Building A Decentralized Blackrock | Index Coop (SotN 7/27)

Index Coop is a DAO focused on making fully decentralized crypto index products, like the DPI (DeFi Pulse Index). Recently, the Index Coop teamed up with Bankless DAO to launch the BED Index: 1/3 Bitcoin, 1/3 Ether, and 1/3 DPI. Products like these make it easier than ever to get some skin in the game, so Do Your Own Research, and learn why the future of finance is decentralized. For this week's State of the Nation, we bring on four core contributors of Index Coop to walk us through it. Live on Tuesday at 11am PST / 2pm EST! ------ 🚀 SUBSCRIBE TO NEWSLETTER: https://newsletter.banklesshq.com/ 🎙️ SUBSCRIBE TO PODCAST: http://podcast.banklesshq.com/ 🎖 CLAIM YOUR BADGE: https://newsletter.banklesshq.com/p/-guide-2-using-the-bankless-badge ------ BANKLESS SPONSOR TOOLS: ⚖️ ARBITRUM | SCALING ETHEREUM https://bankless.cc/Arbitrum 🍵 MATCHA | DECENTRALIZED EXCHANGE AGGREGATOR https://bankless.cc/Matcha 🔐 LEDGER | SECURE YOUR ASSETS https://bankless.cc/Ledger 🦄 UNISWAP | DECENTRALIZED FUNDING https://bankless.cc/UniGrants ------ 📣 SMARTCON | Register for Smart Contract Summit 2021! https://bankless.cc/SmartCon ------ Resources: Index Coop: https://www.indexcoop.com/ Announcing the BED Index: https://medium.com/indexcoop/recommending-crypto-to-friends-family-just-became-10x-easier-ccb57ea1903a Verto on Twitter: https://twitter.com/verto0912?s=20 BigSky on Twitter: https://twitter.com/BigSky_7?s=20 Dark Forest Capital on Twitter: https://twitter.com/DarkForestCap?s=20 LemonadeAlpha on Twitter: https://twitter.com/AlphaLemonade?s=20 ----- Not financial or tax advice. This channel is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This video is not tax advice. Talk to your accountant. Do your own research. Disclosure. From time-to-time I may add links in this newsletter to products I use. I may receive commission if you make a purchase through one of these links. Additionally, the Bankless writers hold crypto assets. See our investment disclosures here: https://newsletter.banklesshq.com/p/bankless-disclosures

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:13Ryan Sean Adams?

  Hey guys, welcome to another episode of State of the Nation. This is the episode where we do a deep dive on the topic of the week. We apply it to the lessons we learn in the podcast and on the newsletter. David, I'm super excited about this episode. We've wanted to get the folks from Index Co-op on for a while. Now we have the team. We're talking about a new product release. We're talking about all the growth and success they've had since late 2020. We're talking about building a decentralized BlackRock, trillions of dollars in asset capacity here. And this movement with decentralized indexed funds, indexed products is just getting started. So David, I'm super excited to dig into today's topic.

• 0:55David Hoffman?

  And today's topic of indices is such a timely one because this is coming after two weeks after the bed index from the Bankless Dow and Index Co-op, which I think is the best crypto index of all time. I have opinions about this, but maybe that's something that we should talk about in the actual show. And crypto indices, or indices in general, I think is something that is really, really powerful specifically in DeFi, simply because how easy it is just to compose tokens into an index. Once you have tokens on Ethereum, once you have tokens as ERC20 tokens, making a smart contract to put them into an index is really powerful. And so there's so much to talk about there. And I'm really excited to get into that topic of conversation with the Index Co-op team.

• 1:40Ryan Sean Adams?

  Yeah, dude, I remember when we first uncovered this topic on the Bankless newsletter. It was like 2019 and token sets was just coming out. And I think the article we wrote in Bankless was something like, "In the future, money robots are going to be the ones managing your money", right? And look how far we've come. Now, I think Index Co-op has over 200 million in assets under management. They had like close to 400, 500 million earlier this year. And I think the dream is really starting to come true. And if, like you talk to any- Many of your friends in the space who are outside crypto and they're investing, they're likely doing their traditional, their old FIVE investing through some sort of an index fund, you know, a Vanguard fund, an ETF of some sort, something that is pegged to the S and P 500

• 2:24Ryan Sean Adams?

  or some other stock market index indices. They're just really simple, easy products to use in traditional finance and they're even better, more composable, more interesting, more permissionless, more interactive in DeFi. So that's why the space is super exciting. Well, David, we're going to get into that in a minute, but we should talk about what is new first. You were at ETHCC last week. We just put out a post about the ETHCC experience and an epic, an epic podcast, man. I listened to that on Sunday. It was so cool. It just like cured my FOMO. Thanks for being there. What are the highlights from that podcast?

• 3:05David Hoffman?

  Yeah, the highlights were that there is so much new surface area to build in DeFi these days that people are really overwhelmed with what can be built. A lot of the projects and presentations and talks given at ECC are not talking about theoretical first new products of Ethereum, but a lot of projects and products that are the next iteration or the next evolution of something that we've already talked about. So that was a common theme. Another common theme was everyone was just really stoked to be in person again. And this is something I wrote in the post and not included actually in the, in the podcast. So definitely read both, read, read the post from the market Monday on Bankless and also listen to the podcast. But everyone was really stoked that we are now back in the real world once again as an industry.

• 3:46David Hoffman?

  And it's, I think there's something to say about, you know, we had 15 months where no crypto events happened and then ETHCC happened. And we are also now starting to change the real world. At least that was one of my takeaways. Everyone is really excited to see mainstream adoption, but also see this internet native industry actually start to manifest itself in the real world. So definitely don't miss that episode. There's interviews from Vitalik Buterin, Stani, Stani from AVE, Kane, Cooper Turley, so many fantastic interviews all packed into a two hour episode. So if you had FOMO about ETHCC, make sure you listen to that podcast.

• 4:20Ryan Sean Adams?

  That's step one is curio FOMO, listen to that podcast. I think step two is to go sign up for this Chainlink SmartCon conference. That is a DeFi conference put on by Chainlink every year. This is a virtual conference. The best thing about this, in addition to the 200-plus DeFi speakers and thought leaders that are attending, builders that are attending this conference, is that it's absolutely free. Free education, free investing on DeFi. I attended last year, it was fantastic. David, you and I are going to be doing a panel this year on EIP1559. This will be hopefully right after it launches. So we'll have some cool updates, things to share with the community. I'm excited about everyone who's going to be there. I'm excited about the

• 5:03Ryan Sean Adams?

  topics, automated market makers. We're going to talk about Oracles. We're going to talk about Layer 2. It's really just a fantastic DeFi education event. So if you missed ECC, do not miss this next event, August 5th through the 7th. There will be a link in your show notes. We can go sign up for that. So get on it. Man, let me ask you the question I ask at the beginning of these episodes every week. David, it's that time. I hope you're ready. What is the state of the nation this week, my friend?

• 5:32David Hoffman?

  The state of the nation is we are getting in bed. We are getting in bed with Index Co-op and with Bankless Dow. The bet index got released last week. Bitcoin, Ether, DPI, while it looks like it has three tokens in it, it actually has 16 because DPI also has tokens inside of it. And I think that it is the best crypto index that I think perhaps could be for the really long time, at least a really long time. I'm not going to say forever, but like there's very compelling reasons as to why Bitcoin, Ether, and DPI are the best crypto index for you, for your friends, for your family. And now it's live. And so that's definitely going to be a topic of conversation in today's show with the Index Co-op boys. But that is the state of the nation, getting into bed.

• 6:15Ryan Sean Adams?

  You know what my favorite thing about this, the bed index, David, is it's so damn meme-able, right? Did you see that? This is, just go to bed.

• 6:22David Hoffman?

  There happens to be a bed right, right behind me as well. Yeah.

• 6:25Ryan Sean Adams?

  Mr. Mayor, yeah, there's a bed behind you. I mean, there's like infinite possibilities getting to bed. There's infinite possibilities with this meme, so I think this is going to be fun for the community to dig into in the weeks and months to come. All right, guys, we are going to be back in just a moment with the folks from Index Co-op talking about everything that they are building, everything on the horizon. But before we do, we want to thank the sponsors that made this episode possible.

• 6:51David Hoffman?

  When you shop for plane tickets, you probably use Kayak, Expedia, or Google to compare ticket prices. So why would you limit yourself to just one exchange when you trade crypto? When you make your trades, you want to make sure that you're getting the best possible price on your trade and that you aren't paying high gas costs that you could have otherwise avoided. That's why you should be using Matcha. Matcha routes your orders across all the various DeFi exchanges on Ethereum, Polygon, Binance Smart Chain, and gives you the best possible prices without taking any commission. Matcha has smart order routing that splits your order across multiple liquidity sources if Matcha sees that it gets you better pricing. Trading on Matcha is super easy because it pulls the liquidity for me into a single, easy-to-use platform, and that has even saved me multiple times from accidentally picking the wrong Decks to trade on

• 7:35David Hoffman?

  and accidentally getting a bad price. Matcha also allows for you to make limit orders on-chain, so you can set and forget your DeFi trades, and they will go through automatically while you're away. New to Matcha is an integrated fiat on-ramp. You can purchase crypto directly with your credit or debit card and have that fiat be instantly traded for any token that has liquidity. When you're making a trade, head over to matcha.xyz/banklist and connect your wallet to start getting the best prices and most liquidity when you trade your crypto assets. Arbitrum is an Ethereum scaling solution that is going to completely change how we use DeFi. If you've been using Ethereum for the past 12 months, you've probably noticed the high gas fees and the slow confirmation times that have been plaguing DeFi. Too many people want to use Ethereum, and it doesn't have enough capacity for all of us.

• 8:21David Hoffman?

  That's where Arbitrum comes in. Arbitrum is a layer two to Ethereum, which means Arbitrum Arbitrum can increase Ethereum's throughput by orders of magnitude at a fraction of the cost of what we are used to paying. When interacting with Arbitrum, you can get the performance of a centralized exchange while tapping into Ethereum's level of security and decentralization. This is why people are calling this Ethereum's broadband moment, where we get to add performance onto decentralization and security. If you're a developer and you want to save on gas costs and make an overall better experience for your users, go to developer. offchainlabs.com to get started building on Arbitrum. If you're a user, keep an eye out for your favorite DeFi apps building on Arbitrum. Arbitrum has been working with over 300 teams,

• 9:02David Hoffman?

  including Ethereum's top infrastructure projects, and will be opening up to all users shortly. There are so many apps coming online to Arbitrum, so you may want to pack your bags in preparation for the great migration to the Arbitrum Layer 2. To keep up to speed with Arbitrum, follow them on Twitter at Arbitrum and join their Discord.

• 9:24Ryan Sean Adams?

  Hey guys, welcome back to Bankless. We are here with the folks from Index Co-op. This is a small portion of their team, actually, and because their team is vast, it's decentralized, and we're really excited to talk about Index Co-op today. Index Co-op is building the next gen of index investments, doing it in DeFi. The old finance world, that's traditional finance, has over 6 trillion in assets inside of indexes. But in DeFi, crypto native indexes are just getting started. So Index Co-op is really a community-led, decentralized, permissionless organization. Their goal is to create, maintain,

• 10:04Ryan Sean Adams?

  and drive the adoption of crypto index products. As David said in the intro last week, Bankless DAO and Index Co-op released their newest product, which is called the Bed Index. This is a compilation of 1/3 Bitcoin, 1/3 Ether, and 1/3 DeFi. We're super excited about that. We're going to talk about that. But first, we're going to talk about all about crypto indexes, why they're important, and get into that subject matter. So let me introduce our guests. We have three of them. We have JD Cook, is on the analytics team of Index Co-op. We have Simon Judd, Business Development Lead, and we have Dark Forest Capital. He is a Metaverse Index Methodologist. Guys, thanks so much for joining us on Bankless. It is fantastic to have you.

• 10:49Speaker 02

  Thank you for having us. We've been looking forward to this for weeks.

• 10:53Ryan Sean Adams?

  Oh, my gosh. Hey, I gotta ask before we dig in. You know, the bed index wasn't the the only recently launched index product that hit crypto media waves. I just learned of a crypto index product that Goldman Sachs is bringing to market. This is a DeFi index. I don't know if you guys saw this. Did you catch this news and see what's inside of this thing?

• 11:17Speaker 02

  Yeah, I mean, I was squinting pretty hard trying to find DeFi.

• 11:21Ryan Sean Adams?

  Yeah, so it's absolutely crazy. For those of you not familiar, this is this is a tweet I put out yesterday, but crypto Twitter world has been a buzz about Goldman Sachs releasing a DeFi index. And they're, you know, going through the registration process in the SEC. And inside of this index, the first company listed, the largest portion is Nokia. The second is Facebook. The third is Alphabet. All of these are securities. All of these are equities. None of these are DeFi assets, or even close to DeFi assets. I don't even think you

• 11:55David Hoffman?

  Not even GBTC.

• 11:58Ryan Sean Adams?

  Yeah, not even GBTC. And this is what a bank is is calling a DeFi index. I know you guys know better. I know you guys are putting together some crypto native indexes. But why don't we start JD? Could you tell us a bit about indexes in general? Like, why are index products important financial products for everybody? And why are they so useful in crypto?

• 12:25Speaker 02

  Yeah, I think just in general, the simplest way is index products take away a lot of the complexity in investing, right? There's especially in crypto where we're so early in the space and a lot of people that enter the space are unsure where to invest, what's going to be the best returns. So so an index product is a single asset that really gives you exposure to a multitude of assets within a given sector or strategy. That way you don't have to worry about picking winners. You basically get to ride the momentum of the sector as a whole.

• 13:01Speaker 03

  Can I add one thing that this is really key to the index co-op narrative in our story? So when index fund were introduced in the late 60s and the early 70s, they enabled millions and billions of families globally to enter the middle class in a way that simply wasn't possible before that. They allowed people to avoid some of the volatility. They allowed people to invest in a risk, in a more risk-free way. And you know, what we are trying to do at index co-op is we are trying to bring that same vision to crypto investing, to allow millions and millions of families to very safely enter investing in this space through passive investing and passive management.

• 13:45Ryan Sean Adams?

  That's super cool. Forrest, do you want to add anything to that?

• 13:51Speaker 04

  No, I think those guys have covered it really. I think the fact that we're trying to make, or indexes make investing easier and simpler. I mean, that you don't have to pick winners. You don't have to be deeply, deeply knowledgeable. I think that's why sort of the index co-op was formed and why it's so important that we, you know, we can enable people to have access to financial products without that expertise needed.

• 14:15Ryan Sean Adams?

  So Dark Forest, let's stick with you. Index co-op has grown to be about 200 million in assets. That is as we're recording and it was, was higher a couple of months ago while crypto prices were up. But that's phenomenal growth, right? Like just getting started at the end of 2020, I think is, is kind of when you guys got started. Can you tell us the story, Dark Forest, about index co-op? So how did it come to be? What's the genesis story here?

• 14:42Speaker 04

  Yeah, so our flagship product was launched back in September, I believe, in 2020. But at the time, it was just DPI out on the market and launched between SET and DeFi Pulse. And the index co-op was actually created at the start of October. And the idea was to form a community around the idea of like growing, integrating and like enabling these products to spread, basically. So, yeah, we have all sort of formed around this idea, like I say, of making crypto investing simpler. We use the term like becoming the, the BlackRock of crypto as well. And I think that kind of touches on the inspiration of it and where it came from, really.

• 15:31Ryan Sean Adams?

  Simon, I'm curious about this question. Like, so what is the difference between index co-op and set token? The set token protocol? Because I understand that index co-op is using some components of the set token protocol itself. How are you guys related? How are you different? Where does the mission? Where does one organization's mission start and the others kind of, you know, take things up?

• 15:58Speaker 03

  Yeah, absolutely. So, you know, I think we're incredibly fortunate to have token sets Felix Fang, Alex Song, and their incredible team as really, really close partners in the journey as we've launched this DAO. The way I think of it is it's really like a tripod. So token sets is the baseline technological infrastructure that we were built upon. The methodologies such as DeFi Pulse and luckily now Banklist are really the data providers that provide us the data and they're also the distribution platform. And then alongside that index co-op, like we are really the glue that holds all that together, whether that is supporting those products with go-to-market, with marketing, with exchange listings, with all the DeFi expertise that we bring as a community.

• 16:43Speaker 03

  And, you know, it is really a tripod and all three legs that tripod make this just incredibly compelling product.

• 16:51Ryan Sean Adams?

  One of the questions I have for index co-op is that you guys don't seem to have any of your own products. You guys don't build your own product yourself. You seem to tap into, for example, DeFi Pulse to do the DPI, into Bankless DAO to do the Banklist Bed Index. Talk about the decision to outsource the methodology rather than make that in-house.

• 17:14Ryan Sean Adams?

  Oh, let's go to Doug Forrest first.

• 17:17Speaker 04

  Yeah, I was keen to jump in here because we actually do. So we have the Metaverse Index, which is a community-launched product, the first of its kind, which I'm a methodology for, and so is Vertu, who unfortunately couldn't make it onto the call today. So, yeah, we do. And we have also, obviously, part Partnered with these like credible external partners to try and launch products. Um. But the Metaverse Index, like if I can talk a little bit about how that came about. Um. The idea actually went out in October, like went at launch. Um. I got quite excited. Thought this was a great opportunity to to get involved in DeFi. And so I put the idea out onto the forum.

• 17:58Speaker 04

  And it actually took quite a few months of um pushing and like understanding how the the index cult was forming before that actually became something that was then went through the the product onboarding pipeline, uh as as you guys have experienced recently with the bed index. Um. So yeah, we do have it and uh me and Verto kind of spun that up in a way where we can still be involved with the index co-op. So we're managing this product on on the side. But what we didn't want to do is step away from the index co-op itself and not be able to still like contribute and participate in in the success of the DAO. So um we're what's called community methodologist, which means that we stick around, stick our noses into stuff and and try and help the community continue to move forward.

• 18:41Ryan Sean Adams?

  So for for people who aren't familiar with like index co-op products, I I wonder if it makes sense to just give a high level of what the existing products you you have are. And uh you know what people can do with them. So I'm showing right now the index co-op um like homepage. And I see, I think I see five products listed here. So one is called the DPI, which we've made reference to before. Another is called ETH two X F L I. There's the the Metaverse Index that Dark Forest was just talking about. We've got a Bitcoin two X F L I. And then we've got the bed index. Um. Can you talk about what these products are aimed at? Maybe maybe Simon, could you just give us like the T L D R for each of these products, like why

• 19:24Ryan Sean Adams?

  someone would want to hold them and and what they do for an investor looking for exposure uh into uh into this asset class?

• 19:32Speaker 03

  Yeah, absolutely. So the DeFi Pulse Index, like I would really think of it as the S and P 500 of DeFi. So it is really the large cap DeFi protocols, your AVAs, your uni swaps, your makers of the world. And this, like this, when we talk to community members, you know, the thing they tell us is like the first thing they do after they move their ETH to their MetaMask wallet off their centralized exchange is they buy DPI. Because it really is the simplest way to gain exposure to what is, at the end of the day, a very, very complex sector. Ryan, if you want to scroll up, we can do.

• 20:10Ryan Sean Adams?

  Yeah, I'm actually, before we do another one, I'm curious as to what it takes to actually get into the DPI. So you, I know, obviously, this is arranged by its market cap weighted in some way. But there is also some entrance criteria, right, for being accepted. And you got the methodology actually outlines what this is. I wonder if you could just give a quick brief of how an asset comes into the DPI.

• 20:36Speaker 03

  Absolutely. So, you know, it has to be a product or a protocol that's been operational on mainnet for over six months. I'm just certain of what each protocol needs. And then, you know, finally, there's various audits that DeFi Pulse ensures that each protocol is going through. And when taken together alongside the, really the market cap of how everything breaks down, that's really what builds the methodology on their end.

• 21:08Ryan Sean Adams?

  So what's, how does DPI become governed, right? Because there are decisions that need to be made. Who is actually governing over DPI? Same question to you, Simon.

• 21:21Speaker 03

  Yeah, so that's really the beauty of it, right? So when you think of this kind of tripod that we have of the technology providers, the go-to market, the technology company, which is Index Co-op, and then the methodologists, each has its own role to play here. And when you think about an index product, you don't necessarily want the methodology to be something that's voted on every month by a community or is really subject to change in that way. Which is why we go to, you know, trusted outside parties, whether that's DeFi polls or bankless, to construct a methodology that essentially remains the same month to month to month outside of those routine rebalances.

• 21:59David Hoffman?

  Okay, so that's the DPI we just mentioned. Maybe Simon, you could just take us through a few of the others. So what is this ETH2XFLI that feels like I'm going to get some leveraged exposure to ETH? Is that the case?

• 22:11Speaker 03

  So first of all, just for everybody listening, so the ETH2XFLI and the BT2XFLI, like, these are some of the coolest technological products that are out there in crypto right now. They spent, the SET engineering team spent months building these. At a very high level, what is happening is it is a way of abstracting away a collateralized debt position, right? So some amount of BTC is deposited in Maker, DAI is borrowed out, more is, and then with that DAI, more ETH or BTC is bought, and it is a tokenized version of that that you can trade. And the incredible thing about these products is you can quickly enter and exit leveraged positions in a way that simply isn't possible anywhere else in DeFi right now.

• 22:57Speaker 03

  And you can enter and exit these positions on decentralized exchanges pretty much instantaneously, and you can do it at scale. And that's really, that's really not possible anywhere else in DeFi right now. And we're extremely excited about these products. We have a number of other leveraged products that we're also in the process of developing and releasing. And we see this as just being a absolutely massive market opportunity moving forward.

• 23:23David Hoffman?

  I think the cool thing about this is that you have turned leverage into a money Lego. So leverage is now something that you can build upon simply by instantiating the leverage as a actual single asset in DeFi. And there are assets like this in the traditional finance world, right? There are assets that are inherently like leveraged gold or leveraged oil. But we haven't really had these same assets in DeFi. And there's obviously been like a pretty decent amount of demand because of the market cap by both BTC and ETHFLI. So I think that's absolutely fantastic. Have you seen these assets being integrated as collateral anywhere? Or any of the money Legos expressions of these assets being found anywhere else in DeFi?

• 24:07Speaker 03

  We're in the baby, baby step phase of these being integrated as collateral. I believe people are doing it very, very slowly. To be fair, we just, we just launched our first Ferrari Capital Fuse pool with Fly as a collateral there. If anybody is feeling adventurous, we do encourage you to go over there and, you know, try to play around with that. That is, that is, David, like you said, that is the future. That is kind of the, the very cutting edge of what you can do with these products. And it is going to be super exciting to see, especially on layer twos, especially on like Polygon. You know, how these products are incorporated into the broader money legos of DeFi.

• 24:49Ryan Sean Adams?

  All right, this is super cool. So, so far, guys, we, we have a token, basically an index token that gives you exposure to DeFi, which is the DPI token. Then we have two other indexes that give you leveraged exposure to the crypto monies. That is ETH and Bitcoin. That's the ETH 2X Fly and the Bitcoin 2X Fly. Now, Dark Forest was talking about this, this Metaverse index. Simon, could you describe what's in this, this Metaverse index? It looks like it's maybe a compilation of sort of crypto gaming, Metaverse style, you know, tokens. How was this selected and how did this come to be? And maybe we can bring in Dark Forest to talk about this. But first, give it, give us the high level, Simon.

• 25:31Speaker 03

  So, Dark Forest, A, Dark Forest and AG know more about these protocols than anybody else in the world right now. I think they've built probably our most exciting index. The way I think about this index is it's really like, it's like, imagine in 1995, if you could own an index of Nintendo, Sony, Microsoft, Sega, Genesis, and then maybe throw in Pokemon in there and the Pokemon trading cards as well. It is one of the coolest things we have out there. It's been, you know, I think everybody in the community is incredibly proud that they were able to put together this awesome index and launch it. I am a huge MBI holder. I think probably everybody in our community is. That's my pitch for it. I'm sure Paul can get into the details even more, though.

• 26:17Ryan Sean Adams?

  Yeah, so give it to us, Dark Force.

• 26:20Speaker 04

  Yeah, definitely. First of all, that was a decent effort, Simon. You've clearly been doing your homework.

• 26:27Speaker 04

  Yeah, bonus points for that. In terms of like how it came about and a little bit more about the methodology, I guess. It was, like I say, I kind of put a proposal out back in October now. And having sat in my mom's basement all year and seen the like the trend of stuff moving online, whether that be like socializing, entertainment, business, even like sports starting to either be streamed or like digital versions of sport taking place. I thought there's something that can be done here. And there was a lot of hype around NFTs at the time. But I figured the trend was going to be a lot broader than that. I mean, like this term of metaverse to me is is going to be like an emergent reality

• 27:12Speaker 04

  that blends our current like physical and digital realities that we see at the moment. So the idea was, how can we capture that trend? It's been accelerated by COVID as everything's sort of moving online. And that was what gave birth to this product essentially. And then AG came along and he has a decent financial background. So he kind of tapped me on the shoulder and said, look, I think we can do something a little bit clever around the liquidity. Because at the time, a lot of stuff was low liquidity. So it's market cap weighted, which we then square root, which kind of reduces the volatility during rebalances. And then we've also got a portion that uses aggregate liquidity. And then we weight 25% by that.

• 27:57Speaker 04

  So we're taking partly the market cap and partly the amount of liquidity available to really just try and protect ourselves in the early stages of this product as we sort of watch this market start to grow.

• 28:09Ryan Sean Adams?

  This is super cool.

• 28:10David Hoffman?

  Dark Force, when you talked about the liquidity and weighting by liquidity, that's news to me. That's actually pretty cool. And I'm assuming you're actually tapping into on-chain data for on-chain liquidity? Or are you also tapping into like liquidity on Coinbase or Gemini or other centralized exchanges?

• 28:25Speaker 04

  Yeah, this is all decentralized. I think we probably wouldn't be welcome on this podcast if it wasn't. So we

• 28:31Ryan Sean Adams?

  If it ain't bankless, get out of here. That's how we do it.

• 28:36Speaker 03

  We don't negotiate with centralized entities.

• 28:40Ryan Sean Adams?

  Well, they are good for bridges. You know, we have to have our fiat bridges. But guys, what I love about this product assortment is like it solves real problems that investors have when they're entering this space. As you were saying, Simon, like the first thing people do when they get their custody of their keys and they go bankless is they might buy something like DPI, right? People ask all the time, okay, which DeFi token should I buy? And this gives an easy answer to this. Just buy the DeFi pulse index, then you don't have to worry about it, right? MVI does the same thing, only in the metaverse, where you just buy this asset and you have exposure to all of these up and coming metaverse style investments,

• 29:20Ryan Sean Adams?

  community type investments. That's also what we're doing with Bed, which is basically, you know, kind of the bankless thesis synergized into one token, where you get the crypto monies, you get Bitcoin and Ether, and you also get exposure to DPI. So you don't have to do anything. Just go into crypto, buy this asset and, you know, spend the rest of the time not worrying about price action, but like playing with the cool crypto ecosystem that is before you. But like the common theme across all of these products is you buy it and you set it and forget it, like passive index investing. And you guys have brought that into crypto and made it composable. JD, I'm curious about this. Tell us about the growth story here of some of these assets.

• 30:04Ryan Sean Adams?

  So I think right now on the NXCOOP website says there's 195 million or so diversified across these assets. So how has it grown since, I guess, September 2020, when you guys launched? And what are the most popular indexes so far?

• 30:25Speaker 02

  Yeah, so I'm looking up the actual, the actual charts here on our, on our dashboard, but we had,

• 30:35Speaker 02

  I think we launched DPI in September and the next product didn't actually come until, was it late March, early April, when we launched Fly? So we were 100% DPI, but since, since that launch, DPI now is only about 60% of the AUM, where ETH2X Fly now has about another 20% and the remaining have, the remaining three products have the last 20%. So we've seen really, especially with ETH2X Fly, we've seen really explosive growth in unit supply since April. And Metaverse, especially the last month, has been growing weekly,

• 31:17Speaker 02

  you know, 7, 10, 12% in unit supply every single week, which, you know, week over week growth like that is, is really awesome to see. DPI, yeah, since we, even since, you know, we've launched those other products in, in March, we've seen another, you know, 100% growth in DPI as well. So we're growing, growing really quickly and it's only going to accelerate as we, as we bring more products to the market.

• 31:48Ryan Sean Adams?

  JD, we're showing a Doona Analytics dashboard. I'm not sure, you know, someone from the Bankless team dug this. Actually, you're the author of it. Okay, so is that, is that you right there JD?

• 31:58Speaker 02

  That's me.

• 31:59Ryan Sean Adams?

  All right. So is this like a KPI dashboard that the Index Co-op team uses internally in the DAO to sort of measure itself and to, and to self-organize?

• 32:11Speaker 02

  Exactly. Yeah. So this, this main dashboard, these are our core, we call them North Stars and core KPIs, the things that we try to orient ourselves on. We report on them every week in our, in our meetings and keep track of them. So the key ones being, you know, address exposure, being focused on what users are holding our products. Unit supply is, is just how we measure demand of our products in the market. And the other one I want to touch on is Is unincentivized unit supply, which you can find in there, which especially for index products, the whole point of an index product. Uh, is that you don't, the product itself, the methodology, the, the value proposition of the index is, is.

• 32:51Speaker 02

  Is incentive enough for you to hold, hold it rather than having to be paid in what, whether it's liquidity incentives or staking incentives. So. Our goal is for these to be self sustaining products because they're valuable in and of themselves without external incentives for holding. Those are some of the, the core KPIs we focus on.

• 33:11Ryan Sean Adams?

  Yeah, I wanted to bring attention to this one. Um, so this is index co-op address exposure. So is it the case that you have, look, it looks like just over 20,000. Different ETH addresses that hold uh, an index co-op product. And of course, an ETH address, as listeners will remember, that can be an individual. Or that could be some sort of capital pool that could represent a DAO that could represent a uh, an entire hedge fund. It's like a bank account, I guess, would be the analogy in the traditional finance space. Um, why is a address exposure important to you? Does that represent sort of the, uh, I guess the distribution across, uh, different, different stakeholders and parties? Is that why that's important?

• 33:53Speaker 02

  Yeah, I think, I think it's important for, this is, I would say this is a high level metric for sure. And it's important, the reason why we have it is it's important for us as a DAO to be. Really intentionally focused on users. Um, and it's hard, like just for the reasons you said, it can be hard because we don't know if. One address equals one user, if three addresses equal one user, or if it represents a DAO or, or whatnot. Um. But we have other metrics and other dashboards that try to break that out. So we look at addresses by their, their amount of exposure they have by when they signed up. Um, so we really try to dig in as much as we can and we're in the process because we want to be user centric.

• 34:36Speaker 02

  We, the whole point of our DAO is we pump out, want to pump out multiple products a year and everyone should have strong product market fit and, and user fit. And that's what we want to stay focused on.

• 34:47Ryan Sean Adams?

  Awesome.

• 34:48Speaker 03

  You know, one, Ryan, if I could just jump in one quick note here is this is really like what JD's built here. This is really one of the best dashboard in DeFi. And I think if you spend a lot of time on these dashboards going through it, you recognize like this is really the future of financial reporting. Like this is where

• 35:06Ryan Sean Adams?

  This is the 10K.

• 35:07Speaker 03

  Many, many companies, 100%. And like these, this is kind of the clean edge of it. But five years from now, there is going to be a significant number of companies in S and P 500 that report their earnings using a Doon Analytics dashboard, something like what JD has built here. Like that is the future we are moving towards. And once you start playing around with it, you really recognize the power of these dashboards and the power of on-chain data.

• 35:32Ryan Sean Adams?

  Well, it's so cool. This is powerful. I'm glad you brought this up, Simon, because this is powerful for DAOs themselves, because anybody in the DAO can go tap into this data and start measuring it. This is, this is powerful for analysts who are trying to figure out, okay, what is Index Co-op really doing? And how do I look at the, the, like, the value or potential future for Index as a, as a token? It's valuable for other partners who want to, you know, like, do something with, with Index. Uh, it's also valuable, and they don't appreciate this yet, guys, but they will. It's valuable to regulators. This is insanely valuable data to regulators because we're moving from a system of like forced disclosures,

• 36:17Ryan Sean Adams?

  right, where organizations, say corporations, have to be pushed into, you know, from a regulatory perspective, disclosing things every quarter. And it's sort of selective in terms of what, what they can disclose to something that is completely open. Like, everything is on-chain. All of your products, all of your revenues, all of your fees, uh, like all the way down to kind of the code and who, who manages the code, which is, it's like all public, it's all on-chain. I wish regulators could figure this out because there's some regulatory flood right now about DeFi. But like, show them a Doon Analytics dashboard, right? Like, what more information do you want? This is like, this is way better than any 10K I've seen. It's actually digestible, understandable.

• 37:01Ryan Sean Adams?

  If you don't like it, you know, change the data around, build the graphs out in a different way. They have access to all of this. This is why we call it open finance, people. Sorry, rant over, but I'm glad you mentioned that, Simon.

• 37:14David Hoffman?

  That actually brings me into my, the next question I wanted to ask anyways is how are indices built on DeFi fundamentally different than indices built in in traditional finance? And one of the answers that we just gave is, well, there's more, there's more data, there's more transparency, there's more reporting, but what else is there to talk about with, with why indices on DeFi are so powerful and how they're meaningfully different than the indices that we know and on our Robin Hood accounts or traditional brokerages? JD, do you want to, do you want to take that one?

• 37:45Speaker 02

  Yeah, I'm thinking. So if anybody else, Simon or Paul have a better answer in the meantime, go ahead.

• 37:53Speaker 04

  Yeah.

• 37:53Speaker 03

  So I think the thing, go ahead, Paul.

• 37:56Speaker 04

  Yeah, I was just gonna say that the main thing is like, I think you, you have the ability to do very similar things, but it's all much cooler in DeFi because it's all self sovereign. So we have the ability to execute meta governance, for example, using the underlying tokens in DPI. And I don't know anybody who holds an Amazon, Amazon share that's ever voted on anything, you know, Amazon related, whereas if you're a DPI holder, you're not only holding the, the tokens in your wallet, but, or if you're an index token holder, sorry, you can like use your index tokens to vote on an ARVA proposal, for example, and we can use the amount of ARVA tokens held within DPI because of the way the contracts work to actually

• 38:39Speaker 04

  vote on ARVA proposals. So as an index token holder, you have like this extra superpower called meta governance, and that's one thing. Then we've got stuff like intrinsic productivity, which at the moment we're still kind of talking about and trying to figure out because it is so new. But what we can do there is start to look at ways to make these underlying tokens productive. So could we have a contract, for example, that you deposit DPI into, we break it into its constituent parts, and then you stake your wifi in the wifi governance portal, for example. So you can then start to yield on your assets as well. And like, yeah, I mean, compare that to holding, even holding crypto in a Robin Hood account,

• 39:22Speaker 04

  you can't really do anything with it. There's just so much more composability and interoperability with like ERC token, ERC 20 tokens.

• 39:31Speaker 03

  Yeah, I mean, so like Paul said, so comparing a on-chain index and I firmly believe, I think everybody index co-op believes is like all ETFs, all index funds are eventually going to be held on-chain. And comparing an on-chain index to an off-chain like normal ETF, it's really like comparing like a 1960s Honda Accord or 1970s Honda Accord, like a 2021 Tesla S, like Model S, right? Like, they're both cars, right? They'll both like get you to the grocery store, but they are very, very different technologies and one will do it in a far, far more efficient way. And, you know, be able to do it in just an extremely efficient manner in a way that, you know, the prior technologies just can't.

• 40:16Speaker 03

  And on top of that, like you can use our indexes for collateral. You can borrow against them, you can lend against them. You can, you know, at any moment, return those indexes for all of the underlying. And like those, that, that level of compostability is just simply not accessible in, in normal index funds, normal products. And like, yes, the grayscale's this world are entering like, or Goldman Sachs, right? Like the crypto ETF, the DeFi ETF. But like on-chain indexes are just, it's just an entirely different world of efficiency and capital, of capital efficiency that is just not accessible in private, in previous types of funds.

• 40:55Ryan Sean Adams?

  Yeah, I feel, I feel like so, um, like, once you go into this world and you start doing things with, with DeFi tokens, things like, like these indices tokens. And then you go back and log back in, I don't know if you guys have done this, but log back into your, like your brokerage account, like your Charles Schwab account or E-Trade account. And you're sitting there looking at the ETFs you hold there. And you're like, oh my God, what do I do with these things? I log in and visit them in like jail, you know, once a month or whatever, but they're stuck here. They're not doing anything for me. They're completely trapped. And you compare that to like the DPI token, which you can use anywhere else in DeFi, right? We're talking about governance, but you can also use this as a super fluid collateral to back a loan.

• 41:40Ryan Sean Adams?

  I mean, that's sci fi stuff. That's crazy stuff. And only until you start to experience like the DeFi side of it, do you actually see how how all of your other ETF assets are basically in like brokerage jail? Yeah, I'm curious about this, the the index curation process. And Paul Darkforest, you're you're talking about proposing the Metaverse index. I'm curious what that process is like. So if someone like you has a good idea, wants to be a methodologist for index co-op, what's the process for getting an index submitted, approved and created? What does that look like? How long does it take?

• 42:21Speaker 04

  Yeah, that's a good question. And it's something that's being approached by the community at the moment to try and improve because I think that we've we found some sticking points, like we're not perfect with it at the moment. But basically, it comes down to coming up with an idea, and whether that's something completely novel, like the Fly series, where it's, you know, abstracted leverage, basically, or if it's a really powerful theme, like the DeFi Pulse Index, or the Metaverse Index, or obviously Bed. So basically, the first step is to approach our community. And that takes place on the forum. And so you put a post out on the forum and say, here's our idea. We have a template for this. So any potential methodologists will follow that template and they'll say,

• 43:06Speaker 04

  you know, here's our potential addressable market. Here's how the methodology will work. Here's how we're going to approach, you know, integrating it. Here's what the unique parts of it are. And then what the co-op community does really well is they'll come out onto the forum and say, okay, we like this, or we don't like this. We've seen this work. Here's the data. Very often, we'll, you know, we're going to Pester JD to to get some more information around stuff. And then we'll try and refine refine that post effectively. And then we have a couple of like formal gateways. So assuming that the feedback is is fairly good and the sentiment is positive. Now, we can have a, first of all, a community call, which we did with you guys, which was great because everybody got to feel like a rock star.

• 43:50Speaker 04

  And be on a call with David and Ryan from Bankless, which is awesome. And, and, and that's another opportunity for the community to learn a bit more about like what the methodologists offer, what they're thinking about the product. But if assuming everything's positive there, we, we go to DG1, which is decision gate one. And that's the first actual vote where index token holders can have a say on a product. And at that point, uh, excuse me, it's basically just to gauge the sentiment. So there's no quorum, uh, as far as I remember, but it's just to say, are we in general agreement or not? Once that goes through, then there is a product team that basically dives onto it headfirst and does a deep dive and says, okay, they said here's that this is what the addressable market is.

• 44:34Speaker 04

  Do we actually see that coming true? What kind of reach do they have? What's the engineering lift in the background? You know, what's it going to take? What does the fee split look like? And, and what's the return on investment for index co-op? So all of those hard numbers go into a prioritization rubric. And then that helps us to prioritize our product pipeline. From there, it then falls into, um, once it gets to the, you know, the end of that pipeline or the top of the priority, it will go to DG2, which is the, the final vote. And that does have a quorum requirement. I think it's five, uh, 15% has to vote and 60% have to, has to be in favor. And if you pass that, you get to launch your product with index co-op.

• 45:16David Hoffman?

  So index co-op has been praised as been one of the most like fluid and efficient and streamlined DAOs that's out there. And that was definitely my experience when, when Ryan and I were, were going through, uh, the, the whole DAO process with, with the bed index. But, but I have a, I have a critique, I want to pay devil's advocate here is that, you know, this industry runs on permissionlessness and it seems to be that index co-op is really careful and really methodical about the indices that it wants to create. But that means that you have to actually go to the index co-op and ask for permission to make an index. And so what about, you know, this, the average person who wants to make their own index for their own purposes? Is this something that you guys have your sights on maybe in, in the roadmap for index co-op?

• 46:00David Hoffman?

  Just making, uh, making an index a little bit easier or, or what's the, uh, what's the, the social contract of the DAO with how it approaches to opening or lowering the, the gates or the, the barriers to actually making, making an index?

• 46:15Speaker 02

  Yeah, I can, I can take that for a second. Um, I think that the vision is to get to a point where, whether it's an incubator style or um, whatever it looks like, the vision is to get to a point where, where anybody really can come in and create an index. And that's actually possible, you know, with token sets on its own without the index call. You can create an index product and try to drive a um, really the index co-op is would be is like, look, thinking about like a partnership with a complete distribution platform, engineers, product people, marketers, business development. So the co-op right now is we're really only eight, nine months old, even though that growth has been

• 46:57Speaker 02

  really fast. You know, we're focused on launching big products, products that are going to really win the market because because this market is a winner takes most market. Um, and we need to be focused on winning the market and as at the same time improving our processes. So it becomes easier and easier to work with the index co-op to launch products. And I think we're very aware that we need to improve those processes over time and and we're focused on that, too.

• 47:24Ryan Sean Adams?

  Hey, Simon, I'm curious your perspective on this, but like putting your biz dev hat on. So JD was talking about, you know, adoption, right? Growing this as big as it as it can grow. And it's very clear that you have mind share among sort of the the crypto natives, the define natives for index co-op products, right? Like, check that box, you know, that's only going to grow. Well done. Um, I I see two other areas of growth, like one area of growth is centralized exchanges. So is there a way to get these assets listed on centralized exchanges? When we had Jim Bianco over, he was just talking about like, um, he's done gone into that he's a, you know, a fund manager,

• 48:07Ryan Sean Adams?

  CNBC contributor, this sort of thing. And the question he always gets when people get into crypto, they'll create their Coinbase account and they're like, oh, okay, how do I buy the DeFi token now? Like, where is that? And I'm like, well, that's DPI. How soon? Like, is there a world where something like DPI gets embedded in these crypto exchanges? And if so, how soon is that world coming? Simon, what do you think?

• 48:36Speaker 03

  Yeah, Ryan, that's so that's a very interesting point that we've been we've really navigated over the last eight months. So I think of first, just for context, I think it's good to understand. A lot of the exchanges that centralized exchanges are still very much operating from like a 2017 ICO, right? Where they are very much built to keep out the ICO tokens and then screen, you know, a certain number of tokens based on volume to allow onto their exchanges. What we're starting to see with a lot of the leading exchanges, um, is they're really starting to transition their business model from like a closed garden approach that really

• 49:14Speaker 03

  centralized exchanges from say 2017 to 2020 to more of an open garden approach like what characterizes a uni swap or a sushi swap. So we're A in the middle of that transition and I think all DeFi calls right now are feeling the pain of that, right? As we're like struggling to get each of these different products, you know, DBI, MVI, Bed, you know, the tokenized leverage products like listed on centralized exchanges. Like we're very much like working through that. Um, and you know, we are in active communication with several of the top tier centralized exchanges right now. And like, I think there's going to be some extremely solid movement there over the next couple of months with really our fullest of products.

• 49:56Speaker 03

  And I think the other segue on top of that is the the index index co-op and our our products like we're going to be because of our strategy of partnering with really blue chip methodologies such as Bankless, such as DeFi Pulse. Like we're going to be the first choice index partner for major institutional capital. Like that is where we see ourselves as a protocol. That is where we see, um, you know, these massive in these massive funds that are funds that are about to flow into DeFi. Like we see them flowing into um, DPI, into MVI, into Bed. Because the reality is like, we think of institutional capital as super highly sophisticated, which it is.

• 50:36Speaker 03

  But these like these major banks, these major financial institutions, like they don't have the DeFi knowledge that we've built over the last two years. Like they are just as, you know, just as blind in this space as the average consumer and they are going to want exposure um, in through index products. They're going to need it. And you know, a big play we're making in X co-op is we want to be the landing spot for all of that institutional capital.

• 51:02Ryan Sean Adams?

  This is so cool, right? It's like at some level, hey, we gotta save them from the Goldman Sachs DeFi ETF, right?

• 51:08Speaker 03

  100%.

• 51:10Ryan Sean Adams?

  Like, that's what's going on. And even, you know, God bless Grayscale, love their efforts, high management fees, you know? And like, and you don't actually own your own crypto assets. So like, I'm curious, because institutional DeFi has sort of been a theme. We've seen Compound Treasury release sort of an institutional product, Ave with their Ave Pro product, which David, that's called something else, isn't it? Not Ave Pro. Ave Ark. Ave Ark product. So how close do you think we are to, for institutions to be able to directly buy and hold index co-op products like the DPI or Bed?

• 51:50Ryan Sean Adams?

  Are we far away from that? Do the exchanges need to integrate that? Or is there a world where they start buying before these things are even listed on exchanges?

• 51:58Speaker 03

  So up to, so up to right now, and this is a common misconception. So up to right now, what institutional DeFi has meant, really up until like the present moment, is institutional participation in staking, right? So there are numerous funds in Switzerland, in Europe, in the United States that are very active in DeFi staking. So, you know, a number of top hedge funds are very, are recognizing or have already recognized that, hey, like I can beat my, my expected return just by, you know, either playing in stablecoin pools or staking, right?

• 52:35Speaker 03

  And I can beat the return that I would get investing in like a more volatile asset class, or more volatile, like traditional equity asset class, right? So that transition, that evolution has like, the boom has happened. Like, maybe we haven't seen the mushroom cloud, but the boom has happened. Um, so what we're starting to see right now is

• 52:57Speaker 03

  These funds that have entered the space and have been very active in staking, they've been very active in LPing, you know, stablecoin pairs. They're starting to really expand their horizon of how they think about DeFi and how they think about investing in this space. Um, and really like the next step in that is, is them directly holding

• 53:21Speaker 03

  actual governance tokens, holding indexes like DPI. They're, they're very, very close to it. And you know, what we're seeing right now is, you know, really over the last year, the crypto space, the DeFi space, it was dominated by about 15 to 20 kind of what I would call DeFi native funds, right? Like your Three Arrow Capital, your Almeta, um, some of these. And that is slowly transitioning, right? Those funds still dominate a large sector of it, but that is transitioning to more traditional venture capital funds who are entering the space with a specific thesis of holding governance tokens long-term and treating, you know, these early-stage DeFi protocols like any, anything held in DPI or Index Co-op,

• 54:03Speaker 03

  like they would a, really like a world-class Series A-funded startup, right? Like that is how these, you know, institutional capital is starting to treat governance tokens. And that is an incredible shift. And it is going to be an incredible accelerator for wide-scale adoption of DeFi. Because, you know, these previous funds that just, you know, they traded and dumped, right? That was a very bad reputation for VCs. What we're transitioning to is major VCs holding these governance tokens as long-term investments that they expect to develop and grow over the period of decades. And that is so incredibly exciting for DeFi and where we're headed.

• 54:43David Hoffman?

  Guys, this has been a fantastic exploration into the world of Index Co-op. And, excuse me, uh, and like I said earlier in the show, uh, Index Co-op has been praised for being one of the most, uh, you know, streamlined and, and, and fluid DAOs there is, there is out there. And so we, I really want to pick your brains about how Index Co-op, uh, how, how it DAOs. What does it mean to DAO from the Index Co-op perspective? And I also want to get into the bet index because I think there's some really interesting things about the bet index that are worth noting. Notably, the fact that an Index Co-op product, DPI, is actually in another Index Co-op product's bet. I think that's a, something I want to parse apart. But before we get to the second half of the show, I want to take a moment to talk about some of these fantastic sponsors that make this show possible.

• 55:27David Hoffman?

  Living a Bankless life requires taking control of your own private keys. Not your keys, not your crypto. That's why so many in the Bankless Nation already have their Ledger hardware wallets, which makes proper private key management a breeze. But the Ledger ecosystem is more than just a secure hardware wallet. Ledger is the combination of the Ledger hardware wallet and the Ledger Live app. And if you're used to seeing all of your crypto services and favorite DApps all in one place, Ledger is where you want to be. Not only does Ledger let you buy crypto assets straight from the app, but it also hooks into decentralized exchange aggregators like Paraswap, which makes sure that you are getting the best prices on your trades without your assets ever leaving your control. DeFi never stops growing, and the Ledger Live app grows alongside with it. So click the link in the show notes

• 56:11David Hoffman?

  to see all the DeFi apps that Ledger Live has. And stay tuned as more and more apps come online. And if you don't have a Ledger hardware wallet, what are you even waiting for? Go to ledger.com, grab your Ledger, download Ledger Live, and get all of your DApps all in one place.

• 56:29David Hoffman?

  Bankless is proud to be supported by Uniswap. Uniswap is a new paradigm in asset exchange infrastructure. Instead of a cumbersome order book system where trades are matched with other humans, Uniswap is an autonomous piece of software on Ethereum, which is what Ryan and I call a money robot. No human counterparties or centralized intermediaries, just autonomous code on Ethereum. Input the token you want to sell and receive the token you want to buy. Something brand new in the Uniswap ecosystem is the Uniswap Grants program is now accepting applications for grants. We have been saying this for a while, and we'll say it again. DAOs have money, and they are in need of labor. If you think that you have something to contribute to the Uniswap DAO, apply for a grant to Uniswap.

• 57:13David Hoffman?

  Just look at the size of the Uniswap treasury. It's almost $3 billion. This mountain of capital is looking for labor. Do you have something of value to contribute to the Uniswap DAO? No matter how big or small your idea is, you can apply for a uni-grant at unigrants.org and help steer Uniswap in the direction that you think it should go. That's exactly what we did to get Uniswap to be a sponsor for Bankless, and you can do the same for your project. Thank you, Uniswap, for sponsoring Bankless.

• 57:43David Hoffman?

  Alright guys, we are back with the team from Index Co-op. And in the first half of the show, we went through all the things about indices, both in TradFi and DeFi and why they are so cool. In the second half of the show, I think I really want to get into the actual DAO side of Index Co-op. Index Co-op is a DAO and my experience with interacting with the Index Co-op is they are one of the most streamlined DAOs in existence. And so I want to ask about the topology or the org structure of Index DAO. How is Index DAO organized? And so who do you think of the three members on this panel is most equipped to answer that question?

• 58:21Speaker 04

  Yeah, I can take that one. Fairly involved. Yeah, I'd say at a high level, it's mainly between like working groups and our funding council. But those things didn't exist in the like the format that we see them today, nine months ago. All of this stuff has kind of like ebbed and flowed as we've, as we've scaled. One thing I should say is that definitely like set protocol are a very switched on and organized bunch. And they started us off on the right foot with our like our weekly calls. Felix, I remember encouraging like one-to-ones and just really embracing like this group of decentralized cats

• 59:04Speaker 04

  that you're trying to herd via Zoom calls like it's just, it's very complicated to do. But the way that we set up our structure at the beginning, I think has really helped us. So in terms of the working groups, that was put forward a few months back. And the idea behind that is you basically set out and anyone can do this. These are emergent, so anyone can come out onto the forum and say, I think the Index Co-op needs a business development working group. And they propose a time box for it. So let's say a quarter, that's what we've kind of ended up doing. And so Simon will come out and say, we need to do some BD and we're going to do it for three months. Here's how many people are going to be involved. Here are the initiatives that we're going to target.

• 59:45Speaker 04

  Here's how you can hold us accountable, like make sure that the community can like hold them accountable to it. But then what we have on top of that is the Funding Council. So the Funding Council started as a Group of like set members on a multi SIG that were able to fund these things at their discretion. And what we're trying to do now is part of like autonomy discussions in the co-op is hand over the power of that council to the co-op and make sure that it's co-op members on the multi SIG and co-op members like advising the decisions there. And so it's been quite a hot topic recently, especially around like the idea of autonomy. And it is a progressive like decentralization effort that we're going through. But I think we do owe a lot of it to set.

• 1:00:30Speaker 04

  We then owe a lot of it to the community members that have like picked it up, run with it and iterated it as well. And so, yeah, hopefully you guys had a really good experience as you came through the process with us.

• 1:00:45David Hoffman?

  Simon, do you want to add something?

• 1:00:49Speaker 03

  Yeah, I was gonna say, you know, I think something that is really, I think, you know, in crypto right now.

• 1:01:00David Hoffman?

  Simon, we have lost you on the stream, so I'm going to move on. I'm sure we'll get you back at some point in time. Oh, he's actually gone, gone. Okay, maybe not. Paul, I have a follow-up question on that. Can you just go ahead and list off all of the working groups that are in the index co-op and what they do?

• 1:01:19Speaker 04

  Oh, that's a, that's a test.

• 1:01:21David Hoffman?

  Is it really that? I have a number?

• 1:01:24Speaker 04

  It is this month. Yeah, we're going through like our second phase of it at the moment. So there's a fair few, but we have, we have the growth working group, which is obviously focused around growth, marketing, business development. We have people, organization and community. We have analytics, we have meta governance. We have a product. Obviously, we have, what else do we have? Potentially a language one coming up as well.

• 1:01:59Speaker 02

  Institutional business?

• 1:02:01Speaker 04

  Institutional business, yeah, that's a new one this month as well. And I've probably missed another one in there.

• 1:02:09David Hoffman?

  So if you add all of the working groups together, is that index co-op in its totality? Or are there other parts of index co-op that are outside of the working groups as well?

• 1:02:20Speaker 04

  Yeah, so that's a really good question, actually. So what we were doing as the Funding Council was kind of basically giving out rewards to contributors. And what we've moved to is this model where, because the three of us on the Council were basically too far away from the coalface to the point where we couldn't reward people accurately, because we couldn't keep track of what 60 or 70 people were doing in the DAO. So we pushed that responsibility down to the working group leads. So they're requesting a budget, they're saying, here's the work that I need to do to make this successful. They tie it to our KPIs, and then here's how much money I need, and here's the contributors that are going to do that work. So the Funding Council just basically requests a budget to fund that. There are still some bits and pieces that fall between the gaps,

• 1:03:05Speaker 04

  because obviously we can't account for everything in all of the working groups. We might have a really good idea, or something in DeFi might change to where we have to, you know, react to it, and a bunch of work gets done that needs rewarding. So there will always be the Funding Council to kind of like fill those gaps as well, and make sure that contributors are rewarded across the whole DAO.

• 1:03:25Ryan Sean Adams?

  It's so fascinating, guys, because I feel like every DAO is trying to figure out how to DAO right now, and that they're having varying degrees of success. But what we see in Index Co-op is a model of success. Like, you guys seem to run, at least from the outside looking in, like a well-oiled machine. And so I'm super impressed with that. And I think you've already shared a few of the things that you've learned along the way. But maybe, me, I'm curious just to put it in a question. It's like, what are the lessons learned on DAOing that you have to like pass on to other DAOs? What are the things that DAOs should do? What are the things they should avoid doing from your experience? JD, let's start with you, if you have some thoughts on this.

• 1:04:09Speaker 02

  Yeah. So...

• 1:04:12Speaker 02

  I think one thing that's becoming apparent now, so this may blend into more of kind of like what we're learning because we are, we're definitely learning right now. I, I, I think we are trying to push the envelope and that's great in a lot of ways. And I think the community has been awesome to realize like we're in a learning process and we're figuring this out over time. But like Paul mentioned with SETS leadership from the get-go enabled us to make the right strategic bets, right? On DPI and on the fly series, but over the last few months as we've launched new products, we've grown our community. We're learning, how do we, how do we maintain like high level strategic alignment and still make strong bets?

• 1:04:55Speaker 02

  And focus ourselves when we have eight, 10 working groups. And I think we're learning what those structures look like. Right now it's the funding cancel working groups. We have a, we just launched an autonomy working group to explore this with other stakeholders more deeply. And, and I think that's the challenge I think we're facing. So as other DAOs think about it, like that's the challenge maybe to look forward to is as your community grows, you, it's harder to keep focus and to focus everybody on the same few initiatives that you and the big bets you might need to make as a, as a young, as a young organization.

• 1:05:36Ryan Sean Adams?

  What are, what are your thoughts, Stark Forest?

• 1:05:39Speaker 04

  Um, yeah, first of all, it just popped into my head that the engineering working group, which is a massive one that I missed off my list earlier. Um, I was going to say that something that I, I came across that I mentioned on our forum was this, this um, like thought model or this uh, like hypothetical situation and it's called Chesterton's fence. And I've seen people on Twitter and from other DAOs kind of talking about this. And what it is, is imagine two people are walking in a field and they come across a fence or a gate, but there's nothing either side of it. So you could easily, quite easily go around it. So one person says to the other, what's this doing here? We should just get rid of it. And the other guy says, well, as soon as you can tell me why it's here, then we can get rid of it.

• 1:06:23Speaker 04

  And so I think what we're seeing in DAOs is a lot of people come in and I did the same very naively thinking that decentralization solves everything.

• 1:06:34Speaker 04

  Unfortunately, it it doesn't. You have to have a group of like high context, highly accountable people to make decisions and move stuff forward. Because otherwise, you you get a lot of friction, a lot of delay. So I think we found, as JD said, like, set kicking things off really helped us. And now, we've got to a point where we really quite rapidly need to move to index co-op, having the the power as either the Funding Council or some other thing that we haven't yet had. And we and we see this at Synthetix with their Spartan Council as well, where you have potentially an elected group of people who are empowered to make decisions quickly. And I think that's a really powerful lesson learned, because the longer you try and hold on to like,

• 1:07:18Speaker 04

  voting by committee or decision by committee, the the more you're going to slow yourself up, potentially.

• 1:07:25Ryan Sean Adams?

  Yeah, that's great feedback, Paul. Thank you for that. Simon, what would you add? What are some lessons learned from from Dowing so far?

• 1:07:33Speaker 03

  So I think the mistake people make is they think decentralized means leaderless, right? And decentralized protocols and DAOs thrive on the strength of the leaders they have. And Index Co-op, you know, from day one, we have built this culture of ownership, a culture of trust, a culture of integrity, a culture that really embraces and values strong leadership. Like JD mentioned, like, he was like, hey, you know, Index Co-op really values analytics. We have six or seven people like working on analytics. Like, no, JD Cook is a great leader and he has, you know, managed to get this awesome team of eight or 10 people working on analytics. And like Paul is, you know, being or Dark Forest being very humble, saying, oh, you know, we have this council,

• 1:08:16Speaker 03

  this council, this direction. It's like, no, like Dark Forest, you know, helped put this together and like, drove it, made it happen. And you know, but I think of what makes DAOs successful and is it's people taking ownership. And then it's embracing DAOs when it's high stakes. Like, anybody can be like elephant Dow and have a multi SIG and kind of be hanging out with your buddies. And it's like, whatever. But what really differentiates a great DAO from all the others is like, can your DAO operate when the stakes are really high? And at Index Co-op, I mean, this is a business on the blockchain. Like, we handle hundreds of millions of dollars.

• 1:08:57Speaker 03

  The stakes are always very, very high, and we have put a tremendous premium on leaders who can A, handle stakes when they're that high, and then execute at an extremely high level.

• 1:09:10David Hoffman?

  That's fantastic. And I think it's really interesting to note that when you look at all the other DAOs in the space, like AVE in theory is a DAO, but you know the name's Donnie. And Uniswap is a DAO, but you know the name Hayden. With Index, there doesn't really actually seem to be one figurehead, but there does seem to be many, many, many leaders moving each one of these working groups forward. So I think that's pretty cool. One of the last few questions we have as we come to the end of the show is, what are the products that are in the pipeline that are not yet released out of the Index Co-op that are really, that excite you guys? Are there any teasers that you guys could give us about future Index Co-op indices coming out of the DAO?

• 1:09:54Speaker 03

  Before we do products, can I just do a shout out to two initiatives that are happening?

• 1:09:58David Hoffman?

  Absolutely, please do.

• 1:09:59Speaker 03

  Yeah. So Index Co-op, we are launching the first DAO internship program. It is happening. It is kicking off August 9th. We have seen, I believe, over 200 applicants so far to intern at Index Co-op. We want the next generation, like, we don't want them to just land on 388 applicants so far. Like, we want the best and brightest to come to Index Co-op. We want them not to say, "I'm gonna go work at Google or Facebook." We want them to say, "I'm gonna go work at DeFi," and we're very committed to making that happen. And I think the other thing I also want to give a shout out to is, you know, Index Co-op has really made a commitment to be a leader when it comes to diversity and inclusion in DeFi.

• 1:10:44Speaker 03

  I would say, you know, over half of our core team members are mentors for C256. We have an incredibly successful women in Index Co-op community. Call that happens every Thursday that has, you know, we have 20 plus women every Thursday from across DeFi, from across crypto, coming, helping out with the co-op, learning about it, getting involved. And like, those are two initiatives that I'm really fired up about. And I think as DeFi grows, like, this can't just be a movement for, you know, a thousand people or 2,000 people. Like, it has to be everybody. And we have to build structures where everybody in the world can feel comfortable entering these DAOs, entering those organizations and pushing things forward.

• 1:11:28David Hoffman?

  Yeah, and that's a, an answer to a question that I wouldn't have known to ask. So, so thank you for, for that perspective, Simon. But also, back to my original question, what other indices are coming down the pipeline that are, that we can all get excited about in the future?

• 1:11:44Speaker 02

  I can, I can touch on a couple.

• 1:11:47Speaker 02

  We are just about to vote on, on the data index, which is a thematic index to give you exposure to data economies, on-chain data economies, such as graph protocol, ocean protocol, even like BAT and Orchid, like, there's this, this, yeah, this chain link. Yeah, sorry. I should have maybe started them. Yeah, this, this whole idea.

• 1:12:12Ryan Sean Adams?

  If you don't include them, by the way, JD.

• 1:12:15David Hoffman?

  Absolutely let you know.

• 1:12:18Speaker 02

  Yeah. So, I mean, it's just this, this theme of web three data economies, capturing a lot of these, which are really interesting tokenomics and a lot of them, these utility tokens, into an index. We have proposed going to DG1, the, the pay. You can see these on our form, the pay index, which is a, a stable, yield-bearing stablecoin index. So nine yield-bearing stablecoins, trying to maximize your risk-adjusted returns on stablecoins, which could be very powerful for both DAOs and individuals in their portfolios. And then the continuation of the fly series, inverse ETH is one of the, is the next one coming through. So allows you to get inverse exposure to, to ETH movement.

• 1:13:04Speaker 02

  Am I missing any other ones that are close?

• 1:13:08Speaker 03

  We're calling that, we're calling that the down only index.

• 1:13:15Ryan Sean Adams?

  What would that mean if, if I'm holding inverse ETH? I'm just curious, that means like when, when ETH goes up, um, you know, I'm going down, I guess, and vice versa.

• 1:13:26Speaker 02

  Exactly. So, I mean, this is a, this is a continuation of our, our focusing on a market of like really um sophisticated traders, right? The, the, these products, these leverage products aren't necessarily meant to be buy and hold products like our thematic indices are. Um, these are more for people that are moving in and out of positions relatively quickly. And we are building out a series that will cater to this market. That being the next one.

• 1:13:55David Hoffman?

  Uh, so my next question is actually about, uh, the bed token, the bed index, which again came out of the bankless Dow. I'm super excited about it. Like I said, the best crypto index, uh, that I think will ever come out. Uh, but you know, it's very early, so maybe I shouldn't say that too soon. But, uh, Paul, as, as the methodologist behind, uh, MVI, I have a question about the, the nuance in, uh, the bed index. Because the D part of bed is of course DPI, which is a product out of index co-op. And so there's an index co-op product inside of bed index, which is another index co-op product in partnership with Bankless Dow. How did that change? Did, did, did that like throw a wrench in the, in the, in the, in the gears about how you think about, um, the methodology behind, uh, the bed index?

• 1:14:39David Hoffman?

  Or what, how, how did that change what you were really kind of thinking about with, um, uh, index co-op products?

• 1:14:47Speaker 04

  Um, not as far as I'm aware, I think for, for me personally, I thought it was quite interesting because I kind of see uh, the, the bed index is like a growth hack for DPI to an extent. So the fact that we've, we've got it included in there and we've partnered with, you know, the bankless Dow and, and yourselves who have fantastic reach and great educational materials. I think putting those two things together, um, helps us like really spread the word about, you know, what you can do in DeFi. And, and for these, um, brand new investors to the space, like it's, it's a perfect product really, uh, for those kind of people. So, yeah, I don't think it, uh, as far as I'm aware, like I say, I don't think it was any, um, spanners in, in the works, but, uh,

• 1:15:33Speaker 04

  It's just a really like a really advantageous thing to do and then it's going to help us like spread the word about DPI and DeFi more generally.

• 1:15:42David Hoffman?

  I I think the cool thing about what you can do by turning your own tokens into another indexes. Bankless Dow partnered with Index Co-op to produce the bed index, but there's DPI inside of the bed index. And so in a way, there's like an unofficial money Lego relationship between Bankless Dow and DeFi Pulse, which has, you know, no other connection other than the actual than what's in the actual bed index. So I think that it's like this unofficial relationship that I think is pretty cool. And that very much goes to what Kevin Awaki was saying over at ETH, ETH CC, when he talks about how all DAOs will all rise together and fall together.

• 1:16:22David Hoffman?

  And putting the relationship of a DAO on chain allows other DAOs to just tap into the power of other DAOs. I don't really have a question there, but if anyone wants to riff on that, I'll open the floor.

• 1:16:35Speaker 02

  Yeah, I mean, I, I think like, I love that point and, you know, something, it provides a synergy with multiple partners trying to push everybody forward, just like you're saying. And I think one of the things I'm really excited about with that is we talk about this like new, new crypto user retail market. And I mean, I've already had multiple people on Twitter or just text me and be like, hey, what's this bed? How do I bed, bed token? How do I get into it? And I'm really excited to see two really passionate communities at Bankless Dow and Index Co-op really try to focus and innovate on how we start to penetrate, you know, new crypto, you like new adoption, incoming crypto users, investors.

• 1:17:20Speaker 02

  And I think that's like, we've talked about the bed being this Dow to Dow partnership and the, the uniqueness and of that. And I'm really excited to see that play out is how we come together and as communities to really drive a new adoption through bed. That's my hope for the product in a large part.

• 1:17:40David Hoffman?

  One of the things I've been thinking about while on this call, and I want to run this idea by you guys because it might be crazy or it might be genius, one of the two, is all of the indices on Index Co-op, there's supposed to be quality, right? Like, you're not supposed to be throwing crap tokens into these indices. Each one of these indices is made with purpose, made with intent, which means there should be quality in every single one of the indices. So have you guys thought about the Index Co-op index, which is just an index of all the products that you guys have ever created? Has this been passed around in back channels? Have you guys thought about this?

• 1:18:18David Hoffman?

  JD, I'll throw this one to you.

• 1:18:19Speaker 02

  Yeah, it's been thrown, there might even be a discussion going on the forums right now with a couple ideas around indexes of the, I think somebody called it the coop. That would be the ticker, and it would just be every index we've launched gets added. Maybe thematic indexes or simple indices, but it's definitely been thrown around. I don't know how far it is in the process, but you're not off on that idea.

• 1:18:50Ryan Sean Adams?

  Guys, this has been a blast. Thanks for hanging out with us. I want to end with this question because, you know, we titled this episode, "Building the Decentralized BlackRock," right? And so, you know, decentralized BlackRock, that is quite a, I mean, I don't know how many trillions they manage, it's got to be like six trillion.

• 1:19:09David Hoffman?

  Excuse me, there's six trillion in ETFs. I don't know how BlackRock is, but it's in the trillions.

• 1:19:13Ryan Sean Adams?

  I think it's close to the six to 10 trillion, right? So what's it going to take for Index Co-op to become the decentralized BlackRock? Like, what's it going to take to get that level? Are you guys serious about that, or is that sort of a tongue-in-cheek sort of joke? What are your thoughts, Simon?

• 1:19:33Speaker 03

  I can take that. So in the next five years, Index Co-op is going to be the largest crypto asset matching platform in the world. Over the next 10 years, we will be competing directly with Vanguard and BlackRock for the ETF space. We firmly believe that we are moving to a tokenized world. All the traditional securities will eventually be tokenized, and we are, you know, laser-focused on being the protocol where that happens.

• 1:20:10Ryan Sean Adams?

  I think we lost Simon.

• 1:20:11David Hoffman?

  Anyone want to finish his thought?

• 1:20:13Ryan Sean Adams?

  Yeah, it's a great place to end almost. Yeah.

• 1:20:16Speaker 02

  Yeah, I mean, I don't know if I can. I was so excited for the for the the energy that was about to come from him, but I that might be the place to.

• 1:20:26Speaker 04

  Yeah, I mean, we we literally have a phrase within the co-op that is big sky energy because he always comes on at the end of calls and like tells us how we're going to be five billion AUM in like a year. Yeah, like he's back on. So hopefully Simon can finish his thought.

• 1:20:43Ryan Sean Adams?

  Hey, Simon, you still hanging with us?

• 1:20:48David Hoffman?

  Hey, Simon, go ahead and go ahead and finish your thought if you don't mind.

• 1:20:52Speaker 03

  Yeah. So like I said, Index Co-op is going to be the single largest crypto asset management platform in the world in the next five years. And in the next 10 years, we'll be competing directly with Vanguard and BlackRock. Um, the way that happens is, you know, we are moving to a tokenized world where the majority of real world assets, real world securities, real world ETFs are held in in in in um in tokens that live on Ethereum. Um, you know, we firmly believe that that will happen in a decentralized way. Like that is the only way to power really the the the financial revolution of the future that can manage this level of complexity. Um, and you know,

• 1:21:34Speaker 03

  we like how that happens on a tactical level, right? Like there's mass adoption that needs to happen. There's mass, um, you know, awareness of the space. But what happens with us internally is, you know, the one lesson we take from TradFi that I think, and this is a real lesson, is how do you build an institution that will last for a decade? How do you build institutions that will last for 50 years or 100 years? And yes, right now, like these, what we are building, it happens on chain, and these are all very nascent organizations. But we are very, very focused on building a protocol that will last for the next decade, that will last for the next 50 years, that is built on humans, it is built on core values, it is built

• 1:22:17Speaker 03

  on our framework of trust, where millions and millions of families can one day, you know, entrust the financial future of their families to what we are building. And that is the reality we are moving to and that that framework and that foundation of values is what will enable us to compete directly with Vanguard, compete directly with BlackRock and and we are going to do it better than they have done it. We are going to do it in a better way, in a more equitable way, in a way that is more fair for families across the world. And the only way to do that is through decentralized finance.

• 1:22:54Ryan Sean Adams?

  There you go, guys. Index Co-op. It's been a pleasure to have you on Bankless. It's clear you guys are dead serious about decentralized version of BlackRock. Five years to flip in the crypto banks and 10, you'll be flipping the traditional BlackRocks of the world. It's been a pleasure to have you guys on Bankless. Thanks so much.

• 1:23:15Speaker 04

  Thank you.

• 1:23:15Speaker 02

  Thank you. Appreciate it.

• 1:23:17Ryan Sean Adams?

  Bankless listeners.

• 1:23:18Speaker 03

  You guys, awesome show.

• 1:23:19Ryan Sean Adams?

  Yeah, thanks, Simon. Bankless listeners, as always, we've got some action items for you. Go check out the Index Co-op products. You can do that at indexcoop.com. Of course, number two, you can also check out the Bed Index. Super excited about that. Just launched, I think, to Wednesday or Thursday of last week. I think it launched with over a million in assets under management. It's like 1.5 or so by the time you are listening to that. So go check it out. Save your friends. Don't get them to invest in terrible assets they find on YouTube unless you're tuned into this YouTube channel. Buy bed instead. Sleep comfy at night. Risk of disclaimers, guys, of course. Crypto is risky. So is ETH. So are the indexes

• 1:24:02Ryan Sean Adams?

  that we talked about in this episode. You could lose what you put in, but we are headed west. This is the frontier. It's not for everyone, but we're glad you're with us on the Bankless journey. Thanks a lot.

• 1:24:14David Hoffman?

  Hey, we hope you enjoyed the video. If you did, head over to Bankless HQ right now to develop your crypto investing skills and learn how to free yourself from banks and gain your financial independence. We recommend joining our daily newsletter, podcast, and community as a Bankless premium subscriber to get the most out of your Bankless experience. You'll get access to our market analysis. Our Alpha Leaks and exclusive content and even the Bankless token for airdrops, raffles and unlocks. If you're interested in crypto, the Bankless community is where you want to be. Click the link in the description to become a Bankless premium subscriber today. Also, don't forget to subscribe to the channel for in-depth interviews with industry leaders,

• 1:24:55David Hoffman?

  Ask Me Anythings and weekly rollups where we summarize the week in crypto and other fantastic content. Thanks everyone for watching and being on the journey as we build out the Bankless Nation.