Understanding PowerIndex: Introduction & Basics
In this article, you will learn about PowerIndex and its use cases
PowerIndex is a decentralized ETF-like Defi index, consisting of 8 different governance tokens (GTs).
PowerIndex in a nutshell
In simple words, it is a portfolio of 8 assets stored on a special smart-contract in Ethereum. Anyone can supply liquidity to the contract and withdraw it if necessary. When someone supplies liquidity to the contract, the special index token is minted. This token represents the index share and has a PIPT (PowerIndex Pool Token) ticker. If you are familiar with Balancer, you can understand PIPT as a BPT token of the pool with 8 tokens. The current composition of this pool is YFI, SNX, AAVE, wNXM, UNI, COMP, CVP, and MKR.
Each token has a 12.5% share initially (it can be changed by the governance in the future). The LEND token will be replaced by AAVE once the main PowerIndex will be launched at the end of November*:
*note, that it is just a make-up from our designer. The token set can be not relevant to the index composition
PIPT is a token containing a portfolio inside. You can do any operations you want with this token (hold it, trade it, etc).
The contract storing these 8 assets has AMM functionality and offers additional functions to users:
- Pooled tokens can be used for Vault-like strategies, generating cashflows for index users. In simple words, tokens stored on a contract are used for producing yield for holders of the index token. Thus, by holding PIPT you can receive additional income.
- Pooled tokens can be used for voting in their native protocols. The contract accumulates governance tokens (such as COMP, UNI, YFI, etc) and all these pooled tokens can be used for voting in Compound, Uniswap, Yearn.finance, etc. We named this process “meta-governance” and invented it back in August 2020.
- Token swapping. Defi users can use PowerIndex for trades as any other pool. PowerIndex offers a possibility to swap governance tokens to governance tokens without any intermediary traders. For example, it is possible to swap UNI for COMP or SNX to YFI in a single transaction.
PowerIndex is entirely community-governed. It means that the community (CVP and PIPT token holders) can change token set, token weights, and fees. It means that the index is flexible and reflects community vision on the market. The possibility of changing token set/weights is a great power — imagine delisting a company from the S&P 500.
PowerIndex use cases
So, PowerIndex is a community-governed Defi index that can use pooled tokens for meta-governance and Vault strategies. PowerIndex offers different types of services and value to users. Typical use cases are presented below:
- Using PIPT (PowerIndex Pool Token) as a single token representing a basket of assets and generating income (CVP liquidity mining program + cashflows) at the same time
- Supplying governance tokens into the index to mint PIPT and make this money work (CVP liquidity mining program + cashflows)
- Using index as a liquidity pool for swapping governance tokens (for example SNX to YFI)
- Using index for voting in governance systems of 8 protocols using a single token
- Using index as a governance end-point (a set of use cases here, first of all for CEXes and custodians holding a lot of GTs on their wallets)
Today we discussed the basic stuff about PowerIndex and possible use cases. In this series “Understanding PowerIndex” we have 6 more articles that will be released soon. They will provide an overview liquidity mining program, PIPT token, index governance, index fees, and sources of cashflows.