About Index Coop

Index Coop is a crypto investment DAO providing investors the broad access to crypto investment vehicles from token baskets to leveraging. An investor in the crypto space faces two primary effort costs. First, for holding Ethereum based tokens like $AAVE or $YFI an investor needs to understand the various dynamics to get good returns on his portfolio of tokens. Second, for investing in any theme like the Metaverse or DeFi or Data-Based platforms or FLI series, investors need to have different platforms to hold assets.

Index Coop solves these problems by acting as a manager of various index assets across crypto themes. Index Coop has a community of diverse and knowledgeable members with backgrounds in DeFi, engineering, and non-technical fields like product management, marketing and sales, experts who contribute to the groundwork that underpins the Index Coop operation and an infrastructure based on Set Protocol's smart contract. Index Coop intends to increase the adoption of index products to a larger audience and be a market leader in the crypto index products space. Index Coop’s strategic partnership with DeFi Pulse and Set Labs is pivotal in achieving these goals. 

The major products on Index Coop are broadly categorized into the following:

1. DeFi Pulse Index (DPI)
2. Metaverse Index (MVI)
3. Flexible Leverage Indices (FLI)
4. Bankless BED Index (BED)
5. Data Economy Index (DATA)
   

DeFi Pulse Index (DFI)

DFI, built by an external methodologist - DeFi Pulse, is one of the most famous products on Index Coop. It is based on a set of Decentralized Finance (DeFi) tokens on the Ethereum Blockchain and was designed to track the performance of these tokens. The underlying tokens that make up this index are 15, including UNI, AAVE, MKR, LRC, SNX, COMP, YFI, SUSHI, REN, RGT, KNC, BAL, BADGER, FARM, INST. Thus, DPI holds the basket of DeFi assets and can be viewed as a benchmark for how the Defi industry is doing as a whole. Their applications include providing various services within the DeFi space.

For example, $AAVE is an open-source liquidity protocol for earning interest on lending and borrowing interests. (To view their individual and index values, kindly visit this link)

According to Scalara, there are criteria for selecting tokens to be added to DFI, and some of them include:

• token must be built on the Ethereum Blockchain
• token must have a Decentralized Application (DApp) or protocol listed on the DeFi Pulse Leaderboard
• token must be a bearer instrument
• tokens regarded as security tokens must not be accepted.
  

Other requirements such as, token supply, traction, user safety, and maintenance are considered when approving the token to be a part of the DFI set. To determine the value of DFI at any point in time, an index calculation is done. This calculation takes into account a fixed weight factor (circulating supply), price of the token in USD and Index Divisor using the Laspeyres formula (Click here for more information on the methodology for DFI).

Metaverse Index (MVI)

MVI was designed to track how far entertainment and business have shifted from real life to the virtual world. It tracks economic activity that takes place within this new virtual world, taking place on the Ethereum blockchain to stay updated on trends occurring in digital reality as they relate to traditional asset classes like equities and commodities.

The underlying tokens in the MVI set are 16. They include: Illuvium, Axie Infinity, Sandbox, Decentraland, Enjin, Rally, WAXE, Audiu, Yield Guild Games, Decentral Games, Whale, Terra VirtuaKolect, Eternity Chain, Rarible, NFTX, REVV. To be part of this set, certain standards need to be met, with the primary being that the token must be on the Ethereum Blockchain and fall within any of these categories: Non-Fungible Tokens (NFTs), Entertainment, Virtual Reality, Augmented Reality and Music.

Also, the index calculation to determine the value is such that it takes into account the root market cap and liquidity weighting (Details on the methodology for this index can be found here).

Flexible Leverage Indices (FLI)

Whenever exposure is made to leveraged tokens, there is usually a fear of liquidation if price movements go in opposite directions until it reaches the liquidation point. In some cases, collateral positions need to be monitored closely. However, with FLI, exposure to specific leveraged tokens is made possible without the risk of liquidation or collateralized debt positions.

Available FLIs include the following:

• ETH 2X-FLI
• BTC 2X-FLI
• ETH 2X-FLI-P
• Inverse ETH 2X-FLI (iETH 2X-FLI)
• MATIC 2X-FLI
• Inverse MATIC 2X-FLI (iMATIC 2X-FLI)
  

For more information on the methodology for this index, click here.

Bankless BED Index (BED)

BED was designed to track performance across three major crypto themes associated with the store of value, programmable money, and decentralized finance. The tokens include wrapped ETH, wrapped BTC, and DFI. These three have an equal weighting parameter of 33.3% (for more information on the methodology, click here).

Data Economy Index (DATA)

Data as we know it is increasingly becoming more critical as online interactions increase. In Web3, the data economy is the second-largest and the DATA Index provides access to this economy via a basket of 7 tokens. The underlying tokens are Filecoin (renFIL), the Graph (GRT), Basic Attention Token (BAT), Livepeer (LPT), Ocean Protocol (OCEAN), Numeraire (NMR), and Chainlink (LINK).

More on the methodology for this index can be found here.

Index Coop Governance

The governance token for Index Coop is $INDEX, and it gives holders the right to vote for or against proposals on Snapshot, like determining which products are built in the community. Also, each token signifies a share in the future value of the DAO. Other areas where holders may vote are smart contract upgrades and allocation of treasury funds.

The adoption of holders drives the value of $INDEX. The token is distributed to people who contribute to the growth of Index Coop. These are both community members (investors and contributors) and partners.

Index Improvement Proposals (IIP)

For every change made to Governance, Product, Community, etc., a proposal is submitted for consideration. For Index Coop, this proposal is known as Index Improvement Proposal (IIP).

The process of moving from submitting an IIP and its adoption goes a long way.

It involves:

1. Discussions on Discord or Forum
2. Writing a formal proposal (IIP)
3. IIP is reviewed by a Governance rep and queued for snapshot voting after 48 hours
4. Once live on Snapshot, voting goes on for 72 hours
5. Implementation is carried out depending on the outcome of the voting process
   

Meta Governance

Meta Governance speaks to the ability for community members (HODLers of INDEX in this case) to be able to vote on governance proposals of underlying protocols allowing them to actively participate in the building process of the individual tokens.

Meta Governance Voting

Since the future of INDEX is primarily dependent on the growth of the underlying tokens that make up a set, it makes sense that holders of INDEX can vote by reaching a quorum on the proposals submitted to underlying tokens such as AAVE, COMPOUND, and UNISWAP.

Some examples of proposals by underlying tokens are Compound Grants Program, Migration to Governor Bravo, Uniswap Providing Voltz with v3 Additional Use Grant, Governance Process Revamp on Balancer, and Adding ENS to Aave V2.

The Meta Governance Module allows INDEX holders to vote on those individual projects. To achieve this, the following process will follow:

• Once a governance vote is called, the proposal is duplicated on Index Coop's snapshot page, and community members vote for or against it.
• Voting for INDEX members ends 24 hours before the actual proposal closes on the token's snapshot page, and If 5% equity is reached, the Index Coop multisig will vote according to the majority.
  

The proposal can be found via this link and this link for more information.

The introduction of Meta Governance is a game-changer for Index Coop because it gives members direct influence over the future of their investments even though they hold passively.

Meta Governance Committee

This committee was set up so that in any event where the community does not reach the 5% quorum, a full delegation of votes will be given to the committee to vote on behalf of the community.

The proposal was developed because most of the votes on underlying tokens go without enough votes. From the analysis, only 25% of the votes reached the quorum between April - June, 2021. It meant that 75% was left on the table hence the need for the committee.

For more information on this proposal, read via this link.

More Members Added as Multisig Signers

Prior to February 2022, 3 of 4 members of the Meta Governance Committee (MGC) had to be present to execute the quorum reached within the 24-hour window of proposals for underlying tokens. However, the execution mainly was not completed as up to 3 members were not usually present to execute, making the Meta Governance process ineffective.

To this end, this proposal pushed for the members to be increased to 7 and having 3 of 7 members present to ease the vote execution. This means they would be given access to the Gnosis Safe wallet to complete the signing. Only long-serving and loyal community members can be added to the MGC.

More information on the proposal can be obtained on Snapshot here.

Voting Strategy

All votes are made by INDEX holders when Index Improvement Proposals are developed and put up on Snapshot. As stated above, it takes 72 hours for voting to be completed and a consensus reached.

For all IIPs to pass through successfully:

• 5% or more of circulating tokens must participate
• 50% or more of votes must be FOR
  

Also, For Decision Gate 2 votes to pass through successfully:

• 10% or more of circulating tokens must participate
• 60% or more of votes must be FOR
  

Voting for all Critical Decisions

Hiring Decisions

As of July, 2021, five contributors were full-time contributors at Index Coop. However, to harness the talent pool within the community and strategically position the organization for growth, there needed to be an increase in the number of full-time contributors. A proposal was developed to vote 28 members of the community as full-time contributors and compensated at different levels of participation. This decision was voted for successfully and has now taken effect. More information on this proposal sits here: Index proposal: IIP-128: Priority Hiring Round #1

Also, two community members were selected as a result of this proposal (Index proposal: MGC Election: November 2021) to become members of the Meta Governance Committee (MGC) to vote on behalf of the community when a quorum is not reached for Meta Governance votes. A stipend of $1,500 is to be paid monthly for six months which is the approximate service period for the proposal.

Finally, as a DAO that develops smart contracts for its product, this proposal sought the vote of members to get a web3 Engineer to help build out user interfacing products. The offer provided $12,500 in INDEX per month and a 0.075% of total INDEX supply (7,500) vesting over two years with a six-month cliff. More details on the decision in this proposal can be found here: Index proposal: IIP-75: Web3 Engineer - Full-Time offer.

Treasury Decisions

The operations account held as of September 2021, nearly one million Dollars ($1M). This amount is believed to grow to higher amounts in the future because streaming fees are channeled directly to the operations account. Also, transactions need to be approved in a timely manner over a live call hence the proposal to vote for an increment in the multi signers from 5 to 8, with 3 being available to form a quorum and approve the transaction. Two of the members of the operations multi-sig were removed, and six were added to make up the number. More details on this proposal can be found here: Index proposal: IIP-88: Update Operations Account Multi-sig

Another proposal for this section is the temporary decision-making responsibility for the funding council for Q4, 2021. This was primarily for proposals from working groups requesting funds to run the quarter. The proposal is submitted on the forum, and a final vote is given on the final proposal posted on the forum. The funding council was given the power to fund or not fund a proposal based on the community's decision FOR or AGAINST the proposal, respectively. This decision gave the council a clear path to know who to release funds within that quarter. More details on this proposal are seen below:

Index proposal: IIP-85: Temporary Funding Council Decision Making

Redirecting FLI revenues from the Community Treasury to the operations account was only possible via community voting. A proposal was developed for community members to vote to move these funds because of the perceived risks involved in leveraging. Usually, an automated system should convert FLI to ETH before hitting the treasury account. Still, due to developers’ heavy workload, the way to do the conversion is manually and periodically. From experience, if this conversion is done from the treasury account, there are losses since it is manual; hence, the next option is to send the funds to the operations account and do the conversion from there. More detailed information on this proposal is here: IIP-72 Redirect FLI Revenue to Operations Account

NFTs and the gaming sector are fast-growing and as of 2021, there was a massive adoption of the products in that space. MVI, an index product for tokens within the metaverse and NFT world, needed to be promoted via various channels to drive the adoption of MVI. This proposal sought a budget of $128,000 from the community treasury to implement and experiment on growth ideas for MVI. The community voted for the budget to be approved, and MVI has grown to more significant heights. More information on this proposal is here: IIP-48: MVI Growth Budget.

Process Decisions

Index Coop has proven from the past to be one of the most significant vote constituents when voting Meta Governance proposals. On Compound, for example, Index Coop is usually among the top 12 votes, and more protocols are seeing how relevant Index Coop is to underlying tokens in terms of influence. It is expected that other protocols will approach Index Coop to use their voting power to create a proposal that will serve an underlying protocol.

A proper process is required so that every Meta Governance proposal fairly as they are all subjected to the same approval process. This proposal made that process possible. More details on this proposal can be found here:  IIP-80: Meta Governance Proposals (MGP) Process [Second Submission]

Product Decisions

Due to a crash in the price for both BTC and ETH on May 19th, 2021, Index Coop needed to be sure they would be able to liquidate FLIs if there was the need for that. However, the pricing was obtained from Compound’s oracles which gave high gas fees due to its understanding that the prices of BTC and ETH were significantly higher than what it was trading for. This meant that had prices continued to crash, Index Coop would not be able to liquidate its positions due to price differences. Also, FLI trades on Sushiswap failed because Compound was giving artificially high prices. Upon consideration of that event, it was clear that was a loophole in Compound’s Oracle, and so FLIs needed to be upgraded to a different oracle.

This proposal was developed to use Chainlink oracles and was voted FOR by the community to prevent the previous occurrence on Compound’s oracles. The details can be found here: IIP-47: Upgrade FLI to use Chainlink oracles.

Treasury

The $INDEX token which is the governance token has a sharing system and is broken down into the following:

• 1% allocated to the historical airdrop for DPI holders
• 7.5% allocated to the Index Methodologist program over a period of 18 months (starting 60 days after launch)
• 9% allocated to the 60 day liquidity mining program
• 52.5% community treasury (with 5% available immediately and 47.5% vested over 3 years)
• 28% allocated to Set Labs Inc
• 2% allocated to DeFi Pulse
  

Funding Council (Treasury Committee)

A proposal was developed to set up a committee to manage the distribution of funds to contributors across various levels of development of Index Coop.

10,000 INDEX was set aside for a 3-4 month trial period for contributors to get rewarded for work done.

The major reason for this was to make community members feel motivated to continue to contribute to the growth of the DAO.

Also, three main values drive the committee's work;

• Fairness so community members feel the reward process is fair based on contributors’ work.
• Sensibility such that the committee spends funds wisely for the development of the community.
• Flexibility which takes cognisance of the layers of contributions as work progresses.
  

To learn more about this proposal, please visit this link.

Conclusion

Index Coop, through its crypto indices (e.g., DPI) offer tangible value to investors allowing them to diversify their investments across multitude of crypto investment vehicles. Along with risk diversification, it takes away the investment complexity that comes with managing the debt, i.e., paying down the interest rate and monitoring the collateral constantly, while also simplifying the entire investment process. The offering is particularly useful for risk-averse and new to the crypto investment investors, who find it hard to pick winners and are usually looking for a third-party support in investment decisions. 

Along with a great product, Index Coop is one of the true pioneers in the DAO space. There are many things it can teach other projects.

We hope this article provides some pointers to people planning to start a DAO as well as gives some insight into how a decentralized autonomous organization can be managed efficiently.