This is a draft of the Index Cooperative’s master plan. The intention is to lay out the current views and considerations on what it takes to win the index market. This isn’t perfect yet and requires feedback from everyone before it’s a plan the entire community can buy into.
Where We Are Today
The mission of Index Coop is to introduce and expand adoption of the index primitive to a broad audience beyond those already in DeFi today. In doing so, Index is well positioned to be the leading provider of crypto index products, to command large AUM / influence, and to benefit from developing the nascent crypto index market.
So far, the strength of the community has helped the DeFi Pulse Index quickly vault to $13M+ in assets locked and support one of the deepest liquidity pools on Uniswap. In addition, it’s been amazing to see the enormous amount of passion, energy, and activity in the Discord and Discourse forum directed at improving Index in all matters whether launching new indices, improving governance, distribution or incentives.
To move productively and efficiently, there should be alignment on an overarching strategic plan to achieve this goal and clear methods to mobilize effectively - which is what this document aims to provide.
There are many strategic considerations to consider including:
- Indexes are a winner-takes-most market and the first significant mover typically gets the biggest share. In the traditional financial world, most people only know about Blackrock/Vanguard and S&P500 / DJIA, all of which enjoy the benefits of higher profits, greater visibility, and publicity. Thus, it is critical for Index to be the first mover in getting its products to scale.
- The technology behind indices is simple. It is brand, distribution, and marketing that helps gain and maintain market leadership. Thus, it is critical to reach scale and broad distribution with index products and to have a very strong, concerted marketing to spread the word. That means getting the index into the hands of millions of users. The most efficient way to do that is to have it listed on centralized exchanges, wallets, etc - which interface with users who need the product the most.
- Getting a product to scale requires focused efforts. By successfully getting one Index product to scale, Index Coop will have built the brand, reputation, distribution channels, etc. to more easily get other products (e.g. L2, NFT, leveraged indices) to scale. Thus, it is critical we focus on getting one product to scale at a time and not on too many different indices. That means focusing awareness, marketing, and branding efforts to getting DPI listed on exchanges + wallets, mentioned in press, and evangelize to a broader audience - to grow # holders and assets locked.
- Sustainable growth requires capturing high-retention users. As amazing as the recent growth has been, a non-negligible amount of capital in the DeFi Pulse Index today is short-term oriented and focused on reaping the yields from the liquidity mining program. The incentive program will inevitably end and the capital will shift to higher-yielding offerings. Index products have great utility for a great number of users, and it is critical to rapidly diversify the user-base to those who use the product for its intended purpose (not just yield farming).
- New utility unlocks use cases and personas: In the traditional financial world, there are various use cases of index products. Retail users purchase indices to passively invest at a low cost, while investment funds utilize indices to hedge through spread trades or get simple sector exposure. In the crypto world, getting index products listed on lending protocols such as Aave, Compound, and Maker unlock the ability for new use cases such as hedging, margin trading, and spread trades - increasing user retention.
Taking into account these considerations, a sensible master plan is:
- Step 1: Focus on getting a single index to scale (1% of the DeFi market and majority held by sustainable holders).
- Step 2: With the connections, brand, and marketing from the first success, launch additional indices that achieve scale and are leaders in their respective verticals. If we get one index listed on a centralized exchange and adopted by distribution partners, it will be significantly easier to sell the rest.
- Step 3: After achieving high market share in each category, focus on long-term Index Coop sustainability - enjoying the benefits of market leadership.
In each phase, the most effective ways to contribute would be to:
- Step 1: Help market, spread awareness, educate, and help onboard new high-retention holders of DeFi Pulse Index. Help get the DPI listed on exchanges and wallets to expand distribution and get DPI added as collateral on lending protocols to expand use cases.
- Step 2: Help design / create / launch new indices and continue marketing/spreading awareness of new products
- Step 3: Help figure out sustainability whether through financial analysis, adding yield capabilities, etc.
In working together in a focused manner based on a clear strategy, Index will have the opportunity to be the dominant provider of indices and we will collectively win as a result.
Don’t tell anyone.