX for monthly wages, and many contributors subsequently sold their INDEX rewards once they received them. This shouldn’t be surprising, though, as people had to pay for rent, food, etc.

However, the new construct (only being put in place now) changes that dynamic (by offering a base salary in stablecoins) and therefore aims to change behavior by encouraging longer-term holding of core contributors’ INDEX holdings (their ‘equity’(like) piece). One would be better off selling stablecoins to pay bills and holding onto the airdrop to increase DSM benefits, rather than selling.

Re: @setoshi’s comments, I wholeheartedly agree with Matthew that the forum is a poor venue to have that discussion. I share some of Felix’s concerns and criticisms for how the organization was operating, but his comments here are based on outdated information and don’t factor in the turnaround that has been actively in the works since he last visited the forum.

I want to thank the Finance Nest - @Matthew_Graham, @Hammad1412, @prairiefi, and @ElliottWatts - for their work to refresh the numbers so we can have this conversation and vote on the proposal, regardless of how it turns out. It’s terrific work.


@setoshi Thanks again for sharing your honest opinions and perspectives on these complex topics.

I am an advocate of any airdrop being subject to vests and long term incentives for the community to retain such an allocation. This was my understanding of one of the benefits of the DSM.

My personal perspective was that increased community ownership is reflexive in the sense that it helps to align incentives with the aim to increase the long term equity value of $index. Not only through profitability and growth but also owning the responsibility of prudent management of resources.

I was under the impression the whole council/leaders of index 2.0 were in close communication with key stakeholders and that this perspective was also shared. We have spent what has felt like 100’s of man-hours collectively building this consensus. This is why there is such a huge expectation shock from myself and many others at the sudden change in narrative. I do empathise with those who feel an airdrop is a blunt instrument, but again I feel I/many were lead to believe a lot of time and effort had gone into refining and addressing as many of the drawbacks as possible.

I agree KPI options are also a potentially useful tool. Could you clarify who you believe would be delegating in this instance? VCs? Sets allocation? Community treasury allocation etc? And to who? You mention a “CEO” DAO, I take this as literally one person or a very small team to make top-down decisions. Who in your view who would make such an appointment? Token holders or the community?

Disclosure: I would be a beneficiary of this airdrop

Re: change, will be brief here as I feel this particular dialogue is becoming worthy of its own venue… We are just 8 days from the end of the council. From there or after a short break we will need to either continue it, revert back to pre-council times or find a new decision-making team and/or even a new structure. Given your views what do you believe is the best course of action to take from here. Will you and the council be in close discussion?


If my memory serves me correctly, there were almost twice as many contributors eligible for the airdrop than there were priority hires this season. That ratio will likely tip even more towards non-core team now that Nov / Dec / Jan have been added to the eligible airdrop window (can confirm this once the data is available). Granted, the ultimate airdrop allocation will overlap significantly with priority hires that already have salary + equity packages, but we can’t overlook all the other contributors who didn’t make the cut this season (myself included).

I was personally disappointed to not receive an offer, but there was consolation in knowing this airdrop could grow my ownership in the Coop (especially since I’ve opted for USDC rewards since going full-time). I understand that the DSM will also accomplish this, but it’s frustrating to learn here that priority hires have early access to the DSM ahead of the rest of the community. We must be mindful of this segregation we’ve introduced - consciously or not - between the newly-christened core team and community contributors.

I hope that this comment does not come across as embittered or envious because I am genuinely delighted for the core team that was hired, and I’m pleased to see so many key people rewarded for their persistent contributions to the Index Coop. My request is that we don’t forget about the majority of contributors who may have also put in many months of work and are equally committed to our collective success.

While I generally agree with conserving the community’s capital, I see this airdrop as a show of good faith to the gold owls and other full-time contributors like myself who hope to be included in the next round of hiring. The actual amount of INDEX to be airdropped is a fraction of the original proposal as @Metfanmike alluded to, and for the average recipient, their share of the airdrop will be significantly lower than the equity allocated to the lowest band of priority hires. In other words, this airdrop could very well retain some of the talent that must wait another season to be considered core team. This is simply my perspective though.

Conflict of Interest Disclosure: I am a potential beneficiary of this airdrop.


Allan raises very valid points. We have been here before in creating perceived segregation when the FT packages were first introduced. Again the sentiment was that the people chosen were deserved but that it left many out with no objective plan or criteria to include them at a later date. The unintended consequences lead to trust and perceptions of fairness being eroded and tarnished which crept into working day life within the community. That was just a handful of people, I expressed concerns at the time of what it would lead to. This time the scale is much much larger and starting from a place of a material dislocation in expectations.

I strongly ask that we do not rush this IIP through and risk prematurely cementing the current confusion, frustration, disappointment, division and feelings of unfairness into the community psyche.


I’ll be voting against this proposal as written.

The main reason I’m opposed to this airdrop is because it doesn’t reward performance over the long term. If the proposal used a longer vesting period (at least 3 years) then I’d have a much easier time supporting it. Even if 100% of the airdrop went to current contributors, I think it would be a mistake to let them keep all their tokens if they, for whatever reason, were no longer highly productive contributors in six months’ time.

I completely agree with everyone who thinks contributors should have a larger ownership percentage. We have to square that up with the fact that we can’t mint any more INDEX tokens. We have to make whatever tokens we have last for the next decade, or longer.

If we combine all the INDEX in our Treasury and Operations wallets, plus the INDEX left in our Treasury vesting contracts, we have about 4M INDEX (40% of supply) at the DAO’s disposal.

Considering that we need to convert INDEX to USDC to pay salaries and expenses, it’s pretty obvious to me that we’ll need to use the majority of the remaining INDEX to raise cash. It takes a lot of capital to grow a company to the kind of scale we all want Index Coop to achieve. The median amount of funding raised by U.S. companies before their IPOs was $167M in 2020. A lot of those companies weren’t even profitable at IPO.

Even in the most generous situation where we only need half of our remaining INDEX to fund operations through our high growth phase, that would leave 2M INDEX for current and future contributors. That’s 20% of total supply. I believe that is the absolute ceiling of what we can spare.

I don’t know exact numbers, but I’d estimate that we’re already set to award about 2-3% of total token supply to contributors this year alone.

As this basic math hits home for me, I’m still hopeful we can find a way to sufficiently fund our growth and for early contributors to gain meaningful ownership. Giving away 1.5% in a short amount of time, largely for past performance, is not how I’d do it. I say this as someone stands to benefit from the airdrop. I also say it as someone who knows none of this will matter much anyway if we don’t launch products with over $20M in AUM soon.

Whatever happens in this vote, I want to say thank you to the early contributors. I hope you all feel rewarded in due time.

P.S. - A number of great perspectives have come out of this discussion. I like the idea of using an incentive structure similar to stock options. @setoshi if your goal is to motivate leaders at Index Coop to act more CEO-like, I’d urge you to think about sourcing a portion of KPI-based options from Set Labs’ allocation.


Hi All,

In response, to the comments made above regarding the Airdrop’s INDEX emissions within the DSM program, a vote was held by the group who compiled this IIP in collaboration with the original founding group and the proposal has been updated to reflect the following:

Specification Amendment

Technical Specification Amendment

With these amendments, it is believed the concerns relating to the methodology presented with this proposal have been addressed.

Looking forward, kindly @sixtykeys, @mel.eth may a IIP number assigned and the Snapshot scheduled for commencing Tuesday 22nd February. I believe this is only 24hrs instead of the normal 48hrs as per the standard process, however we intend to distribute contributor rewards this Friday and would like to action the result of this airdrop as well.

There is a wide range of views and opinions presented throughout this thread. Some fantastic views have been expressed and it has been a very engaging proposal that is for sure. We can now all look forward to a vote and accepting the outcome.

I would like to take this opportunity to thank the team that created this proposal. I would like to recognise their professionalism and ability to move swiftly in response to last weeks leadership call. I thank each contributor for the time and effort in supporting the development of this proposal.


Thanks @edwardk - We will be considering utilizing Set’s allocation towards CEO / executive-level incentives.


gm @Matthew_Graham -

@sixtykeys will be your GovRep for this Proposal; the proposal has been reviewed the status is now PROPOSED. As discussed on the weekly call the 48-hour discussion period will remain, and the vote will commence on 23 February 2022 at 3AM UTC.

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I’ll be voting against this proposal as written and in this timeframe.

I am voting against this proposal primarily based on the short, and IMO incomplete discussion around this topic. I do not want to make, what I would consider to be, a snap decision on the subject and @edwardk 's argument concerning the future runway of the treasury and his experience with startups is a compelling issue in my view.

However, I cannot overstate how similar in feeling I align with @allan.g and @MrMadila in posts above concerning the perception of incomplete implementation of the original Index 2.0 compensation and community ownership effort. To Allan’s point above, one of the goals laid out in the Community Ownership | DSM post was to eliminate an “in” or “out” dynamic but it feels we have simply increased the in element from 5 to 25:

We have seen the tension created by an “in” or “out” dynamic with full time compensation packages as the only real path to contributor ownership. We must look to promote community ownership in a scalable way that does not create further disharmony.

I can’t put my thoughts into a more well written statement than Allan so I will simply lean on his words as well around my thoughts towards the hard work so many have put in and the team that was hired deservingly, while still having an eye towards a successful future.

I second this request:

The reason stated by @Matthew_Graham above for pushing this to IIP quickly is so that rewards can begin in February, however if I understand correctly there will be no $index handed out this month or for the next 5 months that can be sold or moved as it is vested for a 6 month period. If we are able to accomplish a lookback for the airdrop of 21 days to Feb 1st, can we not also do a look back of 45 days?

Pushing forward with the DSM + Airdrop topic from a perspective of only priority hire round #1 vs addressing both issues from a holistic point of view as laid out repeatedly in the Index 2.0 posts seems short sighted. If I am correct the most recent information we have on the DSM is in the Hiring round #1 post. As @mel.eth made fairly obvious in last weeks leadership call, there are still many open questions and uncertainty around the DSM mechanics from a priority hire perspective, with almost no concrete information surrounding the inclusion or mechanics for non-priority hire members of the Coop. Even though I would very likely be a yes-vote on DSM for all > bronze contributors and a no-vote on the airdrop, the most critical thing is clarity and completeness for all the many contributors putting in significant time and commitment to the success of the coop. Ambiguity and confusion breeds dissent.

Regardless of this proposal and its outcome, I hope we collectively can address the following discussions with creative solutions in the near future:

  • A path towards meaningful ownership for the full spectrum of contributor; including those that may need to come behind us and grow to be critical members of IC’s success. This problem needs a creative solution that may or may not be based on holding more $index token with both its financial and governance benefits together.
  • Deciding what is the best use of the treasury we have to accomplish and incentivize the next 18-24 month roadmap that we consider success for IC.

Hey @Matthew_Graham @mel.eth , an IIP number has been assigned (134) with a snapshot vote queued for 23rd February 2022.
Snapshot here


Agree with that and will AGAINST.

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