I am in support of this proposal. Much like MVI, I believe there is a lot of value in what’s being built in the space, but I wouldn’t be comfortable trying to pick winners, so I would find an index quite attractive. My comments echo some that have already been raised, and my background is in risk so some views may not be mainstream, but I will run through them here:
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Inclusion:
I would like to see a very clean definition of what this index covers. I’m currently left wondering if ETH 2.0 staking providers may fall under this umbrella? Uniswap is getting into the oracle space - will they be considered? I think it may become important to have a clear definition of what this is, as, “capturing the growth of on-chain data economies” will likely most often be met with, “What’s an on-chain data economy?” (which is fine if we have an awesome answer; I currently don’t) rather than, “That’s awesome, where do I buy it?” -
Weighting:
I would be interested to see some analysis of various index weighting strategies wherein there is one dominant component in a small basket. I’m not opposed to the proposed strategy, I just don’t find it very easy to understand - and in turn - easy to explain to a potential investor. If it can be linked to more TradFi rebalancing metrics yet still minimize heavy weighting toward one protocol, I would be more comfortable with it.- It might be worth exploring a 2-layer weighting strategy (50% of the total basket weight may be attributable to 30 day average MC, 50% attributable to 30 day average volume relative to MC . . .
- Maybe it’s as simple as, "If there are 4 tokens, weighting will be 40-30-20-10% . . . if there are 5 tokens, weighting will be 35-25-25-10-5 . . . if there are 6 tokens . . . ".
- Maybe it’s by MC, but capped at double its equal-weighting percentage - 4 tokens at 25% each would cap a single token at 50% even if its MC would put it at 90% . . . the remaining tokens split the other 50% by MC.
I’m spitballing here, but I think if it’s kept simple it will be more likely that someone will invest.
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Availability:
I believe maybe the most challenging aspect of this index (for now) would be ERC-20 tokenized availability. There will eventually be a lot of players in this space, but I’m concerned that at this time there are only a few viable candidates ‘On Ethereum’. I expect that there will likely be synthetics for most non-ethereum-native providers. Furthermore, having a token is fine, but I would want to be sure that the token is integral to the protocol (e.g. - are there solid tokenomics - a real limitation to some staking providers and L2s - or even say Storj which doesn’t require that users use the token to pay for the service). I think this specific challenge will diminish greatly over time.
I don’t see any of these things as blockers, but clarity around the topics without unnecessarily limiting the ability to govern this specific index down the road would be helpful, not just for our own thinking, but with an eye toward marketing and large-scale adoption. This is a solid proposal @Thomas_Hepner and @Kiba - it’s well thought out, well researched, and I’m genuinely looking forward to this discussion developing further.