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We made a DeFi Index Funds for newbies video but @BanklessHQ and @reganbozman dropped a MONSTER newsletter laying out the Bull Case for decentralized Index Funds if you wanted to go deeper.
A #Pillar thread summarizing their Bull Case
A #Pillar thread summarizing their Bull Case
Quick innovations in DeFi allows teams to launch crypto native index funds. $DPI hit 25M AUM in less than 3 months while it took Bitwise 3 years to get to $100M AUM 
Let’s start with a breakdown of four important Crypto index Funds: Grayscale, Coinshares, Bitwise, and Coinbase
Let’s start with a breakdown of four important Crypto index Funds: Grayscale, Coinshares, Bitwise, and Coinbase
@Grayscale has their ‘Digital Large Cap Fund’ tracking $BTC, $ETH, $BCH, $XRP, and $LTC.
$131M in AUM at time of writing, available only to accredited investors and a $25k min
@CoinSharesCo launched the CoinShares Gold
and Cryptoassets Index (CGCI) in April 2020
$131M in AUM at time of writing, available only to accredited investors and a $25k min
@CoinSharesCo launched the CoinShares Gold
and Cryptoassets Index (CGCI) in April 2020
The CGCI is composed of five cryptoassets and physical gold 
, rebalanced monthly to include the top 5 cryptocurrencies by market cap.
2.5% management fee, but not tradeable yet on exchanges.
, rebalanced monthly to include the top 5 cryptocurrencies by market cap. 2.5% management fee, but not tradeable yet on exchanges.
@BitwiseInvest has their 10 Crypto Index Fund (Ticker: $BITW) currently with a 74.4/13.1 BTC/ETH ratio + 8 other coins.
$25,000 minimum investment, 2.5% management fee, and is only open to accredited investors and reporting a 78.1% ROI since inception in 2017.
$25,000 minimum investment, 2.5% management fee, and is only open to accredited investors and reporting a 78.1% ROI since inception in 2017.
Good old @coinbase has been 0/2 on the Index Funds, having quickly shut down both attempts at it. 
@reganbozman argues that these Index funds are a fraction (.06% to be exact) of the crypto market, due to regulation and lack of demand.
@reganbozman argues that these Index funds are a fraction (.06% to be exact) of the crypto market, due to regulation and lack of demand.
They tack on high management fees due to regulatory uncertainty AND have poor liquidity as they’re deemed as securities.
Finally, while this could change, it seems as if there is low investor demand for these products - maybe these investors prefer to just hodl $BTC?
Finally, while this could change, it seems as if there is low investor demand for these products - maybe these investors prefer to just hodl $BTC?
“A number of decentralized index funds have emerged to allow investors to get passive, diversified exposure to the DeFi market”
DeFi has become the most investable asset class in crypto, and it’s had to keep up with the number of high quality teams launching new products.
DeFi has become the most investable asset class in crypto, and it’s had to keep up with the number of high quality teams launching new products.
The rundown on four Crypto Native Index Funds:
sDEFI was introduced by @synthetix_io in 2019 - as a synthetic asset $sDEFI does not hold any underlying tokens, but rather uses price feeds to track their value.
sDEFI was introduced by @synthetix_io in 2019 - as a synthetic asset $sDEFI does not hold any underlying tokens, but rather uses price feeds to track their value.
Composed of nine tokens at launch with pre-defined weights (based on Twitter polls and community feedback)
It’s the oldest DeFi index with 0 rebalance fees (by switching price feeds and not trading assets) and is built on the solid infra of @synthetix_io
It’s the oldest DeFi index with 0 rebalance fees (by switching price feeds and not trading assets) and is built on the solid infra of @synthetix_io
Downsides are that there is low liquidity, counter-party risk, and currently has less than $2M AUM. 
MOVING ON…
@PieDAO_DeFi is a beast in its own right with a focus on building infrastructure to make it easy to create tokenized indices.
MOVING ON…
@PieDAO_DeFi is a beast in its own right with a focus on building infrastructure to make it easy to create tokenized indices.
@PieDAO_DeFi indices hold the underlying tokens and the community votes on updates.
As a constant weight fund, weight of each asset is predefined so the fund constantly rebalances as prices change.
While this can be expensive,’s product is built on top of
@BalancerLabs
As a constant weight fund, weight of each asset is predefined so the fund constantly rebalances as prices change.
While this can be expensive,
’s product is built on top of@BalancerLabs
#PowerIndex (PIPT) was launched this month, designed to accumulate voting power in DeFi governance tokens and includes $CVP.
@powerpoolcvp’s native token indices produce yield through trading fees, can potentially spread risk, and are redeemable for the underlying assets.
@powerpoolcvp’s native token indices produce yield through trading fees, can potentially spread risk, and are redeemable for the underlying assets.
DeFi Pulse Index was launched by @SetProtocol and @DefiPulse, each asset’s weighting tracks its market cap (market cap weighted) with the index holding the underlying assets.
Set launched the
@indexcoop - a #DAO, and added the idea of an ‘Index methodologist’ 
Set launched the
@indexcoop - a #DAO, and added the idea of an ‘Index methodologist’
Index Methodologist proposes an index and is responsible for rebalancing every month.
$DPI added a liquidity mining campaign whereby Index Coop is incentivizing people to purchase DPI and is now currently nearly 4x larger (AUM) than other indices.
$DPI added a liquidity mining campaign whereby Index Coop is incentivizing people to purchase DPI and is now currently nearly 4x larger (AUM) than other indices.
While Market cap weighting removes human judgement to make it more effective than just relying on community votes, it could also promote concentration risk - analogous to how #FAANG comprises over 25% of the S&P 500.
One other drawback highlighted is that it is less decentralized (for now) than other indices due to heavy involvement of the @SetProtocol team. Curious how they will move to be more decentralized in the future! 
Finally @reganbozman lays out the #bullcase and the TLDR is that DeFI can move fast while trying not to break things 
Mentions $YETI, a @iearnfinance ecosystem index, which conceivably can be launched and traded within 2 weeks of ideation
Mentions $YETI, a @iearnfinance ecosystem index, which conceivably can be launched and traded within 2 weeks of ideation
Decentralized indices are represented as standard #Ethereum tokens, and easier to create a liquid market - $DPI has $40M of liquidity on @UniswapProtocol in less than 3 months 
Using smart contracts to handle rebalancing, minting, custody, and redemption gives decentralized indices a major cost advantage, with expense ratios under 1% annually vs the 2.5% from the centralized options. 
Purchasing is fast and composable - future indices could include #NFTs or social tokens? 
But uncertainty lies in regulatory murkiness - no firm clarification of these indices as securities, and also uncertain if there will be broad institutional interest in these assets
But uncertainty lies in regulatory murkiness - no firm clarification of these indices as securities, and also uncertain if there will be broad institutional interest in these assets
Finally, #DeFi tokens are still highly correlated, it’s not yet obvious that an index diversifies risk significantly.
That’s it.
That’s the bull case.
Are indices a permanent fixture of a #DeFi future? What can we expect from 2021? How will regulations affect them?
That’s it.
That’s the bull case.
Are indices a permanent fixture of a #DeFi future? What can we expect from 2021? How will regulations affect them?
So which ones are you invested in? $DPI $CVP $DOUGH $INDEX
Full credit again to @BanklessHQ @reganbozman and anyone else that contributed to the article. Read the full article here https://bankless.substack.com/p/the-bull-case-for-decentralized-index
Full credit again to @BanklessHQ @reganbozman and anyone else that contributed to the article. Read the full article here https://bankless.substack.com/p/the-bull-case-for-decentralized-index
