SECTION 1: APPLICANT INFORMATION
Provide personal or organizational details, including applicant name, contact information, and any associated organization. This information ensures proper identification and communication throughout the grant process.
Applicant Name: Jordan Tonani
Project Name: Index Coop
Project Description: The Index Coop builds innovative token products that simplify access to the top themes and strategies in crypto. Our product suite includes sector index, yield, leverage, and automated strategy tokens. First launching in September of 2020, Index Coop is the most tenured and trusted provider of onchain index tokens on Ethereum Mainnet.
Team Members and Roles:
List team members and their roles/responsibilities
| Name | Role | Link |
|---|---|---|
| Pranav | Smart Contract Engineer | https://twitter.com/pblivin0x |
| Edward Kim | Full Stack Engineer | https://www.linkedin.com/in/edward-kim-ny/ |
| Jann Driessen | Front End Engineer | https://twitter.com/janndriessen |
| Crews Enoch | Marketing / Social Media | https://www.linkedin.com/in/crews-enochs/ |
| Emma McAleavy | Marketing | https://www.linkedin.com/in/emma-mcaleavy/ |
| Dev | Marketing / BD | https://twitter.com/0x_Devon |
| Jordan Tonani | BD / Partnerships | https://www.linkedin.com/in/jordantonani/ |
| Allan Gulley | Product | https://www.linkedin.com/in/allan-gulley/ |
| Anthony Bowman | Product | https://twitter.com/AnthonyBowman43 |
| Andrew Jones | Product | https://twitter.com/MisterMadila |
| Scott | Front End Engineer | |
| Christian | Smart Contract Engineer |
Project Links:
Enter Any Relevant Project Links (website, demo, github, twitter, etc.)
- Website
- Products
- Github
- Youtube
- The State of Onchain Structured Products Whitepaper
- Index Coop Master Deck
- Dune Dashboards
- Product Fact Sheets:
- Recent Press Mentions
- How Index Coop Is Capitalizing on ETHâs Price Momentum
- eToro Partners With Index Coop to Launch Crypto Smart Portfolio
- Crypto for Advisors: Onchain Investment Tools and Vehicles
- How Index Coop is Capitalizing on ETHâs Price Momentum
- The Untapped Potential of Onchain Structured Products
- Index Coop Aims to Improve Limitations of Protocol, Onchain Structured Products
Contact Information:
Point of Contact (note: this should be an individualâs name, not the name of the protocol):
Name: Jordan Tonani
Forum Handle: Jordan_IndexCoop
Telegram Handle: @jordantgs
Twitter: @jordantonani
Email: jordan@indexcoop.com
Do you acknowledge that your team will be subject to a KYC requirement?
Yes
SECTION 2a: Team and Product Information
Provide details on your teamâs past and current experience. Any details relating to past projects, recent achievements and any past experience utilizing incentives. Additionally, please provide further details on the state of your product, audience segments, and how you expect incentives to impact the productâs long-term growth and sustainability.
Recent Achievements:
-
September '23: Launched the first-ever cross-chain Large Cap Index ($ic21) in partnership with 21.co, the parent company of 21shares. The token captures the top projects across all blockchains, targeting both new entrants and passive investors. Launched without incentives. See: Introducing ic21
-
October '23: Collaborated with CoinDesk Indices to create an automated strategy token based on the Ether Trend Indicator (ETI). The product dynamically shifts between ETH and USDC, guided by ETI, and is intended for passive momentum investors. The product was introduced without incentives. See: Introducing cdETI
-
October â23: Partnered with eToro to launch a new crypto âSmart Portfolioâ, offering exposure to Web3 through four key sectors: Bitcoin, Ethereum, decentralized finance (DeFi), and the Metaverse⌠The portfolio is managed and distributed through the eToro platform. See: eToro Partners with Index Coop
-
November '23: Enhanced Index Protocol with a rebalancing mechanism using Dutch auctions, marking a significant improvement in how onchain structured products are rebalanced. This innovation allows us to create liquidity at predetermined prices, moving away from the traditional model of depending on available DEX liquidity. It facilitates direct interaction between liquidity providers or market makers and the index, reducing the need for DEX intermediaries. This change enhances trade depth and minimizes price impact, optimizing the rebalancing process and benefiting product holders. See: Why Auctions Matter
-
January '24: Integrated UMAâs optimistic oracle into Index Protocol, streamlining the execution of reweightings and rebalances in a trustless and transparent way. This advancement is crucial for fostering a decentralized structured product ecosystem. See: Index Coop Integrates UMA for Optimstic Token Rebalancing
-
February '24: Expanded Index Protocol to Arbitrum, setting the stage for a new range of Arbitrum-native Leverage Indexes, including ETH2x, ETH3x, iETH1x, BTC2x, BTC3x, and iBTC1x.
Audience Segments:
- Onchain Retail: DeFi users engaging with dApps, DEX Aggregators, and traditional onchain routes.
- Onchain Whales: Major DeFi participants often utilizing additional custody support.
- Agile Funds: Primarily CeFi users leveraging custodians and exchanges, occasionally tapping into DeFi liquidity.
- CeFi Users: Retail investors favoring centralized platforms for their simplicity over onchain navigation.
- Traditional Institutions: Asset managers, banks, endowments and similar entities.
To enable larger purchasers, weâve partnered with top custodians including Gemini, Coinbase Custody, Bitgo, Copper, and Fireblocks to support our ERC20 products. Weâre also working closely with CEXâs and CeFi platforms across the globe to enable better access for CeFi Users.
Team Experience:
Team experience (Any relevant experience that may be useful in evaluating ability to ship, or execution with grant incentives. Please provide references knowledgeable about past work, where relevant. If you wish to do so privately, indicate that. [Optional, but recommended]):
| Name | Experience | Skills |
|---|---|---|
| Dev | 7yrs BarCap & Stone Ridge Asset Management; 7 years fintech (2x founder: 1 IPO, 1 sale); 3 years crypto. | Startups, Fundraising, Marketing, Communications, Sales, Transactions, AML/KYC Infra, Strategy, Investment Banking, Asset Management. Prev: Series 7, 66. |
| Allan Gulley | 4yrs at Auburn University Research, 2yrs at Connected Consulting, MS from Carnegie Mellon | Product Management, Blockchain Solution Architecture, Blockchain Security, Strategic Management, Research & Development, Technical Writing, Financial Analysis |
| Edward Kim | 10 years SaaS startups (CTO, then CRO), 3 years Capital One business analyst, CFA | Software Engineering, Startup Operations, Analytics, Financial Modeling |
| Jordan Tonani | 2yrs Lumen Technology, 4yrs Morgan Stanley | Partnerships, Sales, Operations, Retail Wealth Management, Corporate Finance and Equity Compensation, Past: Series 7/66, Lean Six Sigma Black Belt. |
| Andrew Jones | 2yrs UBS, 2yrs State Street, 6yrs Aviva Asset Management | Prime Brokerage, Operations, Reconciliations, Stock Loan, Corporate Actions, Data Analytics |
| Crews Enochs | 2 years at Northcraft Analytics, 2 years at Manhattan Associates | Solution Architect, Project Management, Marketing / Social Media management |
| Pranav Bhardwaj | 1 year at Set Labs, 1 year at SaaS startup, MS from Stanford | Software Engineering, Data Science, Mathematics |
| Anthony Bowman | 3yrs as Outsourced CFO | Data Analysis, Accounting, Financial Modeling, Project Management |
| Alica Molito | 3 yrs COO at Xone, 4 yrs Creative Director (clients Universal Music, Sony), 3x founder, MA in Business | Product Design, Product Management, User Experience, Research and Prototyping, Startup Operations, Brand Identity |
| Christian Koopmann | 1 year at BCG, 3 years at SaaS startups | Software Engineering, Data Science, Quantitative Analysis |
| Chavis | 4 Years Co-Founder Creative Agency TFAM, MM | Design, Brand, Project Management, Marketing |
What novelty or innovation does your product bring to Arbitrum?
Our products make it easy for users to navigate onchain, allowing users to quickly access the top themes and strategies in just a few clicks. Our experienced team, with almost four years of onchain structured product development, is widely known as the leading and most reliable brand in onchain index tokens. Through our leverage tokens, weâre also able to offer a capital-efficient alternative to perps, which is especially important during markets where funding fees remain extraordinarily high.
Is your project composable with other projects on Arbitrum? If so, please explain:
Our suite of Arbitrum Leverage Indexes (ETH2x, ETH3x, iETH1x, BTC2x, BTC3x, iBTC1x) and our Mainnet Leverage Index (ETH2x, BTC2x) are built on top of Aave V3. They use spot leverage via Aave V3 and rebalance across DEXs such as Uniswap. Our products are ERC20 tokens and can be used throughout DeFi.
Our composite indexes, including the DeFi Pulse Index (DPI) and the Metaverse Index (MVI) have been listed as collateral on money markets. In particular, DPI was listed as collateral on Aave V2. Currently, we are seeking solutions for oracle providers for our indexes because they make excellent collateral due to their diversity. Historically, the challenge has been the cost to post data, not creating feeds. Having our products in size on Arbitrum makes oracles much more feasible and will increase the possibilities for composability as compared to mainnet.
Do you have any comparable protocols within the Arbitrum ecosystem or other blockchains?
The strongest competitor in onchain indexes is Alongside Finance followed by Arch Finance. There are several others with negligible TVL. The strongest competitor in automated spot leverage products is dHEDGE which has similar products to Index Coopâs leveraged products. Other platforms such as Contango, Summer.Fi, Cian, DeFiSaver, and Instadapp have similar functionality, but are designed for more bespoke use cases or sophisticated users.
How do you measure and think about retention internally? (metrics, target KPIs)
Index Coop products are built for passive investors. Our index, yield and automated strategy tokens rebalance on predetermined cadences, adding/removing constituents based on their methodologies. Similarly, our leverage products automate a users leverage exposure by utilizing a new range-bound methodology, where a rebalance occurs whenever the current leverage ratio is less than the productâs minimum or greater than the productâs maximum leverage ratio.
To understand and measure success (and failure) weâve invested in analytics across Dune Dashbaords, as well as a handful of internal tools, and discuss the following Core KPIâs each week:
| Metric | Description |
|---|---|
| Net Dollar Flows | Daily Net Issuance Volume * NAV |
| Total Value Locked | NAV across all products |
| Product Revenue | Revenue from Issuance, Redemption, Streaming Fees |
| Addresses Holding | Count of addresses holding >1 ETH and >10 ETH of products |
We also invest in understanding user behavior such as the number of products held and holding duration.
Weâve done a lot of research to better understand secondary market liquidity. Our goal is to provide sufficient liquidity so users can enter and exit our products at low costs, inclusive of gas fees, swap fees, and price impact. With Mainnet gas prices, it is almost impossible to afford providing sufficient liquidity, however, we have long wanted to have a home for our products on a L2. We ran a very successful campaign during the bear market on zkSync Lite in collaboration with Argent providing order book style liquidity using protocol treasury capital.
Relevant usage metrics:
The dashboard to track all metrics listed is in progress here
Leverage Suite Metrics
| User Metric | Result | Notes |
|---|---|---|
| Daily Active Users (30 DMA) | 20 | Unique addresses transferring FLIs per day excluding known non-user addresses |
| Daily Passive Users (Min 0.1Î) | 1,567 | Unique addresses holding FLIs with a minimum value of 0.1 ETH excluding known non-user addresses |
| Daily Transaction Ct (30 DMA) | 38 | Unique transaction hashes where a FLI token transferred addresses |
| Daily Net Protocol Revenue | $2,311 | Fees generated from issuance, redemption, streaming after fee splits |
| Daily Transaction Fees | Gas fees paid on mint/redeem txs | |
| User List & Gini | Contract Volume, Streaming Fees, Txs, Gini | |
| Daily TVL by Product | $37.28m | NAV * Unit Supply |
| Daily Contract Volume by Product | $182k | NAV * (units minted + units redeemed) |
| Daily Lending Supply Amount by Asset | Amount supplied to Aave | |
| Daily Lending Borrow Amount by Asset | Amount borrowed from Aave | |
| Daily Open Interest by Asset | Aggregate Collateral on Aave | |
| Daily Cost of Carry by Product | Supply Rate - Borrow Rate | |
| Daily Rebalance Trade Volume by Pair | ||
| Daily Net USD Flow by Product (30 DMA) | -$68k | NAV * Unit Supply Change |
Composite Metrics
| User Metric | Objective | Definition |
|---|---|---|
| Daily Passive Users | Unique addresses holding a product | |
| Daily Protocol Fees | ||
| Daily Transaction Fee | Gas fees paid on transfers | |
| Daily ARB Expenditure and User Claims | ||
| Incentivized User List & Gini | LPs, USD Liquidity | |
| Daily TVL by Product | NAV * Unit Supply | |
| Daily TVL in LP Vault | ||
| Daily Trading Volume by Product | NAV * (units minted + units redeemed) | |
| Market Depth +/- 2% | ||
| Price to NAV Ratio | ||
| List of Traders | ||
| List of LPs |
Do you agree to remove team-controlled wallets from all milestone metrics AND exclude team-controlled wallets from any incentives included in your plan:
Yes
Did you utilize a grants consultant or other third party not named as a grantee to draft this proposal? If so, please disclose the details of that arrangement here, including conflicts of interest (Note: this does NOT disqualify an applicant):
No
SECTION 2b: PROTOCOL DETAILS
Provide details about the Arbitrum protocol requirements relevant to the grant. This information ensures that the applicant is aligned with the technical specifications and commitments of the grant.
Is the protocol native to Arbitrum?:
Index Protocol was initially launched on Ethereum Mainnet. Index Coop launched Index Protocol on Arbitrum on Feb 29, 2024 in preparation for its new leverage suite.
On what other networks is the protocol deployed?:
Ethereum Mainnet and Base.
What date did you deploy on Arbitrum mainnet?:
As of February 29th, 2024 Index Protocol is live on Arbitrum Mainnet
Do you have a native token?:
Our native governance token, INDEX, has two key use cases:
- Governance: using your INDEX to vote in Snapshots to govern the DAO
- Meta-governance: using your INDEX to vote - via product holdings of other crypto assets (e.g. DPI holding AAVE or COMP) - in other DAOâs affairs
For more information on INDEX, view our docs. Weâre currently sprinting on ways to add utility to INDEX, and will start dialogue with our community via forum post in Q1.
Past Incentivization: What liquidity mining/incentive programs, if any, have you previously run? Please share results and dashboards, as applicable?
Archived Liquidity Mining programs (DPI/MVI 2021, GMI 2022) can be seen here
Current Incentivization: How are you currently incentivizing your protocol?
The Index Coop community chose to prioritize building new products, enhancing infrastructure, and creating lasting partnerships over deploying any incentive programs during the bear market. We believe now is an opportune moment to reinvigorate our incentive programs, and have recently focussed efforts In that direction.
Have you received a grant from the DAO, Foundation, or any Arbitrum ecosystem related program?
No
Protocol Performance:
Detail the past performance of the protocol and relevance, including any key metrics or achievements, dashboards, etc.
According to DeFi Llama, Index Coop is currently 3rd in total TVL across all protocols classified as âIndexesâ.
Index Protocol, as well as each product supported by Index Coop, has a dedicated Dune Dashboard outlining relevant success materials that is open to the public. You can view all index Coop Dune Dashboards here.
Protocol Roadmap:
Describe relevant roadmap details for your protocol or relevant products to your grant application. Include tangible milestones over the next 12 months.
Index Coop is busy executing on an ambitious roadmap, which includes:
- Improving our app site and user experience through:
- Improved product pages
- New leverage UI
- New discover widgets
- Fiat onramp
- Robust portfolio page
- Improving existing product suite while also creating new and innovative products:
- New Arbitrum Leverage Suite
- Migrate 2x Mainnet tokens on Aave v3
- Migrate icETH on Mainnet to Aave V3
- Execute pre-sale process for the following products:
- High Yield ETH (hyETH)
- AI Index (icAI)
- L2 Index (icL2)
- Balanced Portfolio Tokens (Aggressive, Moderate, Conservative)
- Enabling access to index tokens outside of Ethereum Mainnet.
- Increasing product / INDEX venues and available liquidity
- Researching and building Index Protocol V2 to improve product efficiency, decentralization, security, performance, diversification, expressivity, and accessibility
- Researching and updating INDEX tokenomics
Audit History & Security Vendors:
Provide historic audits and audit results. Do you have a bug bounty program? Please provide details around your security implementation including any advisors and vendors.
Index Coop has products built on both Set Protocol V2 and Index Protocol (a good-faith fork of Set V2). Both protocols have been extensively audited by Sherlock, OpenZeppling, ABDK, Iosiro, and Code4rena. Arbitrum was included as a chain in scope for the most recent Sherlock audit, with all deployed Arbitrum protocol contracts included.
Index Coop currently has a $200k bug bounty program live on Immunefi that has be live since September 2022.
Security Incidents:
Has your protocol ever been exploited? If so, please describe what, when and how for ALL incidents as well as the remedies to solve and mitigate for future incidents
To date, neither Index Protocol or Set Protocol V2, have been victim of a hack or exploit. There was one exploit of two products on Set Protocol V2 that were due to key mismanagement, however, Index Coopâs products are not vulnerable to this attack vector due to proper key management and additional safeguards.
SECTION 3: GRANT INFORMATION
Detail the requested grant size, provide an overview of the budget breakdown, specify the funding and contract addresses, and describe any matching funds if relevant.
Requested Grant Size:
Index Coop is requesting 165,500 ARB across two key areas:
- Incentivizing adoption and usage of Index Coopâs Arbitrum-Native Automated Leverage Products
- Incentivizing migration of TVL and liquidity of two of Index Coopâs Ethereum-Native Composite Thematic Indexes from Ethereum Mainnet to Arbitrum
Total Incentives: $290,000
Justification for the size of the grant:
Enter explanation. More details are better, including how you arrived at the required funding for individual categories of expenses covered by your grant plan
Leverage Trading Incentives: 91,500 ARB ($183,000)
Our goal is $1m in daily trading volume and 200 daily transactions which is an average of $5k per transaction. We are targeting TVL of $10m by week 4, $15m by week 8, and $20m by week 12. Our products have a 0.10% issuance and redemption fee as well 3.65% annual streaming fee on TVL.
Given these assumptions, we are requesting the following:
Volume Fees: $84,000 ($1m vol/day * 84 days * 0.1%)
Streaming Fees: $99,000 ($11.785m avg tvl/day * 84 days * 3.65% / 365 days)
ARB rewards that are not used will be returned to Arbitrum DAO at the end of the program.
DPI & MVI Incentives: 53,500 ARB ($107,000)
Index Coop aims to incentivize migration of both TVL and liquidity of DPI and MVI to Arbitrum from Ethereum. DPI has TVL of $28m and MVI has TVL of $8m. These products can have deeper, capital efficient liquidity on Arbitrum and they will be much more accessible to trade with lower network costs. Additionally, it is difficult to get exposure to all of the constituents of these thematic products, given there is no liquidity for them on Arbitrum.
There is a chicken-and-egg problem with migrating index products to Arbitrum, which these incentives aim to solve. In order to migrate TVL, there needs to be liquidity and in order for liquidity to be persistent, there needs to be TVL and trading volume. Incentivizing both the migration of TVL and LP incentives will reinforce one another and create a sustainable position once incentives cease.
For migrating TVL, we propose using two simple single-asset staking contracts which distribute a fixed amount of ARB per day to users who stake DPI or MVI. The staking contract will manage deposit allowances based on the quantity of DPI or MVI a user has bridged from the Ethereum mainnet. These allowances, reflecting the bridged assets, will be regularly updated to ensure only those who bridge DPI or MVI are eligible for rewards. Direct purchases on Arbitrum will not qualify for these incentives. This will create an opportunity cost to holding these products on Ethereum, and the rewards will cover the cost of migration for most moderate-sized holders.
We believe that we can migrate 25% of the TVL of both products to Arbitrum and we want to incentivize an APY of 5% in ARB. We propose using a fixed amount of ARB per day to encourage first-movers. Additionally, single-sided staking may incentivize net new buyers of DPI from Arbitrum. This would mean that they need to buy from LPs and the LPs would migrate DPI to rebalance their positions.
DPI: $28m * 25% * 5% * 12 / 52 = $47,500 (50% of TVL in Month 1, 25% in Month 2, 25% in Month 3)
MVI: $8m * 25% * 5% * 12 / 52 = $13,500 (50% of TVL in Month 1, 25% in Month 2, 25% in Month 3)
Total = $61,000
For incentivizing LPs, we think that $500k in liquidity is sufficient to facilitate tight spreads (<1%) for trades of up to $50k. Index Coop believes that to be sufficiently compensated, LPs will need to earn 40% on their capital in fees and incentives. We believe that we can achieve $15.4m in volume over the 12 week period which is $183k per day, approximately 15% of the historical daily volume for these products. To get to our goal of 40% returns, we would require 20% in incentives, which amounts to $46,000.
DPI: $500k * 20% * 12 weeks / 52 weeks = $23,000
MVI: $500k * 20% * 12 weeks / 52 weeks = $23,000
Total = $46,000
Grant Matching:
Index Coop will match a minimum of 10% the ARB grants to provide further INDEX incentives for the leverage suite. We will host a trading competition for three months with prizes going to the top 10% of traders by P&L in USD terms. There will be three separate contests over three months. If we exceed our targeted goals, we will increase the prizes. The goal of this program will be to attract interest to the leverage suite, while the ARB incentives will reduce the friction of trading by covering network and protocol fees.
Funding Address:
Index Coopâs Arbitrum Safe Address is: arb1:0xBd6b8EEc7b940DBE196Fe3Bac7B51E63435c8Ae9`
Funding Address Characteristics:
The Safe is a 3/5 signing structure with unique signers all using dedicated signing hardware wallets.
Treasury Addresses:
Please list out ALL DAO wallets that hold ANY DAO funds
| Name | Address |
|---|---|
| Treasury | eth:0x9467cfadc9de245010df95ec6a585a506a8ad5fc |
| Treasury - Operations | eth:0xfafd604d1cc8b6b3b6cc859cf80fd902972371c1 |
| Treasury - Ownership | eth:0x236815b32b50cc80F5C6348396b1A9B09Fd3E7f7 |
| Treasury - Investment | eth:0x462a63d4405a6462b157341a78fd1babfd3f8065 |
| Treasury - Liquidity | eth:0x3a36b94689f303aaf9bfe761068efb8f78912023 |
| Treasury - Fast | eth:0xbf14566a37D96d55485bD281f5E7c547883A54C8 |
Contract Address:
Enter any specific address that will be used to disburse funds for grant recipients
Index Coop has not yet deployed the contract that will be used to disburse funds.
SECTION 4: GRANT OBJECTIVES, EXECUTION AND MILESTONES
Clearly outline the primary objectives of the program and the Key Performance Indicators (KPIs), execution strategy, and milestones used to measure success. This helps reviewers understand what the program aims to achieve and how progress will be assessed.
Objectives:
Index Coop intends to build a lasting partnership with the Arbitrum ecosystem. The grants program will serve as a springboard, directly helping us launch successful Arbitrum-native Index Coop leverage suite and bring our Ethereum-native thematic indexes to Arbitrum.
Our leverage suite is a set of automated leverage products that target a persistent leverage ratio with built-in liquidation protection, utilizing money markets and spot DEXs. These products have been successful on Ethereum Mainnet, but rising network fees have limited growth. These products area reliant on secondary market liquidity which can lead to price-NAV deviation. Additionally, since rebalancing costs are borne by Index Coop, the cost of maintenance can be expensive during volatile periods. Making Arbitrum the home of our leverage suite allows us to launch more products and make the the trading experience significantly better for users.
Launching these products on Arbitrum grows TVL on Aave V3 and increases DEX volume. Adding more collateral to Aave decreases borrow costs for the supplied asset. For example, ETH2x will add 2x the ETH collateral to Aave per dollar of TVL. Reduced borrow costs on ETH will enable leverage liquid staking strategies (e.g. wstETH/ETH looping) to be more profitable and will lead to more LST liquidity on Arbitrum. Similarly, the leverage products will also increase the borrow demand on USDC, adding stablecoin liquidity to Arbitrum as capital takes advantage of high USDC supply rates.
As TVL grows, this also increases rebalance volume (i.e. DEX volume), which increases fees for AMM LPs and ultimately leads to more liquidity on the DEX pairs where these products are rebalancing. Our leverage products will also provide a timely alternative to perps, which have higher and more volatile funding rates compared to spot leverage.
Bringing Index Coopâs thematic Indexes to Arbitrum helps users looking for diverse exposure to DeFi or the Metaverse access these themes in a single liquid token. Index Coop users have been vocal about wanting L2 liquidity for these products, and Index Coop would like to see that liquidity hub be Arbitrum. These products benefit Arbitrum by bringing in sticky capital, as indexes tend to be buy and hold products. If this program is successful, Index Coop will bring more products to Arbitrum, even launching a few composites native to the Arbitrum ecosystem.
Execution Strategy:
Describe the plan for executing including token distribution method (e.g. farming, staking, bonds, referral program, etc), what you are incentivizing, resources, products, use of funds, and risk management. This includes allocations for specific pools, eligible assets, products, etc.
For the leverage suite, Index Coop will track each addresses incurred fees and reimburse them weekly. We want to reduce the friction of using these products by making them fee-free for the incentivized period. Additionally, Index Coop will run a trading competition which rewards the top 10% of traders by P&L each month using INDEX. As noted before, Index Coop does not believe in using incentives to grow short-term vanity metrics, but we want to focus on long-term sustainable products. To that end, we are designing the incentive plan so that there is no arbitrage opportunity. Users will still need to take on the risks and rewards of holding the leverage products and only incurred fees will be reimburse. The trading competition is a sweetener that forces users to focus on real profit-seeking behavior.
For the thematic products, the largest challenge is incentivizing liquidity. Historically, Index Coop has incentivized liquidity, but it was somewhat unsuccessful due to poor design and limited tooling at the time. Index products are unique compared to tokens with free-floating prices. Increased buy demand does not cause the price of index products to go up because they can be issued and redeemed at NAV. This is great for LPs because it means that the LP can provide liquidity with less risk of Impermanent loss, while also being easy to hedge exposure to the LP position.
Index Coop will use a public strategy vault from Arrakis Finance with rewards distributed by Merkl in order to incentivize highly capital-efficient liquidity vaults. This should remove barriers to trading for Arbitrum users.
Incentive Design:
Indexes, by their very nature, tend to be buy-and-hold products which are naturally sticky. There is strong evidence for this in Index Coopâs mainnet products. Strong liquidity for our index tokens will enable more trading volume which generates fees for LPs, leading to better liquidity and tighter spreads. Unlike most tokens, Index Coopâs products have a NAV and can be minted or redeemed according to demand. This means that LPing can be naturally profitable, and incentivizing the initial liquidity will help to overcome the cold start problem. Our leverage products also tend to be held for much longer than perp positions as evidenced by our research.
With Arbitrum as Index Coopâs second âhome baseâ, weâll also be trying new mechanisms to promote stickiness over the long term. $INDEX incentives on our trading competition will help bring users to Index Coop, potentially cross-selling with other passive products. We also will continue to ideate and trial new incentive mechanisms. One idea is introducing âProduct Revenue Tokens (PRTs)â on future products native to Arbitrum. PRTs not only receive a fee rebate on their holding but also receive upside in the productâs success. Weâre currently trailing PRTs on an upcoming Mainnet product called High Yield ETH (hyETH).
KPIs:
Leverage Suite Metrics
| User Metric | Objective | Definition |
|---|---|---|
| Daily Active Users | Increase trading | Unique addresses that mint/redeem |
| Daily Passive Users | Increase holding | Unique addresses holding a product |
| Daily Transaction Ct | Increase usage of Arbitrum network | Unique mint/redeems |
| Daily Transaction Fees | Increase fees earned by Arbitrum blockspace | Gas fees paid on mint/redeem txs |
| Daily Protocol Fees | Increase fees earned by Index Coop | Fees generated from issuance, redemption, streaming |
| Incentivized User List & Gini | Increase usage and user diversity | Contract Volume, Streaming Fees, Txs, Gini |
| Daily ARB Expenditure and User Claims | Daily network fees | |
| Daily TVL by Product | Increase liquidity on Aave V3 | NAV * Unit Supply |
| Daily Volume by Product | Increase trading fees for Index Coop | NAV * (units minted + units redeemed) |
| Daily Lending Supply Amount by Asset | Increase Aave V3 collateral | Amount supplied to Aave |
| Daily Lending Borrow Amount by Asset | Increase Aave V3 borrow demand | Amount borrowed from Aave |
| Daily Rebalance Trade Volume by Pair | Increase DEX Volumes | |
| Daily Net Flow by Product | Increase size of products with new flows instead of price appreciation | NAV * Unit Supply Change |
Composite Metrics
| User Metric | Objective | Definition |
|---|---|---|
| Daily Passive Users | Increase # of users holding products passively | Unique addresses holding a product |
| Daily Protocol Fees | Increase Index Coop revenue | TVL * Streaming Fees |
| Daily Transaction Fee | Increase fees earned by Arbitrum | Gas fees paid on transfers |
| Daily ARB Expenditure and User Claims | ||
| Incentivized User List & Gini | Increase diversity of LPs | |
| User List & Gini | Increase diversity of product holders | |
| Daily TVL by Product | Increase TVL on Arbitrum | NAV * Unit Supply |
| Daily TVL in LP Vault | Increase Liqudity | |
| Daily Trading Volume by Product | Increase Fees earned by LPs | NAV * (units minted + units redeemed) |
| Market Depth +/- 2% | Increase size of trades enabled | |
| Price to NAV Ratio | Reduce spread to NAV | |
| List of Traders | ||
| List of LPs |
Grant Timeline and Milestones:
Pre-start timelines:
| Date | Action | KPI |
|---|---|---|
| 02/29 | Launch Index Protocol on Arbitrum | Transaction ID |
| 04/01 | Create DPI/WETH and MVI/WETH LPs on Arrakis | Transaction IDs |
| 04/01 | Deploy Leverage Suite on Arbitrum | Transaction IDs |
| 04/15 | Complete LTIPP Dune Dashboard | Link |
| 04/15 | Launch ETH2x/3x, BTC2x/3x, iETH/BTC on Arbitrum | Launch Tweet |
| 04/15 | Launch incentives programs | N/A |
Post-start timelines:
| Product | 4 weeks TVL | 8 weeks TVL | 12 weeks TVL |
|---|---|---|---|
| Leverage suite TVL | $10m | $15m | $20m |
| DPI/WETH LP | $300k | $400k | $500k |
| MVI/WETH LP | $300k | $400k | $500k |
| DPI TVL | $2m | $3m | $4m |
| MVI TVL | $500k | $750k | $750k |
How will receiving a grant enable you to foster growth or innovation within the Arbitrum ecosystem?
Securing a grant will jumpstart Index Coopâs ability to grow within the Arbitrum ecosystem. As a leading provider of on-chain structured products, introducing a leverage suite to IArbitrum will increase transaction fees and TVL for key partners like Uniswap, Aave, and Arbitrum. Our products offer an economical alternative to traditional perpetual platforms, with the potential to provide low leverage at a much lower cost during periods of high funding fee rates, adding value to traders on Arbitrum.
By bringing our flagship DeFi and Metaverse indexes to Arbitrum, currently unavailable on other Layer 2 platforms, we enable access to a broader range of projects and attract users from ETH Mainnet who prefer the lower-fee environment. Currently, MVI and DPI have a combined $35.5m (03/01) in TVL, and based on community feedback asking for a low-cost alternative to mainnet, weâd expect a portion of that to move to Arbitrum. This effort, combined with continued incentives and the addition of potentially new and innovative products, solidifies Arbitrum as Index Coopâs Layer 2 of choice and underscores our dedication to its growth.
Do you accept the funding of your grant streamed linearly for the duration of your grant proposal, and that the multisig holds the power to halt your stream?
Yes
SECTION 5: DATA AND REPORTING
Is your team prepared to comply with OBLâs data requirements for the entire life of the program and three months following and then handoff to the Arbitrum DAO? Are there any special requests/considerations that should be considered?
Yes
Does your team agree to provide bi-weekly program updates on the Arbitrum Forum thread that reference your OBL dashboard?
Yes
Does your team agree to provide a final closeout report not later than two weeks from the ending date of your program?
Yes
Does your team acknowledge that failure to comply with any of the above requests can result in the halting of the programâs funding stream?
Yes