**[Under Revision]** - Creation of Polygon 10 Index (P10)

IIP: XX

Title: Polygon 10 Index (P10)

Status: Proposed

Author: @Hamzah Khan (Head of DeFi, Polygon Foundation), @AsifKhan (DeF Teami, Polygon Foundation @Mringz Created: 2021-06-27

Simple Summary

Following the launch of Set protocol on Polygon’s POS chain , the Polygon Foundation would like to partner with Index Cooperative to launch the Polygon 10 Index (P10). This index will showcase the top-performing projects built on Polygon based on weighted market cap. The index will serve to give holders exposure to the leading protocols that natively exist on Polygon.

Motivation

The launch of this index will mark the first scaling solution native product from Index Coop, both showcasing the innovative culture at Index Coop and marking the beginning of Index Coop’s expansion to other chains. If launched this will be the first native Index token on the Polygon network.

Size of Opportunity

Polygon has seen large amounts of liquidity and trade volume and has established itself as the undisputed leader in scaling infrastructure. According to Nansen AI, Polygon boasts 400,000 daily active addresses, processes around 5,400,000 daily transactions (~62.5 tps).

Product Differentiation

Polygon is able to provide blockchain developers an ultra low-fee environment which has led to the development of entirely new classes of dapps. We believe that the Polygon 10 Index has the potential to capture the best of these new projects and offer a holistic, sector agnostic snapshot of the innovations occurring in the Polygon ecosystem. Ethereum needs to continue to scale in order to reach the average consumer and scaling solutions such as Polygon will play a critical role in helping usher in that vision.

Initial Composition & Token Inclusion Criteria

Selection of the components of the P10 Index is based upon the following criteria:

  • The token must be available on the Polygon blockchain.
  • The protocol has a first-class Polygon deployment.
  • The 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 can be used to demonstrate organic network activity.
  • Circulating market capitalization must be over 10M MATIC.
  • Protocol token must have sufficient Polygon DEX liquidity to support inclusion. If a token has insufficient liquidity, it will be removed from the index during the determination phase.
  • Protocol must have at least 2 months history of operation and its token must have at least 2 months of price and liquidity history.
  • An independent security audit should have been performed on the protocol and results reviewed by the product methodologist. In the case that no audit has been performed, the methodologist applies subjective judgement of the protocol based on assessment of the criteria above and communications with the team.
  • In the event of a security issue the methodologist will work with the project team to understand the issue and any effects to P10 holdings. The team is expected to provide users of the protocol with a reliable solution and adequate documentation to ensure transparency about any incidents.

The P10 Index will use circulating market capitalization to determine the weight of each token included in the index.

The weight of each token within the index will be calculated as follows:

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The methodology for P10 will include a 20% weight cap for any one project to ensure that it provides diversified exposure.

The initial tokens that we propose to include according to the methodology are as follows:

Product Circulating Supply Allocation Description
Quickswap 159,753 13.40% DEX
Dfyn 18,418,617 5.84% DEX
Aavegotchi 47,976,705 19.01% NFT
Cometh 90,793 2.35% DeFi & NFTs
Adamant Finance 1,352,852 6.25% DeFi
Decentral Games 286,465 9.71% Metaverse
SportX 79,733,333 10.45% Sports
Telcoin 56,969,406,904 20.00% Payments
Qi DAO 16,156,540 3.93% DeFi
UniLend 52,885,000 9.05% DeFi

Maintenance

The P10 Index is maintained quarterly in two phases:

  • Determination Phase: During the determination phase, the tokens being added and deleted from the index calculation are determined during the final week of the quarter and published before quarterly rebalancing.
  • Rebalancing Phase: Following publication of the determination phase outcome, the index composition will change to the new weights during the first week of the following quarter.

We acknowledge current limitations in the TokenSets Polygon deployment currently limit the ability to rebalance and for that reason we are selecting a quarterly rebalance, however once sufficient development and testing has been conducted, we intend to rebalance monthly.

Fees

A more detailed fee structure will be determined before the DG2 vote and subsequent product launch. However, Polygon’s methodologist portion of the fees generated by the P10 Index will be streamed directly to the Polygon Ecosystem Development Fund, to support the continued growth of the Polygon Ecosystem. We also hope to direct a portion of the methodologist INDEX rewards earned from the P10 Index to a bounty program to encourage the further development of IndexCoop and TokenSets technology on Polygon.

Author Background and Commitment

Polygon (formerly known as Matic) is a protocol and a framework for building and connecting Ethereum-compatible blockchain networks. Polygon’s open-source technology provides developers with the tools to readily deploy a stand-alone network or to a secure sidechain, such as MATIC, that leverages the security of the Ethereum network via smart contracts. Polygon maintains its security from Ethereum, however it uses a Proof-of-Stake consensus layer to allow for up to 7,000 transactions per second, helping bring much needed scaling to the Ethereum ecosystem.

Polygon is committed to making DeFi, NFTs, Dapps, and all kinds of blockchain based technology accessible to everyone. This mission is deeply aligned with the Index Coop’s strong desire to make crypto investing safe, easy and accessible for all.

Michael Mtenga will be the internal methodologist for Index Cooperative. He has been constantly contributing for the Index Coop since February 2021. His contributions include initiatives with PoolTogether, Perpetual Protocol & Rabbithole. Furthermore, he has been a key member within the business development working group (BDWG) creating and leading the DeFi Partnerships vertical. He also serves as the protocol ambassador for Maker DAO.

The P10 Index methodology was jointly developed by core members of the Polygon Team and BDWG, and is hopefully the first of many collaborations between the Coop and external protocols.

Special thanks to @oneski22 from the Simple Indices Pod and BDWG for advice and feedback.

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Confirming I have edited and updated this post as requested by @oneski22

p.s. 100% in support of this proposal given its clear distinction from our other products.

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This is awesome - love to see it brought forward via collaboration between Polygon team and Index Coop contributor @Mringz!

This product is a no-brainer to me. Excited to see it pass and launch!

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Of the 10 proposed tokens, how many have not had independent security audits performed and published? The second clause in this paragraph leads me to believe that not all ten tokens have cleared this hurdle, but I realize the exact language could be borrowed from other proposals so I could be wrong here.

As a community member and likely investor, I would like to better understand the risks that I may be taking on by holding an index comprised of un-audited protocols (if any). Thanks!

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100% in strong support of this proposal. While it may take a while for this index to reach full feature parity with our mainnet indices, I hope the coop builds a great long-term partnership with Polygon and the Polygon ecosystem.

Should the methodologist and community be content with a limited feature set at launch, I see no reason why we shouldn’t move this forward!

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Wow, this is incredibly exciting! The Telcoin project is honored to be included in the index.

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The Cometh team stands ready to help, hop on public calls, disclose and share anything relevant to demonstrate our proficiency and the seriousness of our project!
Thanks again to the Polygon team for suggesting our project in this index!

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Hi @allan.g this is a standard clause we have seen in similar index proposals

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Thought it looked familiar :grinning_face_with_smiling_eyes:!

So is it safe to say that all 10 tokens in this index have undergone independent security audits, with the results being published publically?

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Looking through the list, there are a number of projects deployed on Polygon which have significant TVL/usage, but aren’t included. There are also some projects that aren’t Polygon only (Telcoin, Dfyn, UniLend, SportX, etc). So I can’t quite understand why these multi-platform projects are included, where others are not. On this basis, what would thoughts be on including Balancer / BAL on this list?

Balancer has a growing deployment on Polygon: Balancer and fits all the criteria listed, although is a few weeks away from having 2 months deployed on Polygon. It’s fully audited, and v. highly regarded/trusted by the community in that regard.

edit: if the idea is the index is only for projects that have the majority of their activity on Polygon, perhaps that should be included within the criteria list? Currently Balancer, Curve, Aave, etc all meet the criteria, amongst others.

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Hey @bakamoto! Thanks for your feedback.

I definitely understand where you are coming from and these questions are important for refining the index so it achieves its goals. The goal here is to showcase the best projects native to Polygon as you mentioned this can take many forms like liquidity, size of polygon community, protocol origin or general polygon native support.

The goal is also not to include the projects we already have in our existing products as we are also trying to build liquidity with all our existing products on Polygon as well. So trying to minimize that as much as possible. I believe we already hold BAL in DPI.

We also are working closely with the Polygon Foundation and these are their initial recommendations. The feedback that we get from this post will be considered before we take this proposal to on-chain vote (DG1).

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Very excited to see Telcoin in the list.

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This is the index I did not know I needed. At least 5 tokens from my watchlist.

Fully support this proposal. Good job from Polygon, @Mringz and @oneski22. Fantastic that Polygon have chosen to partner with Index here. I hope to see it progress swiftly, there are some tokens in this index that I expect to make significant gains within the next 8 weeks.

Furthermore, superb to see two of the projects represented in the posts - @jdetychey @TelcoinParker.

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Telcoin representing! This is great!

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Makes sense! From an investors perspective though, if I’m Bullish on Polygon as an ecosystem, wouldn’t I want exposure to the tokens doing the greatest activity on the Polygon network, rather than just what’s natively built there?

If it’s “created for Polygon specifically”, should add that as key criteria, but that would exclude some of the current projects as well.

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I really like the theme here – great work @Mringz / @AsifKhan / @oneski22 ! Looking forward to future discussion on it. Two follow ups…

Piggybacking a bit on @bakamoto 's theme – I’m wondering how you’ve defined “first class” and if that’s the criteria that’s restricting Balancer & Aave from inclusion in the index?

Wondering what specifically the limitations are in the feature set? It sounds like rebalancing would be a manual process – and I’m wondering what else might come up here from the engineering side!

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This is awesome news for all Polygon holders!

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LOVE that you guys are including a decent GHST weighting in this given the soundness of the team and project.

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Two quick thoughts.

First, whether we should include MATIC. If the purpose of the index is to have a single asset which captures exposure to Polygon ecosystem, it seems MATIC should be included. If we do, I suggest fixing the weight to 10%-15% - otherwise it will dominate allocation by market weight.

I believe the strongest counter argument would be it is relatively easy to add MATIC in addition to this asset. Strongest pro argument IMO is adding MATIC transforms the product to a single click “easy button” for Polygon exposure and makes it more comprehensive.

Second, I echo the need for clarity on criteria - especially around why some major protocols are excluded. I’d like to suggest metric based filters around Polygon primacy. This can take the form of some threshold a protocol must pass, such as 70% or more of total active users must come from Polygon.

I believe this falls within the spirit of the original proposal and help differentiate it compared to other products.

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+1 to include matic in the index.

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