DeFi or decentralized finance has contributed to the growth and launch of several sophisticated open-financial systems and tools that don’t rely on banks and other legacy systems. The potential of this space is corroborated by the constant innovation of new products/protocols. In addition, investors have turned to passive income generation techniques to extract value from digital assets, and DeFi offers several favorable propositions.
DeFi platforms enable investors to earn high APYs with the click of a button. However, the plethora of opportunities for passive wealth generation requires in-depth knowledge of the product and the ability to make split-second decisions. Thus, even though the options exist, profiting from them requires time and effort.
In traditional finance, the most effortless investment is through index funds. Index products belong to a mature category of products and have been in play for over five decades.
Index funds have made their way into the ever-growing and rapidly emerging DeFi space. But before diving into crypto Index Funds, let’s look at ETFs and index products in the traditional financial sector.
Pitched as low-risk and inexpensive, Index Funds are the ultimate example of passive investing, offering investors relatively stable and long-term returns. But what are index funds? To understand index funds, let’s know what an index is-
An index is a tool to track an asset or group of assets’ performance. It replicates the actions of a specific segment of the market.
Simply put, index funds provide a straightforward way to gain exposure to an entire sector by investing in a single asset. The peg to its constituents makes the portfolio mix of these funds simpler to understand and more predictable. Furthermore, these funds usually have a lower expense ratio than those requiring active management.
Thus, the broad diversification, low costs, and attractive returns associated with Index Funds make them the perfect passive investment strategy.
A quick recap of Index Funds
They incur low expenses as they’re not actively managed
Replicate the performance of a designated index and not aimed at outperforming the market.
They help investors manage as well as balance the risk in their portfolios.
Index funds do not guarantee massive gains or the best returns. So then why should one opt for them? Firstly, they overcome human bias, and more importantly, they instantly diversify your portfolio and minimize the risk involved. Thus, an Index Fund created by a portfolio manager/methodologist with in-depth knowledge of the underlying products provides investors the opportunity to earn a better return given the level of risk. As a result, investors may not gain massive returns but better protection against huge losses.
Index funds have made their way into the emerging world of decentralized finance (DeFi), wherein they’re not only efficient but affordable and permissionless. Moreover, investors don’t need to acquaint themselves with the economics or performance of various tokens or understand the intricacies of different protocols to invest.
Similar to the Traditional Financial world, where investors can purchase ETFs and Index Products, investors in DeFi can head toIndex Coop to buy these products. Currently, very few organizations are working in the cryptocurrency index fund space, with Index Coop being the leader.
As previously mentioned, crypto index funds are similar to traditional index funds, except for being entirely blockchain-based. As a result, these funds are not controlled or managed by a centralized asset manager; instead, there is open-source software and a decentralized governance system or DAO like Index Coop for making the decisions.
Index Coop, a decentralized autonomous organization (DAO), came into existence to create and maintain crypto-native structured products built on DeFi asset management primitives. It enables the creation and adoption of on-chain crypto index products for retail investors, institutions, and investment professionals. INDEX token holders govern Index Coop. Designed to facilitate voting and community ownership, $INDEX is an ERC-20 token on the Ethereum blockchain launched in October 2020. Community members and methodologists are rewarded with $INDEX for their contribution.
$INDEX is the governance token of Index Coop. It grants holders the access to vote on Coop’s various proposals, future products, strategic direction, and potential projects for investments. $INDEX should be viewed as a ‘proof-of-work’ token as it is distributed to those who contribute to the progress of Index Coop.
A max supply of 10 million Index tokens will be distributed as follows.
In case you’re interested in acquiring these tokens, you can do so through the following means
DEX — You can purchase $INDEX on a decentralized exchange (DEX)
Liquidity Mining Programs — You can participate in liquidity minings programs to obtain $INDEX
Index Coop — Contribution to the DAO gets rewarded with $INDEX.
For more information, clickhere.
Index Coop Product List
Let's cover some of the products available on Index Coop.
DeFi Pulse Index (DPI)
$DPI is a result of a partnership between two leading crypto teams, TokenSet and DeFi Pulse. This digital asset is designed to track DeFi token performance. $DPI, an ERC-20 token as a capitalization-weighted index, contains popular Ethereum-based DeFi tokens. It allows investors to gain broad exposure to Ethereum DeFi in a single token.
Metaverse Index (MVI)
MVI is Coop’s first Index Product to be launched without an external partner as the methodologist. It is composed of tokens from VR, AR, music, NFT, and entertainment as it is designed to capture the trend of entertainment, sports, and business shifting to a virtual environment.
Flexible Leverage Indices (FLI)
Built on Set Protocol, FLI is Coop’s second collaboration with DeFi Pulse. The Flexible Leverage Indices are built to minimize the risks and costs associated with managing and maintaining collateralized debt. In the words of Index Coop itself,
Leverage is one of the killer use-cases for DeFi. However, legacy DeFi leverage workflows are not for the faint of heart. Users must monitor health ratios, watch out for liquidation risk, and avoid penalties.
The Flexible Leverage Index was created to address those risks and make leverage use safer and easier to maintain.
The FLI uses a novel strategy built on Set Protocol and Compound that abstracts collateralized debt management into a simple index — constructed as an ERC-20 token.
ETH 2x Flexible Leverage Index- Ethereum Flexible Leverage Index
ETH 2x Flexible Leverage Index (Polygon)-The Polygon-native version of the Ethereum Flexible Leverage Index
BTC 2x Flexible Leverage Index- Bitcoin Flexible Leverage Index
Note: ETH2x-FLI is the original ETH2x product on Ethereum main net, while ETH2x-FLI-P is a distinct, Polygon-native product.
Bankless BED Index (BED)
A collaboration between Bankless and Index Coop resulted in the creation of BED on Set Protocol infrastructure. Investing in BED allows users to gain passive exposure to assets that allow for independent banking.
BED stands for Bitcoin, Ethereum, and DeFi. These are considered the essential components of the open finance or bankless revolution. It is based on the thesis that each of these holdings captures the upside of three investment crypto themes in equal weight:
Bitcoin — the “digital gold” or store of value
Ethereum — programmable money
DeFi — decentralized finance
Data Economy Index (DATA)
The Data Economy refers to an ecosystem comprising data-based products and services. Created by Thomas Hepner and Kiba Gateaux, The Data Economy Index ($DATA) gives investors passive exposure to some of the most significant innovators in the data economy. The index includes Filecoin(renFIL), the Graph(GRT), Basic Attention Token(BAT), Livepeer(LPT), OCEAN, Numeraire(NMR) and Chainlink(LINK) and is data-centric and chain agnostic.
icETH or Interest Compounding ETH
icETH or Interest Compounding ETH is Index Coop’s first yield offering. icETH is designed to enhance staking returns using a liquid staking strategy on Set Protocol. With a risk profile lower than FLI tokens, icETH abstracts collateralized debt management, automates rebalancing, and minimizes cost and liquidation risk.
In short, icETH deposits stETH within Aave v2 as collateral and recursively borrows ETH to procure more stETH. Thus, token holders have spot exposure to ETH and the ability to earn amplified returns compared to simply holding stETH.
How to Buy Index Coop Products?
To get started, Let’s assume you have a Web 3.0 wallet likeMetamask. This tutorial will focus on buying Index Coop Products from Decentralized exchanges directly. Many DEXes like Uniswap, Sushiswap, Loopring, and Matcha can be used. For the sake of this tutorial, let’s go ahead with Sushi.
All these products can be availed from the Index Coop App and are offered by Uniswap and Sushiswap on Ethereum Mainnet. In addition, users can use Polygon or Ethereum for DPI, MVI & DATA. Unfortunately, BED is only available on Ethereum Mainnet.
DPI, MVI, FLI & DATA on Sushiswap
Head onto the SushiSwap app.
- Connect your wallet using Ethereum/Polygon Mainnet.
2. Search the product you want — DPI, MVI, and DATA.
3. Select the token and enter the amount you want to use. Click on Approve.
4. Confirm the transaction.
5. Click on Swap and confirm the transaction again.
For BED— Use Ethereum Mainnet.
For icETH — Check out the Youtube video tutorial
With simplicity and efficiency being the most vital value proposition, Index Funds are here to stay. The ability to create a diversified portfolio through investment in a single highly liquid asset makes them highly valued. Investing in only one asset enables DeFi users to save on significant gas fees associated with purchasing multiple tokens while having access to a wide range of tokens. Users don’t have to worry about tracking individual tokens saving valuable time and effort. Index Funds grant a more mainstream audience exposure to DeFi’s incredible offerings. It reduces the existing barriers of high volatility by diversification of investment.
The demand for these index products is expected to grow as the DeFi space evolves and grows. Because only limited players exist in this particular space, Index Coop, with its broad list of products and strong partnerships, is emerging as a front runner. If this wasn’t enough, Index Coop works as a DAO with a strong community responsible for the critical decisions propelling it in the right direction.
**EverythingBlockchain —**In pursuit of simplifying the different blocks of the chain metaverse.
Please consider supporting through donations, referrals, or following on social platforms.
Donation address — everythingblockchain.wallet
Any or all of the information provided through this work is intended solely for educational purposes and must not be treated as investment advice. Any lapses in presenting any of the information correctly are ours alone. We disclaim any liability associated with the use of this content.