Thread by @litocoen

I discovered a really interesting Index project that has been largely under the radar so far (launched end of december)

Indexed.finance is a protocol to build indices similar to @indexcoop and @PieDAO_DeFi

However, it is different in a couple of regards 👇

1) The underlying assets are not just stored in a smart contract and sit idle

They are in a multi-token @BalancerLabs pool, with each token having a weight representing the proportion of the pool value held in that token

By using an AMM as the holding mechanism for liquidity, index pools can generate returns beyond the price appreciation of the underlying tokens

The Balancer pool has a 2.5% fee, which accrues to token holders

ndxfi.medium.com/introducing-in…

Every time a trader buys a token from the pool they pay this fee and thereby add to the liquidity of the pool (making index holders better off)

This is a really smart way to put the assets in the index to productive use 💡

2) On-chain re-weighting and re-balancing

The indices extrapolate mkt. caps of the underlying tokens from their moving average prices as recorded on a @UniswapProtocol oracle.

Every time market caps of tokens change a re-weighting of the balancer pool is triggered..

Creating small arbitrage opportunities over time which arbitrageurs can execute to move the actual balances toward their targets

Abritrageurs are paying the 2.5% swap fee going to index holders

In other words, the re-weighting happens automatically (just using market forces)

This is a really elegant solution as it doesn't require any off-chain oracle or API and is extremely governance light

Something that should be strived for in any protocol design as voter apathy is real

Governance should only come in for key decisions

https://twitter.com/santiagoroel/status/1348008701924237315?s=20

Moreover, it removes the necessity for traditional rebalancing, where a fund has to execute massive trades (once per week e.g) with external markets to change the index composition.

Another small but nifty detail is that it uses the market cap sqrt. to assign targets for tokens

Most index funds only use the market cap

Since DeFi tokens have a wide range of mkt caps you run into the danger of over representing large caps this way

In a volatile market you don't want to under represent the small caps so mkt cap srqt. is a better approach

They currently have a liquidity mining program distributing 20% of the $NDX supply to users:

- who supply liquidity on Uniswap (on either DeFi5-ETH or CC10-ETH)

- stake their DeFi5 or CC10

To get the index tokens you can either buy or mint yourself
ndxfi.medium.com/how-to-mint-an…

The distribution is extremely fair 🤯

The founders only hold 20% of the supply and will be diluted in +- 2 months

A Snapshot is already in place to make governance proposals

Join the Discord: discord.gg/jaeSTNPNt9