Elliott Watts
The Index Coop
Published in
15 min readAug 12, 2021


The Index Coop has performed well in challenging market conditions throughout July. With overall gross profit growing 7.5% in June, while revenue grew 6.5%, highlighting better capital efficiency due to lower liquidity mining incentives which dropped 14.5% MoM. The treasury has seen an upward growth trajectory which currently stands at a total of $57.7m.

This is a result of a slight recovery in market conditions with INDEX closing at $29.77. As of 31 July 2021, the Treasury holds $49.1m in INDEX tokens (85.1%), $7.8m in USDC (13.5%), $390k in DPI (<1%), $345k in ETH2x-FLI (<1%), $45k in BTC2x-FLI (<1%) and $24k in MVI (<1%) see below. Index Coop is currently exploring ways to diversify our holdings to manage market downturns better. The Index Coop has seen continued growth since genesis, with revenue totaling in excess of $1.5m. Revenue has grown to $307k in May, this increase is exclusively growth on DPI, revenue has remained consistent for all other Index products. DPI generated $113k in streaming fees, an increase of 18.1% when compared to June. The leveraged product suite accrued $187.5k in fees generated; the contract was called on the month-end date, fees not claimed are negligible. It was positive to see a reduction in liquidity mining costs within the month, the greatest expense to the DAO by 14.5%. This reduction has not seen a significant drop in unit supply, with total incentivized unit supply now only totaling 6.4%.

This month ​​Several members of Index Coop’s team attended ETHCC in Paris. The primary reason for attendance was to interface with Index Coop investors and further evangelize the full-suite of Index Coop products. Over the course of the conference, the IC team was able to speak with a vast section of the Ethereum community including speaking on panels and interfacing directly with some of the most important figures in crypto. Key takeaways from the conference include the need to focus on recruiting top-tier developer talent globally as well as the need to re-focus efforts on recruiting and retaining world-class methodologists. Events such as these are essential to developing the future success of the DAO and we are excited to attend more in the future.

Key takeaways;

The treasury continues to receive periodic income from a vested token contract, with 460.8k INDEX tokens becoming available between now and October 2021, another 1,425k tokens in the following year, and 950k tokens in the final year. The 1 year vesting contract started with a balance of 2.38M INDEX tokens and has been drawn down periodically as tokens are made available. The table below details the remaining balance within the 1 year vesting contract that will be released to Index Coop treasury. At today’s prices*, the remaining balance within the vesting contract is $84.4m. The Index Coop uses these funds to create products, fund working groups, and promote the DAO. These funds are used to secure the future success of the organization. Amounts vested can be seen below.

P/L analysis

As can be seen below, the Index Coop profit or loss account continues to improve monthly. Revenue spiked during April’s market bull run, which then turned turbulent through to May. However, July has seen the market stabilize and start a positive upward trend. This is highlighted by improved streaming fees and product price improvement across the board — shown by increased treasury token holding value.

The P/L currently shows a loss of $6.1m. This is largely a result of LM incentives since genesis which were initially needed to bootstrap new products to enhance user experience. The community has decided to reduce incentives on a scaled basis; the main discussion points are around the sustainability of liquidity mining programs, given that costs far exceed revenue generated. July saw a 25% incentive reduction with planned reductions for August from 12,758 INDEX to 3,000 INDEX. MVI mining will remain unchanged given its infancy in the product life cycle model.

When excluding liquidity mining costs from the P/L, the Index would be generating a loss of $814k, this is a positive outlook for the future given that the first three months since genesis streaming fees were very low in comparison to June. Tapered LM costs and strong revenue growth paint a positive picture for the future success of the DAO.

The Income Statement above is presented in USD and records the USD value of each transaction at the time each transaction occurred. For instance, if INDEX tokens are transferred from the treasury to a merkle contract for distribution to contributors, the USD value of the transfer to the merkle contract is recorded. The tokens are priced using CoinGecko USD closing price on the day the transaction occurs.

The streaming fees for each product are detailed below:

  • DPI streaming fee is 0.95%. This is split 70/30 between the Index Coop and DeFi Pulse. The total streaming fee has been shown within Revenue within the income statement, and the DeFi Pulse share is shown as a cost.
  • ETH2xFLI and BTC2xFLI, the Flexible Leverage Index series, each have a streaming fee of 1.95% (195 basis points). The revenue generated from the streaming fee is split 60/40 between the Index Coop and DeFi Pulse respectively. Similar to DPI income, revenue has been shown in totality, with the DeFi Pulse portion shown as a cost.
  • MVI streaming fee is 0.95%

Product performance — DPI, ETH2xFLI, BTC2xFLI, and MVI

The Index Coop is continually improving on Key Performance Indicators (KPIs) month on month, with AUM growing to $227.5m. DPI continues to be the main contributor, with a current market value of $139.5m. ETH2x-FLI has grown to $68.1m without incentives, BTC2x-FLI has increased to $8.5m AUM, the Metaverse Index (MVI) has seen impressive growth over the last month with AUM now standing at $9.7m. BED, which was launched on 21st May, totals $1.7m remarkable given its infancy in the market. The Index Coop predicts steady market growth in AUM over the coming months.

We expect revenue to exceed $2m for the financial year to September 30th YTD when taking a forward-looking view on the DAO. The recent market conditions have proved challenging, with revenue down on the spike seen within May. However, continued improvement in unit supply and address exposure is expected to increase, thus generating revenue for the DAO.

DPI whilst it is the DAO’s flagship product it does not on a monthly basis generate the most revenue for the Index. The leveraged trading series — most notably ETH2x-FLI had a surge in fees within April to May, during a bull run in the market, which has seen fees surpass that of DPI. Increased market optimism will likely see further growth in this product for years to come. As a way to expand the product offering, current plans are in the discussion and proposal phase to develop the leveraged trading series within the Ethereum ecosystem. Further discussion can be found here with talks of an inverse FLI series on the horizon, allowing customers to leverage trade ETH in both directions.

Competitor comparisons

In this section, we will look at the performance of our products relative to our competitor’s offerings. We compare each product on various metrics and look at the fees generated to the founding community. Comparison metrics include:

  • Assets Under Management
  • Liquidity within Ethereum ecosystem
  • Daily Trading Volume
  • Annualized Product Fees

Drawing from the below infographic, we can see that DPI and ETH2X-FLI are the market leaders in revenue generation, daily transaction volume, and overall market liquidity, highlighting product-market fit and brand reputation. ETH2x-FLI is significantly outperforming in both fees and liquidity, all AUM is unincentivized. ETH2x-FLI has grown substantially since launch and is expected to exceed $1m in annualized income.

The common theme between the two charts is that there are a clear distinction between small (PieDAO), medium (PowerPool), and large-cap (DPI) products. Typically products with high liquidity generate more trading activity, but the important outliers are the products that outperform in terms of revenue generated relative to trading volume. The leveraged products are an example of this; they have lower levels of liquidity but generate a higher annualized revenue. Both products are in their infancy and expected to increase in liquidity, trading volume, and revenue over time. MVI has seen an increase from previous months. It has greater levels of liquidity than other products such as PIPT and DEFI+L and greater AUM.

Key Cost review

Contributor rewards

The Index Coop has several different ways it rewards its members and contributors. This can be seen by the continued growth of community rewards from $13k in November to $240k in July, just 8 months later. Contributor rewards make up 29.5% of total expenditure. This has grown from previous months due to lowered liquidity mining incentives lowering total expenditure across the board. The community is expected to grow over the coming months, with greater focus and discussion around autonomy within the DAO, discussed more in detail below, generating an environment and rewards structure that focuses on retaining top talent to ensure the future longevity and success of the organization.

It should be noted that there are contributor costs that are not included in these figures due to agreements with individuals as part of the full-time Contributor retention initiative which includes vested tokens not yet included within the income statement. The compensation package is $5k per month, plus vested tokens (two-year lock-up period) at 0.15% of total supply over 2 years for each contributor (total 0.60% of INDEX supply allocated to 4 Index Coop members). Part of the vesting schedule is expected to be distributed in the next month, which will see a considerable spike in contributor reward costs. There has recently been an additional member added to this retention initiative, head of analytics, the remuneration package is slightly different more information and discussion on the topic can be found here;

  • $10,000 USD per month ($5,000 as USDC & $5,000 as INDEX based on standard 20 day TDAP)
  • 0.15% of total INDEX supply (15,000) over 2 years with a 6-month cliff.
  • $20,000 per year stipend for family health insurance and further personal development.

Vesting schedule additional cost per full-time contributor;

Analysis of contributor rewards payment structure

Currently, contributor rewards are shown at the token’s value on the date the transaction is made. An example of this is June rewards paid in July (most paid on 9th July with additional payments made on 20th), creating a disparity between the award amount, which is determined using a 20-day moving average and the actual token price on the date of payment. This has been analyzed below.

As we can see from the analysis, there are several different payment dates within the month. July showed upward price movements in comparison to the 20 day moving averages the awards were granted on. As a result, the actual cost to the index as reflected in the financial statements is $239,889. This has resulted in contributor rewards being $55.5k higher than at the time of the reward. The Index is planning to release a schedule that shows the impact of this price movement. From when contribution rewards have been granted vs actual payment date to determine net effect throughout the year. This contributes and explains to an extent why we see large swings in contributor rewards costs per month as we can see with the month of July increasing 20% from June.

Liquidity mining

Liquidity mining continues to be the largest cost for the DAO on a monthly basis. However, the month of June has seen a significant decrease when compared to previous months. This is a result of lowered incentives following a community proposal to reduce costs. Liquidity mining totals $419.5k a decrease of 14.5% from June. The total liquidity mining incentives are expected to be reduced for August to 3,000 INDEX from 12,758 INDEX in July. This is a positive outcome for the DAO and will, in the long term, help profitability reducing the deficit which currently stands at $6.07m.

We can conclude that a low APR leads to a gradual reduction in LP token staked. While APR trended lower, APR at the month-end was 11.17%. (More details and analysis of liquidity mining can be found within the Dune Dashboard). Since June, we have seen un-incentivized DPI remain relatively consistent, suggesting that the TVL of the DPI-ETH V2 Uniswap pool is more greatly influenced by price movements than the QTY and ultimately the reward value of LP token within the pool.

The reduction in LM incentives has been a long term goal of the DAO, the recent availability of audited Uniswap v3 staking contracts (Developed by Uniswap labs) means that we have the tools available to encourage migration to v3 (as recommended by the INDEX coop research group) and for LP’s to become more capital efficient if they wish.

A single v3 liquidity mining campaign is proposed running for a short duration (15 days) and starting ~ 1 week after the end of v2 Liquidity mining. This should allow LP’s to collect all the potential rewards and then reposition.

When considering LM from a business perspective, we care that our customers can buy our products easily, with low friction, as close to the NAV as possible with the lowest cost, including gas, slippage, and price impact. The financial costs associated with incentivizing liquidity to enable that purchase experience are also a key factor to consider. The move to Uniswap V3 requires much less liquidity, between 3x and 5x less looking at MVI and DPI, to deliver that same experience. Thus, allowing costs to be reduced dramatically, providing more capital efficiency for the Index. Specific plans for each product are detailed in the table below.

Impression mining

Impression mining costs have fluctuated significantly month on month, with the current spending totaling $7,715 a significant reduction in cost from the high in April; the reduction a result of process refinement with only impactful interactions being rewarded.

A team is working on creating a database tracking impressions and the impact this has on key metrics. Measurable targets are essential to ensure impression mining is growing public knowledge of and interaction with Index Coop products. Metrics such as conversion rates to purchase products, website visits, Discord interaction, and ultimately return on investment are all being considered.

The program treats every account as a certified Index Coop influencer/publisher and ascribes an open-ended CPM (cost per 1000 impressions) for certain media types. See the table for values attributed to each platform.​​

Impression mining is seen as a tool to further the success and overall exposure of the Index Coop to ensure future longevity of the DAO and product success for years to come.

Key developments within the month

BitGo listing

“Institutions seek uncorrelated returns from DeFi with risk diversification. Index Coop and BitGo form the ideal partnership to address this need with DPI as a passive instrument. Security and compliance are also key investor requirements and BitGo Trust addresses them through our multi-sig custodial wallets. This partnership provides investors with the opportunity to step into this space in a compliant, disciplined and thoughtful manner.” Thomas Chen, BitGo Director.

On the 15th of July, the Index Coop announced its partnership with BitGo. BitGo is the market leader in custody and security solutions with over $40B in assets under custody focusing exclusively on serving institutional clients. Both Index Coop and BitGo believe that institutional investor interest in DeFi will continue to grow. For this reason, the Index Coop is expanding its structured product offerings as well as making existing products available through as many secure channels as possible.

The Partnership with BitGo will allow growth in institutional investor interest in DeFi, specifically DPI which provides diversified exposure to blue-chip DeFi protocols. As part of growing the Index Coop our Business Development team is constantly trying to further product exposure within the market, increasing AUM and the overall success of the DAO, striving to become the Blackrock of DeFi.

For further reading refer to the announcement document — https://medium.com/indexcoop/index-coop-products-now-supported-on-bitgo-starting-with-dpi-204c4e2837a1

Launch of BED

“Bankless proposed that the Index Coop manage a Set based on an index of Crypto’s most investable assets, BTC, ETH, and DPI, in equal weight. This construction — known as the BED Index or Bankless BED Index — seeks to give safe, passive exposure to a vehicle that captures equal-weighted upside from the most promising use cases and themes in crypto: store of value, programmable money, and decentralized finance” — https://www.indexcoop.com/bed

The BED index was launched on 22nd July and has since performed well with TVL locked at the end of July being $1.7m. This is impressive performance given its infancy as a product. The BED index generates fees for the Index as a streaming fee of 0.25% which is split 50/50 with Bankless DAO and the Index Coop. Similar to that of the other products the contract will be called at the end of the month to minimize the amount of accrued income that would need to be calculated at month-end. The Index sees positive growth potential for the BED product and looks forward to announcing positive results in the future.

Creation of Operations account and stable coin reserve

An important milestone within the treasury working group has been reached with the successful implementation and creation of the operations account and subsequently a proposal to allow the TWG ability to deploy its stable coin reserve strategy. Allowing parts of the treasury to become productive, generating a return of the stable coin holdings. The main vision is that the operations account will be able to fund and manage working capital. The amount of working capital to hold in this account is an iterative process, starting small and increasing with time as the DAO is comfortable with how the account is operating. The first initial injection of capital into this account is the $500k of USDC with $250k being diversified to DAI upon receipt for diversification purposes.

The Funding of the stable coin reserve is equivalent to 3 months of anticipated USD expenses, with the goal to ensure that the treasury is sufficiently capitalized to address the expenses as they arise avoiding poorly timed native token sales to fund working group initiatives.

The role of the Operations Account is to:

  • Identify the primary sources and uses of funding
  • Set and maintain target levels of stable coin and high-quality liquid assets like ETH
  • Provide alternative responses or remediation plans to various scenarios
  • Plan to deal with temporary, short-term, and long-term INDEX price disruptions
  • Operate within working capital risk tolerance levels with oversight from the TWG

This stable coin reserve follows our initial analysis of funding usage and begins the process of establishing a working capital management program. Further reading around specific strategies and guidelines can be found within the stable coin asset management guidance.

Funding council grant completion

The end of June and the start of July finalized the next iteration of working group funds. Every three-month period there is a new round of funding requests that are initiated by the community. This allows the community to grow by reviewing existing working groups and to develop and identify the need for new WG’s.

The Funding Council was awarded a grant of 65,311 INDEX (~$1.59m at the time of funding) from the Index Coop Community Treasury in order to fund Q4–2021 operations. The funds are used to;

This grant is expected to sustain Index Coop operations until the end of Q3–2021 (September 30, 2021). From a treasury perspective, this budget proposal allows future forecasting and monthly reviews of budgeted spending vs actual. These will be separately published through the Index Coop forum.

Creation of the token flow statement

The treasury working group is happy to announce the first token flow statement for the DAO. We have separated out $INDEX transactions and stable coin transactions. The remaining tokens within the treasury do not have significant movement month on month, these will be shown in the full token flow statement in the year-end financial statements.

The token flow statement $INDEX section mainly shows the disbursement of contributor rewards from the Index Coop wallets along with liquidity mining incentives. The receipts represent mostly Index token amounts distributed from the vested treasury working group wallet. It is worth noting that the inflow and outflow are denoted in $INDEX tokens. When reviewing the stable coin token flow all transactions are in relation to the treasury diversification which was completed and raised a total of $7.75m.


Disclaimer — The information presented in this report has been generated using information from Etherscan, Coingecko and internal Index Coop documents as at 31st July 2021. This article does not constitute investment advice and should not be relied upon. The information within has not had an external audit.



Elliott Watts
The Index Coop

Core contributor at the Index Coop with a background in TradFi - Chartered Accountant