Index Coop - DAO launched to democratize access to complex crypto strategies

Nick Sawinyh on 04 Aug 2022

Hello! What’s your background, and what are you working on?

Hey there! I’m coolhorsegirl, and I’m the Content Manager at Index Coop. My background is in research, editing, and publishing, and I’ve spent the last few years freelancing those while finishing up a few degrees. After getting lucky with some cryptocurrency investments early on in the crypto space-time continuum, so to speak, I knew it’s what I wanted to do.

I grew interested in DAOs and heard from what felt like everyone in the space that Index Coop is “the best DAO” before I even understood what that meant. Also, indices is a really unique primitive in DeFi given their popularity in TradFi yet fairly unexplored nature in DeFi. DAOs make so much sense—they democratize the operations behind DeFi companies, completely in line with the objectives of decentralized finance and web3. Within Index Coop, all major decisions are made via our governance process using our native token, INDEX. While there are tons of DAOs, there are not many DAOs that ship products, especially at such a high frequency and quality. We’ve released more than 15 products in under 2 years.

Index Coop is a decentralized autonomous organization (DAO) that powers, launches and maintains structured decentralized finance (DeFi) products and strategy tokens. As part of the DeFi ecosystem, Index Coop builds sector index products, leverage and inverse products, and yield-generating products that use smart contracts on the blockchain. As of August 2021, Index Coop supported 79.3% of on-chain cryptocurrency structured product total value locked (TVL).

Index Coop makes DeFi simple with structured products that the next wave of adopters understand. I love that we make crypto products that can onboard your grandma into crypto, but they’re also useful to long-time crypto investors interested in simplifying their portfolio to be more cost-effective while maintaining the same high-level strategies..

What’s Index Coop backstory?

Index Coop was created on October 6, 2021 by Felix Feng, the Co-Founder and CEO of Set Protocol. Our flagship product, the DeFi Pulse Index (DPI), was a collaboration between DeFi Pulse (now called Scalara) and Set Labs, a subsidiary of Set Protocol. That makes us one of the oldest DAOs in the DeFi ecosystem, also with one of the straightforward motivations: to unlock prosperity for all with products that simplify DeFi.

Indices are a rare breed in crypto, still. Even though 18% of the global stock market is held in indices, less than 1% of DeFi TVL is held in indices. We’re looking to change that. It’s a huge opportunity, for both us and customers—indices abstract away having to pick winners for less experienced users and they help even experienced users save on fees via automatic rebalancing.

Since we’re a DAO, we launched with a native token (ERC-20) called INDEX that enables community-led ownership and governance and has a total supply of 10 million tokens. So initial allocation was split between founders—Set Labs and DeFi Pulse—with 30% and the Index Coop community with the other 70% of tokens. Almost immediately, we began an airdrop to past holders and liquidity providers of DPI. This helped us gain a bit of a following, building up the Discord and all.

I think that since we’re a DAO, people were excited at the opportunity to actually drive the success of the project they held via INDEX. We saw people popping up on our governance forum near constantly with ideas for indices. One of the first, the Metaverse Index (MVI), which we ended up launching about 6 months later, was proposed within the first month of our existence.

So within about our first year we’d launched four products, all thematic indices. Index Coop raised $10 million in investments from venture capital firms, including Sequoia Capital, Galaxy Digital, 1kx, DeFiance Capital, Blockchain.com Ventures, Assembly Capital, 1confirmation, White Star Capital, and Wintermute during its first raise in September 2021. Soon after, we reached a total value locked (TVL) high of $550 million in November 2021.

What went into building the Index Coop?

We released DPI on Mainnet at the same time we launched Index Coop. That said, the smart contracts behind DPI were 2+ years in the making already when DeFi summer came around in 2020. When we released DPI, an exemplary product collaboration between Set Protocol, DeFi Pulse, and the newly formed Index Coop, we were riding on the highs of DeFi summer. Since then, we’ve reached a TVL of more than half a billion dollars a year later in Fall 2021.

Thus far, all Index Coop products are built on Set Protocol, who began idealizing Index Coop in 2018. We raised venture capital funding through the bear market, including some of the biggest names in DeFi investors like Sequoia Capital, Galaxy Digital, 1kx, DeFiance Capital, Blockchain.com Ventures, Assembly Capital, 1confirmation, White Star Capital, and Wintermute.

Keeping user funds safe is our top priority. We only build on the best, battle-tested money legos. We’ve been audited by the best, twice, with those audits publicly available. I like to use this example of how we ensure safety: We only use Compund and Aave for flexible leverage indices (FLIs). The same contracts that were hardened through lots of FLI rebalances to keep volatile ETH safe during 2021 volatility are used to execute Interest-compound ETH Index’s (icETH) leveraged staked ETH position.

What’s your business model?

Index Coop builds structured products that make crypto simple, safe, and accessible for our users.

We established proof of demand pretty early on in our existence, launching simultaneously with our flagship product, DPI. Since we’re a DAO, we build what passes our governance process so our customers have a large say in future products. While pair market research with the products our customers rally behind in our governance process. For example, on our forum, you can decipher which potential products have more and less demand if you scroll through product proposals and look at the quantity and quality of comments on each.

We’re built around simplicity. Since DPI and our other thematic products, we built flexible leverage indices (FLIs) to abstract a leveraged ETH position on Compound into a simple ERC-20 token. We’re now focusing on our third sector of products: yield-generating products, beginning with Interest-compounding ETH Index (icETH) and Market Neutral Yield ETH (MNYe).

Because we build products based around simplicity, they cater to experienced crypto users just as much as they do to inexperienced crypto users. Experienced crypto users can use our products to simplify their positions, which is both convenient and cost-effective in terms of trading fees and taxes. And inexperienced crypto users can use our products to buy into several DeFi projects without having to pick winners because of our indices are inherently diversified.

What’s your position on the regulatory landscape today?

Over the last few months, we’ve seen increasing regulatory scrutiny on crypto companies. And we’re wide-eyed observers in the face of crypto regulation. We work consistently with lawyers to maintain the legality of our products and operations. We’re lucky that regulators, especially in the United States, seem to prefer decentralized operations like ours over centralized ones. We’ve worked over time to dilute the core team as fast as possible, beginning with an aggressive emission schedule in the first liquidity mining program and token supply distribution to early adopters within the first few months of our existence.

As a DAO, Index Coop feels confident that we maintain an adequate degree of decentralization to appease regulators. We’re optimistic about the regulatory landscape as it pertains to us and we’re confident that our thumb is on the pulse should anything unexpected come to the space.

What are your goals for the future?

In the short-term, we’re building. All products run through our governance process and get built immediately, with an average one-month turnaround time from approval to launch. We want to build what our customers want; our forum is open to proposals from anyone. We’re focusing on building sustainable yield-generating products, like Interest-compounding ETH Index (icETH) and Market Neutral Yield ETH (MNYe).

Another goal of ours is to make it as easy as possible for end users to access our products. We’re listed on a few centralized exchanges already—Coinbase and Gemini—and we’re looking to get on a few more before year’s end. It’s important to us that you don’t have to be a full degen or active crypto Twitter user to understand and buy our products.

We’ve found some degree of sustainability throughout the last bear market, raising $10 million in investments and building on schedule. During this bear market, we plan to continue shipping top-quality structured products, business as usual.

What are your future thoughts for the DeFi market?

I’m bullish, especially for DeFi indices. As the crypto market matures, normal people will want diversified exposure to DeFi without having to spend time and gain knowledge to pick winners. It really is inconceivable that we’ve gone this long using TradFi, where you don’t even own your money. Grievances with traditional financial problems, like excessive payments, low interest rates, and long transaction time, are avoidable with DeFi. All these reasons make DeFi a clear solution for the future.

We’re also excited about DAOs. In recent years, we’ve seen the entire workplace disrupted; this provided a solid incubator to try tsomething new. Index Coop has taken advantage of this by sourcing talent from all corners of the world, working in tandem towards one goal decided upon democratically.

In all, our mission is to help normal people get some utility from DeFi in their actual lives. If our products help users become more financially stable or save time while investing in DeFi in a way safer than many DeFi outlets, we are satisfied.

Where can we go to learn more?

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About the author
Nick Sawinyh
Nick Sawinyh is an LA-based crypto entrepreneur. After having spent over four years in the blockchain industry, Nick founded DeFiprime in 2019, with the idea to provide information about emerging DeFi ecosystem. He owns modest amounts of various cryptocurrencies.

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