This forum post is intended to provide clarity on the direction the Product Nest for Season 1.
“Insanity is doing the same thing over and over and expecting different results.” - Albert Einstein. As IC looks at stalled growth from recent product launches, the Product Nest has reevaluated which products to build. The team, in partnership with the growth nest, has undergone market research to understand the customers currently on-chain, and which products they’re looking for.
Index Coop has historically focused on providing thematic indices to DeFi native retail investors, and while the larger opportunity is retail investors, most of them are off-chain. Accessing these customers is critical to long-term success but focusing the short-term product strategy on customers on-chain will help IC win in the short-term.
As we continue to push for greater distribution of our products, we’ve identified a product category that will help improve short-term growth. Yield generating products is a category that appeals to our existing customers, while also unlocking DAO treasuries. DAO treasuries are already on-chain, have large wallets and are willing to diversify a large portion of their stablecoins and ETH. The product team has been researching and is preparing to launch products in this category.
The long-term goal for Index Coop is to provide financial products that unlock prosperity for everyone. The problem is, everyone still hasn’t made it on-chain, yet that’s where our products are available. As we continue to push our flagship products onto Centralized Exchanged and expand integrations, the product team will focus on products that product greater coverage to on-chain customers.
In order to do this the product team will shift from thematic indices to low risk, yield generating products. These products can be sold in bulk to DAO Treasuries while also supporting the retail segment. As an additional effect, DAO treasuries are willing to LP many of these products, reducing the need for IC to provide capital to launch products on a DEX.
Index Coop has built a strong portfolio, but each new product launched provides diminishing results. This is a result of selling new products that solve a similar challenge, to the same customer types. A shift to yield earning products solves a problem IC hasn’t focused on.
Product market surveys completed in 2021 indicated interest for yield earning products from retail investors, but the market and our technical capabilities couldn’t support these products. Index Coop now has a better idea of how to build and market this product type.
In order to become the Vanguard of DeFi, Index Coop will need to create products that appeal to the mass market. If we think about customer segments in terms of the chasm, DAO Treasuries, Degens, and Whales are the primary buyers in the space. The largest customer segment, retail and institutions, either haven’t been introduced to crypto yet, or are still sitting off-chain. Focusing on on-chain customers will provide better short-term results. Below is a chart outlining customers segments by adoption or DeFi.
The Index Coop product team will continue to research and support thematic (or any other type of index product) but the primary focus will be on products that are requested by customer segments currently on-chain. Through extensive interviews with DAO treasuries and market surveys to retail investors, Yield earning products are a clear overlap. This primarily includes yield earning on stablecoin and ETH tokens, but other options are being investigated. The chart below is an outlook of product prioritization of the next few months. Thematic and FLI products will be tapered back as Yield Earning products take over most of the roadmap.
|Product Type||Market Segment||Products||Current %||Ideal %|
|Thematic||Retail, institution, whales||DPI, DATA, MVI, GMI||60||30|
|Yield Earning||Retail, DAO, whales||FIXED, icETH, BASIS||0||60|
Additionally, the product team is evaluating an L2/ alt L1 strategy for new product launches. The challenge is, Ethereum has the most tokens and TVL, resulting in the most opportunity. On the flip side, it’s the most expensive which results in expensive products to build and a poor user experience for our customers.
As the focus shifts to yield earning products, most products will be deployed on eth mainnet because that’s where most yield earning opportunities and DAO treasuries are. Other chains will be evaluated and will be explored
Thematic indices will primarily be evaluated on L2 / alt L1, so Exchange Issuance can be leveraged. Exchange Issuance is a feature that allows users to buy our products directly from the Index Coop website, removing the need to setup a DEX pool. This makes it almost free to launch these products. Given gas cost, this feature does not have the same benefit on mainnet.
A hidden advantage of the above strategy is to remove one of our biggest bottlenecks for launching products, capital. It’s expensive to launch products on mainnet, so products must be prioritized by limiting cost or moving to other chains. Yield earning products cost anywhere from 1/7 to 1/14 the cost of a thematic product on mainnet. Thematic indices launched on other chains can cost close to nothing. By focusing on this strategy, Index Coop will be able to launch multiples more products than primarily launching thematic indices on mainnet.
This product strategy was created by taking a step back, looking at the market we operate in, and identifying which products will bring Index Coop success now. By focusing yield earning products Index Coop will unlock new on-chain customer types and reduce capital expenditure, to support long-term success. To quote Bobby Axelrod - “Being early is the same as being wrong”.