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Ryan Watkins Profile picture
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22 Dec, 6 tweets, 2 min read
On the surface index protocols appear to just be vehicles for passive exposure to cryptoassets.

However under the hood they're much more powerful than that.

Through meta-governance index protocols may be an attractive DeFi aggregation play through voting power accumulation.

1/
It all starts with the premise that index protocols are fundamentally community governed pools of assets that can be used to provide investors:

1. Passive asset exposure
2. Yield from vault strategies
3. Governance delegation through meta-governance

Index protocols are the latest attempt at DeFi aggregation - a topic we’ve explored multiple times.

The reason why is simple - Web2 aggregators have accrued trillions of $$$ in value by occupying powerful positions in value chains throughout the economy.

messari.io/article/value-…
Index protocols attempt to aggregate by accumulating users’ assets in indices which index protocols can then use to influence protocol governance.

The question of course is will they capture value from meta-governance?
What value capture levers can index protocols realistically pull using their meta-governance power?

Is governance valuable in and of itself?

What about the power of governance tokens in the long-run if protocols ossify? (a philosophical question).
@masonnystrom and I explore this question and more in our latest piece on index protocols and meta-governance featuring deep dives on Index Cooperative, PowerPool, and PieDAO.

messari.io/article/index-…

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More from @RyanWatkins_

Ryan Watkins Profile picture
19 Dec
There’s a growing dichotomy between tokens championed by venture funds vs tokens championed by hedge funds.

VC tokens:
- larger insider allocations
- more core team driven
- methodical iteration

HF tokens:
- little to no VC backing
- more community driven
- rapid iteration
I don’t think one class is necessarily better than the other.

But one of the most important features of DeFi is the democratization of financial opportunities.
And the clearest benefit of projects HFs like right now (YFI, SUSHI, AAVE, SNX, etc) is that their communities got in on the ground floor and feel empowered.

When tokens are only available to the public after 10x - 100x it’s just not that same.
Read 5 tweets
Ryan Watkins Profile picture
10 Dec
There’s been a ton of development in the Yearn ecosystem recently to the point where it’s worth asking again:

What the hell is Yearn?

@jotto and I did a deep dive into the theory of Yearn to breakdown what Yearn is and where it’s going.

1/
It all starts with the theory of the protocol.

Protocols are coordination mechanisms that define rules and provide incentives for market participants to facilitate economic activity at a global scale.

messari.io/article/the-th…
The second building block to understand Yearn is to understand a key premise of DeFi:

DeFi provides individuals unprecedented access to financial opportunities traditionally reserved for HNW individuals and regulated financial institutions.
Read 20 tweets
Ryan Watkins Profile picture
7 Dec
On Thursday I posted a proposal to the PowerPool community to create a Yearn Ecosystem Token Index (YETI).

One common question about the proposal was about CVP’s presence in the index.

TL;DR: CVP is an integral part of each PowerPool Index.

1/
CVP is included in each PowerPool index for two reasons.

The first is to enable index holders to participate in PowerPool governance.

Each index holder's voting power will be a function of their share of CVP locked in the index.

messari.io/article/unders…
Index token holders will be able to vote on all proposals and collect rewards using this CVP locked in the index.

For example each PIPT (PowerPool’s first index) holder's voting power will be a function of their share of the 12.5% of CVP in the PowerIndex pool.
Read 13 tweets
Ryan Watkins Profile picture
3 Dec
Proposal for Yearn Ecosystem Token Index (YETI) - a PowerPool index consisting of YFI, SUSHI, CREAM, AKRO, COVER, K3PR, CVP, PICKLE

YETI will create a simple vehicle to invest in Yearn’s ecosystem, while also coordinating governance among its protocols through meta-governance.
The index will serve two purposes.

For investors it would create a passive vehicle for broad exposure to the Yearn ecosystem - like an index on the Yearn conglomerate of protocols.
For Yearn it would be a way of formalizing its recent mergers, aligning the treasuries and governance systems of the protocols in its ecosystem.
Read 6 tweets
Ryan Watkins Profile picture
3 Dec
Ethereum often gets criticized for its “loose” monetary policy.

However after Phase 1.5 (ETH 1.x merge into ETH 2), it is likely ETH’s annual inflation rate will drop well below 1% if not 𝗻𝗲𝗴𝗮𝘁𝗶𝘃𝗲.

At this point ETH’s inflation rate would be far lower than BTC’s.

1/ Image
If you’re an Ethereum skeptic you’re probably thinking “how is this possible?”

It all starts with Ethereum’s shift to Proof of Stake (PoS).
One of the core value propositions of PoS is that stakers are theoretically more willing to pay significantly higher capital costs per a dollar of rewards.

This is because they only face an opportunity cost on their investment and don’t experience any depreciation (like ASICs).
Read 14 tweets
Ryan Watkins Profile picture
2 Dec
ETH 2.0 transforms Ethereum the blockchain, but what about ETH the asset?

In ETH 1.x ETH is used as a money and commodity.

In ETH 2.0 ETH will also be used to produce income through staking.

The combination of the 3 will make ETH one of the most unique assets in crypto.

1/
Let’s start with ETH’s properties in ETH 1.x.

In ETH 1.x ETH possesses store of value properties through its use as collateral in DeFi and use as Ethereum’s native currency.
In ETH 1.x ETH possesses commodity properties through its use as “digital oil”, being used to pay for block space.

This analogy to oil will be especially powerful once EIP-1559 is implemented and the majority of tx fees are burned - literally converting ETH into block space.
Read 15 tweets

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