The two biggest takeaways we received from the community were the following:
Expand the Number of Tokens
Simplify the Methodology
We researched how we could improve the proposal by addressing the community’s feedback without sacrificing the mission and purpose of the index:
The Data Economy Index (DATA) is a digital asset index designed to capture the growth of on-chain data economies. The Data Economy Index tracks projects with significant economic activity that connect decentralized blockchains to off-chain data.
We believe that our improvements to the initial proposal will satisfy the community’s concerns.
Below is a summary of our modifications.
|Item||Initial Proposal||Updated Proposal|
|Mission and Purpose||The Data Economy Index (DATA) is a digital asset index designed to capture the growth of on-chain data economies. The Data Economy Index tracks projects with significant economic activity that connect decentralized blockchains to off-chain data.||The Data Economy Index (DATA) is a digital asset index capturing the growth of on-chain data economies. The Data Economy Index tracks projects with significant economic activity providing data-based services or products.|
|Draft Portfolio (Initial)||4 tokens: LINK (46%), GRT (25%), NMR (24%), OCEAN (4%).||9 tokens: LINK (25%), , RENFIL (25%), BAT (15.5%), GRT (13%), LPT (9.4%), OCEAN (3.8%), NMR (3.6%), OXT (2.9%), REPv2 (1.8%).|
|Combined AUM of Components||~$14.2B||~$18.5B|
|Market Opportunity (current)||~$80m AUM||~$105m AUM|
|Token Inclusion Criteria - 1||The primary function of the protocol provides on-chain data-based services.||The protocol provides data-based services or products.|
|Token Inclusion Criteria - 2||Protocol must have organic network activity and usage as measured by Total Value Locked (TVL) in the protocol’s native token(s) and/or Revenue paid to data providers.||Protocol must have organic network activity or usage. On-chain transaction volume, Total Value Locked (TVL), and/or revenue paid to service providers are all examples of metrics that could be used to demonstrate organic network activity.|
|Token Inclusion Criteria - New||N/A||Protocol token must have sufficient DEX liquidity to support inclusion. If a token has insufficient liquidity, it will be removed from the index during the determination phase.|
|Token Weight (%)||Uses a Matrix Scoring System with a 40% weight to the square roof of the circulating market cap, 20% liquidity weight, and 40% economic activity weight.||Circulating market capitalization weight with a 25% allocation cap on any individual token. This closely mirrors the index calculation for DPI.|
Market Opportunity (current): Currently, DPI is $129m in AUM, approximately ~0.54% of the circulating market capitalization of its constituent tokens. DATA will have $100m in AUM if it captures the same share of the Data Economy that DPI has captured of DeFi.
Noteworthy Additions: Filecoin was added to the token list by using Ren Filecoin (RENFIL) to meet the inclusion criteria of being an ERC-20 token. Augur (REPv2) was added because it is an on-chain prediction market (i.e. data service) with material TVL. Basic Attention Token (BAT) was included because the Brave Ecosystem creates an Attention Economy, using privacy-preserving machine learning techniques to deliver relevant ads to users and reward them for their attention; BAT has significant on-chain transaction volumes and revenues paid to service providers (source).
Liquidity Requirements: In our view, the greatest challenge to scaling AUM will be the liquidity required to support the current 25% allocation to RENFIL. According to CoinGecko, there are currently only 103,525 RENFIL tokens in circulation (~$7m in market capitalization). This will become an urgent issue once AUM for DATA exceeds $5m in AUM. Kiba and I plan on reaching out to the folks at the Filecoin DeFi Bridge to explore ways to increase RENFIL liquidity. If we are unsuccessful, we may need to consider either adding a supply cap to the product or reincorporating a liquidity weight into the index weight calculation.
The Work Team conducted a product prioritization analysis for the initial Data Economy Index proposal, providing a preliminary score. Please note that the score shown below is NOT the final prioritization score for DATA.
Initial Prioritization Score: 1.45
Commentary from the Work Team:
This is a theme worth pursuing. The methodologist team has demonstrated strong competence in putting this index together, has a thoughtful methodology, and the costs are minimal, as the index would benefit from prior IC product constructions and an assumption that UNI V3 makes any LM incentives unnecessary. The product currently gets a relatively low prioritization score because the market for a 4-token index (and we score based on the current state of the product and the market) is likely not large and doesn’t solve burning pain points (or even moderate pain points). Thematic indices become more attractive with several components, as each addition reduces the user’s gas costs and research needs from pursuing the same strategy outside the product. We understand that the current focus and methodology outputted only four tokens, so you’re sticking faithfully to the rules, which is good. Therefore, would it be possible to expand the theme so that the number of tokens increases?
After receiving the community’s feedback on the improvements outlined in this post, we will be reaching out to the Work Team to get an updated prioritization score.
Collect Feedback: Receive additional feedback from the community.
Conduct Product Market Fit Analysis: Collect data/evidence on likelihood of customers to buy DATA through customer interviews, surveys, or market data. Find initial investors and get AUM and/or portfolio allocation commitments, if possible.
Launch Partners: Reach out to potential launch partners and project teams.
Increase RENFIL Liquidity: Reach out to Filecoin DeFi Bridge to explore ways to increase RENFIL circulating supply and DEX liquidity.
Eliminate Engineering Constraints: As @puniaviision noted, new product launches are being pushed back due to Engineering and Product Constraints. We are working with @dylan , @DefiJesus, and rest of the Engineering Working Group to transfer rebalancing and trade execution responsibilities for indices from Set engineers to Index Coop contributors to unblock launching DATA.
- 6.21.2021: Rebalancing period was changed from monthly to quarterly.