Index Coop November 2021 — Treasury Report

Elliott Watts
The Index Coop
Published in
10 min readDec 9, 2021


How well is the DAO performing?

November has seen positive price movements across the product range with a strong month in terms of revenue generated for the Index Coop. November continued the trend higher with $723,710 revenue generated, creating a combined 3-month income of $1.88m. This is the strongest three-month period since genesis. The most notable contributor is ETH2x-FLI which has contributed to over 58% of total fees generated, which is impressive since it was released in March. We attribute the success of the ETH2x-FLI product to traders seeking leverage in current bull market conditions reflecting the strong ETH performance throughout the last 3 months. For our product holders, ETH2x-FLI has generated a return of 43.6%, another notable mention although from a lower AUM base is MVI, across the same time period it has generated 153% ROI for investors. The metaverse index continues to be a strong theme and the DAO is excited to grow its product in this space.

Other products have also performed strongly over the last 30 days. This is in line with general market conditions in the cryptosphere with new ATH’s being hit by Ethereum and Bitcoin generally giving the impression of strong bull market conditions. As a result, we have seen substantial gains across all products when reviewing TVL. But it should be noted that the actual dollar flow which is analyzed below shows a slowdown from September highs. November saw N$F’s decrease significantly however after the turn of the month and the first week through December we have seen a positive uptick in dollar inflows to the protocol.

Financially the DAO has seen continued growth throughout November. Gross profit has continued its MoM increase, improving 12.9% from October highs, the increase in product revenue however was largely offset by rising contributor costs and one of the ecosystem partnerships such as the joint incentive scheme for lending and borrowing of Index Coop products on Beta Finance.

The DAO treasury remains strong with good USDC reserves, however, given the total exposure to INDEX being 71.45% of the treasury the recent drop in the governance token market price has seen an overall reduction of 12.2%. The total treasury balance currently stands at $45.5m. INDEX price closed at $15.89 which has decreased by 31.3% since October. The treasury holds $32.5m in INDEX tokens (71.45%), $9.9m in USDC (21.70%), $829.59k in DPI (1.82%), $916.67k in ETH2x-FLI (2.01%), $90.96k in BTC2x-FLI (<1%), $262.26k in MVI (<1%) and $1.40k in BED (<1%). The treasury also has holdings within the operations account of ETH/WETH 726.68k (1.6%), WBTC 9.19k (<1%) and liquidity within the BED:WETH Uni v3 Pool $280.98k (<1%).

Key developments within the month

The Index Coop has recently just announced the completion of its $10m treasury diversification goal and a further $2.45m with led by Sequoia Capital India, Ventures and White Star Capital. The raise was completed at a token price of $24.26. Investment is essential for the DAO’s continued success and allows us to create a stable financial base for a sound diversified treasury, allowing protection against adverse market conditions.

The Finance nest is also pleased to announce that the Investment account will be funded with $5m USDC which will be actively deployed into various stable coin strategies. This will enable the DAO to make its treasury holding productive creating another revenue stream for the DAO, the opportunity cost was estimated to be ~$450k per annum which equates to roughly 18% of year 1 revenue. This is one step that finance has taken to ensure it meets its overall aim to preserve, sustain and grow. Creating a DeFi Citadel to enhance our community’s ability to survive any and all market conditions, eg: crypto winter, competitor attack, contract vulnerability, DAO hack, black swan event.

November also saw the birth of a thought-provoking proposal by our Finance nest co-leads which explored the ability for the treasury to execute a token buyback and reinvest. The Index coop currently does not have the functionality to be able to buy back its governance token on-market. The ability to purchase, and sell, the INDEX token is something that is essential to maintaining good protocol ownership. On-market buying of the INDEX token also sends a powerful signal to the market that the community feels the INDEX token is undervalued. For Index Coop to realize the goal of becoming a sustainably funded DAO, the community’s assets must be utilized to benefit the community and this includes the ability to transact in INDEX.

November has been a positive month for progression when it comes to developments from a treasury management and financial planning perspective, we have rerouted streaming fees into the operations account so that our positions can be more actively managed. And have also been working tirelessly with the community to create a Q1 2022 detailed budget that will be published in due course.

Vesting schedule

The treasury receives funding from a periodic vested token contract. The one-year vesting contracts have been exhausted and the treasury now moves onto the second-year vested contract which has a total value of 1,425,000 $INDEX tokens and 950 $INDEX in year 3. 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 2nd and 3rd year vesting contract that will be released to Index Coop treasury. At today’s prices ($15.89), the remaining balance within the total vesting contract is $34.3m. 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 note that this is represented in $000;

The treasury after the final vesting contract is called will have no further INDEX flow into the treasury, therefore Finance is currently reviewing the most appropriate way to ring-fence our supply in order to maintain a minimum value in our accounts given there have been recent proposals in relation to community ownership of the DAO along with an airdrop distribution which can be read here. We will be looking to complete a comprehensive review by the start of 2022.

Key financial statements

Profit/(Loss) analysis

We have presented below the GTD (Genesis to date) transaction history of the DAO. To date, the index coop shows a loss of $7.7m. This is largely a result of aggressive liquidity mining incentives since genesis which were initially needed to bootstrap new products to enhance user experience. As of November, there are currently no liquidity mining incentives on DPI, however, we envisage incentives being applied to a number of our products in the future to encourage migration from UniV2 to UniV3 pools; we anticipate this across all our composite products not yet on UniV3. An example of this is the MVI liquidity migration to Visor uniswap v3. This in the short to mid-term will see some increased incentive costs for a number of products.

When excluding liquidity mining costs from the P/L, the Index would be generating a loss to date of $2.05m, this is a positive outlook for the future given that the first three months since genesis streaming fees were very low in comparison to November. We have a strong product pipeline that is set for strong revenue growth creating the building blocks for a successful financial future.

When reviewing the P/L on a line by line basis we can see that there are 3 key costs to the DAO in November on a monthly basis we will explore these in turn;

  • Contributor rewards spend which is the second-largest cost to the DAO behind that of liquidity mining to date for October this totaled $439.2k down 14.4%, mainly due to a decrease in the overall token price of Index, our budget and a large proportion of contributor rewards were determined at a rate of $35. The DAO is currently undergoing a restructure as part of Index 2.0. We will see in the future a difference in the way we compensate our core contributors through a dynamic staking model and also incorporating the fixed hiring guidelines. We see this as a positive spend for the Index Coop, whilst the overall objective is to create products with good market fit, we also need to develop the team to implement, market and grow the products.
  • Ecosystem partnerships are in relation to joint work with other DAO’s and protocols. The $102k incurred in November was in relation to the partnership with Beta Finance. This involved joint incentivization of $102k which is a one-off cost for a three-month period to incentivize lending and borrowing on Index coop products on the platform.
  • Impression mining is the third largest cost for the month totaling $22.3k a significant increase of 1457.7% from October. This is due to rising impression mining submissions within the community which is positive to see as this directly results in more engagement with the Index and its products. It is worth noting that Q4 had a budgeted cost of ~ $140k so we foresee growth in this cost base going forward

Due to the nature of DAO accounting the Index Coop currently only records transactions in the P/L when tokens have left the IC wallet i.e cash accounting. In the coming months, the DAO is working to implement the accruals basis to ensure better accuracy, accountability, and transparency by adopting this model. We dive deeper into the analysis of contributors in the key cost review section below.

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) and a 0.1% minting/redeeming fee. 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%
  • BED generates revenue for the DAO through a streaming fee of 0.25% (25 basis points). This is split 50% to Bankless DAO and 50% to Index Coop
  • Data Economy Index (DATA) will have a streaming fee of 0.50% (50 basis points), a mint fee of 0.10% (10 basis points), and a redeem fee of 0.20% (20 basis points). Split 70/30 with the index Coop and Titans of Data respectively.

Balance sheet review

This represents the balance sheet as at the end of November 2021

When presenting the balance sheet we have adopted best practices, adopting cash accounting in order to create this statement. We have made a number of assumptions that are detailed below;

  • Cash and Cash equivalents are stated using the EOD translation at the end of the financial year using the latest coingecko price
  • Paid in capital is the initial community allocation at launch of the Index Coop token which traded at a price of $3.55 on 07th October (3,625,000x$3.55014)
  • Unrealized price movement on tokens is included within Capital and reserves as a balancing item

Due to the nature of the environment, the DAO operates in, the balance sheet is limited to treasury holdings, any further asset holdings such as debtors and liabilities which in the future we will see as the DAO moves to take on debt as a position on its balance sheet. We have seen a reduction in total assets held from the prior month as a result of adverse token price movement in the Index Governance token. However other assets such as our own product holdings have grown in line with positive asset price movement. The one item to note is the Kucoin market maker fee that was issued in May 2021 we are expecting this fee back in due course.

N$F statement

Net Dollar Flows (N$F) is the measure of “new money” being spent to purchase index products minus the amount that is leaving or “cashing out”. Daily N$F is the product of the average daily price and the net supply change. N$F provides a more accurate measure of growth than TVL or AUM because it only focuses on the attraction of capital, not index performance.

November saw smaller movements in N$F, in the last 3 months September saw the most significant inflow to our products, September was the 2nd highest month for N$F in the Index Coop’s history, attracting over $61m in capital to its six products. $38.5m was attributable to DPI alone.

In November we saw outflows in relation to ETH2x-FLI and the Metaverse index. After strong ROI with positive price performance over the last month, it is expected that holders take profit on their investment as product price slows slightly through November. N$F analysis has become a key performance indicator, and it will continue to play an important role as we try to measure our ability to attract capital in all market conditions. As the chart shows, N$F is volatile which is a potential indication that customers are trying to time the market. With the FLI-series, this is an expected outcome, and to a lesser extent sectoral indices may be “timed.” As the number and variation of products increases, it’s likely we will see N$F become less volatile in aggregate and show steady month-over-month growth.

In summary, the Index Coop has had a positive November with streaming fees generated at an all-time high, strong capital raises from a number of investors, and a large product pipeline all contributing to an expected successful Q1 of 2022.



Elliott Watts
The Index Coop

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