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Competitive Analysis/Benchmarking

Crypto DeFi is early-stage VC-type investment, requiring very broadly-diversified basket/index investments with high levels of automation to harvest intrinsic yield, AND capture the value of aggregated meta-governance power to expand options for earning extrinsic yield and creating hedging options to HELP offset volatility.

Off-chain crypto VC investment funds/family offices require minimum levels of invrestment that exclude everyone except the largest investors. On-chain crypto asset management competitors offer only too-broad packaging of inflexible investment vehicles with inappropriate, mechanistic and passive weighting schemes, no flexibility to make frequent changes, no automation to harvest intrinsic yield, and no hedging options...all at too high fees

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Press Coverage-PowerPool & Competitors

Independent Analyst Coverage

Market Definition: Outlook for Decentralised ‘Baskets’/’Indices’ (from Bankless Dec 2020)

Product Definition: Differences between Stock Indices and Crypto ‘Baskets’

Crypto Asset Management Market

On-chain Competitors: DAO Crypto Asset Managers

Index Coop

Index Coop Overview-Competitive Benchmarking

The Index Coop is a decentralized autonomous organization (DAO) that exists to create and maintain crypto-native structured products built on a separate asset management primitives (Set Protocol). As a DAO, Index Coop is governed by its community members. Collectively, they propose and vote on new ‘index’ products, the allocation of the treasury, and the future direction of the DAO. The DAO governance token is INDEX.

Fees are charged for the management of the index products and split with external methodology and marketing partners like DeFi Pulse/Scalara and Bankless, who are incentivized to help maintain, grow and promote the product with their audience.

It all makes tremendous sense for retail investor diversification... (except for the no rewards/auto-harvesting of intrinsic yield part...but any intrinsic yield gains go to Index Coop DAO $INDEX holders, NOT $DPI token holders)

Index Coop $INDEX tokens have been attracting funds buying their already outstanding tokens on the market. Here is a recent example and overview of Index Coop.

$DPI Overview

Index Coop first captured the public attention with their independently-managed Ethereum DeFi market-cap weighted ‘index’ token $DPI, and continues to launch additional thematic tokens like the speculative long-term 'metaverse' high growth pool token $MVI, innovation index token $GMI and auto-leveraged-exposure tokens like ETH2x-FLI, BTC2x-FLI, DPI2X-FLI and soon BED ($BTC, $ETH & $DPI in equal weights) and auto-leveraged version BED2X-FLI (both sponsored and marketed by Bankless DAO which shares in the fees).

The initial Index product $DPI is leading the TVL/AUM shift to structured products. The $DPI shortlist is periodically re-weighted by DeFi Pulse/Scalara, the independent Methodologist.

DeFi Pulse originally enforced a 25% maximum cap on any one token, thus artificially limiting the weight of Uniswap/UNI, whose market cap would otherwise command a much higher weight. This has now been changed for a more flexible approach, since constantly reducing UNI to only 25% was causing churn in the other constituents. Also, because the rebalance is infrequent, inflexible and manual, they have had to introduce a minimum 2% threshold for new tokens to enter an ‘index’.

DPI Performance and Re-balancing:

DeFi Pulse Index $DPI is consistently one of the most traded tokens on Uniswap. However, because there is no auto-harvesting of intrinsic yield for token holders, and in part due to an arbitrary 25% max cap on the weighting for Uniswap/UNI (over which Index Coop themselves have no control because they outsource methodology to DeFi Pulse/Scalara), the $DPI token price has significantly under-performed the ETH HODL strategy.

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Unfortunately for Index, DPI investment performance is failing to meet the HODL ETH benchmark by 75%, Obviously not a strong product for DAO diversification. Slow to rebalance because they outsourced re-balancing to DeFi Pulse, who has a different agenda. Active auto-harvesting of yield would have helped DPI, but they outsourced their platform to Sets. In contrast PowerPool controls its own platform and its own DAO is responsible fore rebalancing. Bullish

Extrinsic Yield Options: Lending and Borrowing

Index Coop do not harvest intrinsic yield at all. becuase the SETS platfrom that they use lacks generalised autonomos automation like PowerAgent could provide. However, as a well-staffed DAO they are beginning to address the defensive, yield and volatility (hedged) public pools space. Index Coop have been aggressive in developing extrinsic yield options like getting DPI listed on lending sites, like Ruler

Index Coop has a significant stake in a lending site like Aave via the DPI token, so Index can add their metagovernance weight to the voting rather than depending only on Aave voters.

Example of a governance/listing proposal by Index Coop on Aave in favour of DPI:

“DPI would make an excellent fit for collateral in the Aave ecosystem because it allows for a large pool of dormant capital (>$100m in non incentivized DPI AUM) to find a productive use. Additionally:

  • Significant Borrow Demand: There is significant desire from whales to lend out the DeFi Pulse index and to use the DPI as collateral to borrow stablecoins for farming, going leveraged long/short, and implementing structured products (e.g. carry trade).
  • Low Volatility: Because indices are a basket of tokens, they represent less volatility than the component assets by themselves
  • Efficient Sector Representation: Adding an index as collateral also gives exposure to all the component tokens while only having to add in a single token, thus saving gas in Aave’s system
  • Liquidity via Primary and Secondary Markets: Minting and redeeming represent the primary market of the indices, but many users can buy and sell indices on the secondary markets - mostly Uniswap. The price on the secondary markets are kept at Net Asset Value (the market value of all the underlying components) through a network of market makers that redeem the tokens when price is below NAV and vice versa.

Hedging/Shorting Options - Beta Finance Partnership

Index Coop are also trying to introduce hedging options in partnership with Beta Finance

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Proposed Stablecoin Indexes/Pools

Stablecoin Pools: Index Coop Proposed Product: SYI...(would compete with YLA)

SYI allows all investors to invest in the market the same way money managers do in TradFi. Idiosyncratic risk is diversified away across a fleet of products. In its purest form, a static risk allocation is enhanced by tactical diversification. Meaning various productive assets are grouped together based on their risk and investments are made across risk tranches.

There is certain level of capital required to diversify risk across various DEXs, Lending and Asset Manager platforms, and small accounts are simply priced out. Small accounts are more worried about gas costs, added complexity and the time needed to manage such products. Small accounts place concentrated bets and hope that nothing goes wrong with that particular product. SYI changes this, the cost of purchasing SYI on a secondary market would be less than depositing into a mStable, Yearn or Rari Capital. This product also enables a simple passive hold strategy, which is a dream come tax time. All the interest is compounded and reflected in the token price.

There is further upside - the ability to invest in a product that holds the new V3 Uniswap NFT LP tokens and traditional ERC20 LP token. NFT LP tokens are coming and with that Curve’s moat is starting to eroded. SYI captures these market changes and progressively reallocates capital, this is the tactical element, and the results is to reduce idiosyncratic risk. This is just a right now example of how Index Coop can deliver peak user experience.

Upside - we are now starting to see treasuries across the space diversify away from their native token into more stable assets. Productive stable coins are a big part of this diversification strategy. As TradFi talent comes to DeFi the approach to managing treasury capital will become more like TradFi. We are seeing the early stages of this in-house at Index Coop and other DAO 8s are already further along. SYI becomes a very easy choice as a pillar of any diversified treasury. SYI enables teams to simplify their treasury and have a specialised resource managing their cash equivalent products for them.

Other Thematic Tokens - BED, MVI, DATA, GMI etc.

BED Index (with Bankless)

BED charges a 0.25% fee which is split 50–50 between Bankless and Index Coop. Note that Index Coop also charges a 0.25% fee on their DPI product which has a 33% allocation in BED. As a result, the total effective fee for BED is 0.57% (0.11% Bankless, 0.36% Index Coop, 0.10% DFP).

DATA is the most recent thematic token approved (I think it is a thematic mess):

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Meta-governance Approach

Index Coop Organisation

Index Coop has 20 full-time employees and have been aggressively organising a broad team:

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It is instructive to read the list of tasks in the Index Coop Business Business Development team.

Index has now launched a Protocol Ambassadors program:

Structured Funds for DAOs

Llama/Index are proposing more structured funds for DAOs. They are fast moving towards a Sortino ratio based managed volatility for mainstream investors space.

Index Coop Technology Platform - Outsourced to Sets Labs

Relationship with Sets Labs

Right now, Set Labs is the primary technology provider and a mission critical dependency for the Index Coop.

Here’s what the Index Coop is currently handling:

  • Deploying monthly contributor rewards
  • Funding liquidity mining rewards
  • Paying out methodologist rewards
  • Ad-hoc non-protocol work like INDEX Sale execution
  • Updates to indexcoop.com
  • Recommending FLI parameter updates

Here’s what Set Labs is currently handling:

The Index Coop is in the process of being onboarded to technical operations but any new product launches require Set Labs involvement and is subject to its internal roadmap & priorities.

PieDAO

PieDAO Competitive Benchmarking

PieDAO calls itself the ‘asset allocation DAO’ and they have recently launched several thematic ‘pies’/baskets/pools including $PLAY (gaming/metaverse) and soon $SCALE, an Ethereum L2 portfolio targeting tokens expected to benefit from the shift of TVL/fees away from ETHL1 to a combination of sidechains (MATIC, GNO, SKL, METIS) ALTL1s (AVAX, FTM, LUNA) and rollups/zk layers (ZKS) the themes is similar to a combination of the proposed PowerPool $L2DEFI and $ALTL1 baskets, essentially combining the two themes:

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According to the PieDAO Product Roadmap, PieDAO is approximating PowerPool in terms of functionality. However, they lack an automation network and modular vaults with wrapper/router. The latest release supports Treasury Vaults, defined as follows:

“Treasury Vaults are tokenized portfolios that truly unlock the power of the PieVault architecture. As well as using strategies such as lending they are able to hold positions in liquidity pools like Uniswap/Sushiswap and Curve, farming tokens by staking in contracts such as the Masterchef and Gauges and compounding profits. As such they lay down the tech for LP Indexes which were proposed by the community not long ago. These vaults can be co-governed between the DAO deploying the funds and PieDAO, allowing (each) DAOs community to ultimately vet decisions on how funds are used. Treasury Vaults are tailor-made for each DAO, allowing decentralized communities to easily maximize their potential and mitigate risk. The pilot program of Treasury Vaults is about to launch with Aragon, subject to a successful vote by their community. A proposal will be published for PieDAO to do the same soon”.

PieDAO struggles with supplying liquidity across sufficient DEXes and other DeFi sites, to the extent that, like PowerPool, they have retained Wintermute, while also pursuing the ability to manage LP pools proactively. PieDao is taking over the BasketDAO Community and trying to onboard the Liquidity.

Methodology

StakeDAO

StakeDAO is a much broader-range structured investment provider, which makes it more difficult to organise and to market products ranging from staking native L1 tokens to complex strategies. They are committed to going multi-chain.

They have already decided to divide themselves by product, rather than function.

StakeDAO Foundation has been created to play some of the roles required to further the goals of the DAO. Contributors funded the initial Foundation SDT capital base with their own vested allocations.  The Foundation’s SDT will be locked in a vault on a third-party lending protocol such as Aave or Unit. The Foundation will borrow capital against the locked SDT to finance research and development and initiatives that bolster the progress of the Stake DAO ecosystem.

Indexed Finance

Indexed Finance Competitive Benchmarking

Another competitor who also (confusingly) features ‘Index(ed)’ in their name is Indexed Finance, also based on Balancer, with a pure governance token NDX, based on UNI. They have been launching many pooled vehicles marketed as ETF-like crypto products for anyone. Their most popular offering is their DEFI Top 5 Index, which holds {UNI, AAVE, COMP, SNX, and CRV} with a market cap north of $17MM. The token has good liquidity on Uniswap, and a surprising amount locked on the Matic/Polygon bridge due to the arrangement with Quickswap. It is also listed on the lending site Ruler Protocol. They have announced a collaboration with MCDEX, a derivatives site, to offer a perpetual derivative of the pooled token.

They use a simple methodology of “Top N” category ranking and (square-root) of market cap weighting, as described here.  Each index has two 'groupings': the current constituent shortlist - those tokens that are currently active within the associated Balancer pool - and a secondary 'candidate' shortlist of tokens waiting on the sidelines, ready to be switched in if an active member underperforms relative to the others, or if a particular candidate's performance justifies its inclusion. Re-indexing occurs after three weekly re-weightings. Re-weighting and re-indexing also occurs within the non-wrapped components, keeping target weights on track at multiple points. They track their results versus both an Ethereum & BTC HODL benchmark strategy.

Currently, Indexed are operating on their own fork of Balancer v1, so ownership of the pooled tokens stays with the token owners. “It's worth emphasising that the Indexed DAO itself does not control the assets that comprise the indices (pools) that we enable. They are kept within the Balancer pools themselves, and ownership of the assets is strictly limited to owners of the index tokens.” They use a 5-person ‘Sigma’ committee to launch new products, such as the proposed ‘Future of Finance’ fund-of-funds.

Exploit Recovery

DEGEN Index

Proposed POLY10 Index

Index uses crowd-sourced quadratic voting and are moving to more thematic pools:

They are heavily incentivising buying their pool tokens to LP/stake them:

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Their marketing focus is via integrations into Zerion, Zapper, Debank, CoinGecko, Argent and DeFiLlama. To better serve the needs of users wishing to trade their various ‘ETFs’ without being subject to significant gas costs on Ethereum’s mainnet, they partnered with Quickswap, the Polygon sidechain-based exchange, and Quickswap have incentivised Indexed LPs with their native QUICK token.

Bitwise

Formation.fi is targeting a similar market positioning to PowerPool:

“By optimizing the return-to-risk ratio for each unit of risk, and prioritizing secular diversification based on data-driven insights, Formation Fi promises to deliver superior returns over time. The platform also aims to simplify the DeFi world so that ordinary investors can participate and earn yield over the long haul. The Formation Fi platform has been developed for a diverse user base. To get started, users need only deposit their preferred cryptocurrency and select a preferred investment style, in the form of an index coin such as Alpha, Beta, Gamma, and Parity. Each index coin can then be further deployed for additional yield at the holder’s discretion. Thereafter, the protocol will commence generating yield with users gaining access to the best-performing cross-chain yield strategies according to their stated risk tolerance.  Formation Fi has developed its own native token which can be deployed in yield farming strategies or added to a liquidity pool to boost yield. A triple-utility token, $FORM entitles holders to voting rights, a share of future net income generated by the protocol, and grants exclusive access to Formation Fi’s Darkpool AMM pools.”

  • Invictus Crypto10/Crypto20

You can also make automated baskets using: -KuCoin trading bots

Off-chain Private Crypto VC Fund Asset Managers

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Off-chain Private Crypto Hedge Funds

TradFi-emulating crypto hedge funds (privately-managed) are already operating in the crypto space. According to the 2020 PWC report on crypto hedge funds, some interesting findings are worth highlighting:

  • The vast majority of investors in crypto hedge funds (90%) are either family offices (48%) or high-net worth individuals (42%).
  • The median ticket size is US$0.3 million, while the average ticket size is US$3.1 million.
  • Almost two-thirds of crypto hedge funds have average ticket sizes below US$0.5 million.
  • Crypto hedge funds have a median of 28 investors.
  • About half of crypto hedge funds trade derivatives (56%) or are active short sellers (48%).
  • Crypto hedge funds are also involved in cryptocurrency staking (42%), lending (38%) and borrowing (27%).
  • The median of the best performing strategies in 2019 was discretionary long only (+40%) followed by discretionary long-short (+33%), quantitative (+30%) and multi-strategy (+15%).
  • About 65% of crypto hedge funds have either a hard or soft lock and 63% have either an investor level or fund level gate.

The most recent version of the report tells much the same story.

These data highlight the opportunity in the crypto-community-owned accessible hedge fund niche. Clearly, $300,000+ typical investments pooling around 28 investors are not very inclusive. Under U.S. regulations, these funds can be marketed only to SEC 3C7 qualified purchasers i.e. limited partners with at least $5.0 million of investable assets.

Automated robo-advisors like Strix-Leviathon are applying defensive, maximum drawdown-limiting algorithmic strategies based on Sortino ratios, and they have just launched a more publicly accessible vehicle called Makara.

These 'expert'-managed and algorithmic funds may be well-managed, but I believe that investing knowledge for crypto is best gathered and applied across multiple data-driven experts and algorithms using a DAO. There is as yet no evidence that these off-chain privately-managed 'expert' or algorthmically-managed funds are really worth 2+20% fees. Especially for discretionary long-only strategies without rewards (just buy DPI and relax!). These fund management fee levels were  just blindly imported from TradFi with no rationale. If PowerPool executes the New Vision well, investors giving up 20% of their gains to external hedge fund managers will become a thing of the past. Instead, by staking xCVP, anyone can become a part-owner of their own hedge fund.

A very interesting opportunity/positioning for PowerPool would be to partner with existing TradFi hedge funds looking to enter the crypto space. There are many, and they will not find a more attractive platform partner than PowerPool executing to this new vision at full speed. For example, Point72, managed by Steve Cohen, is typical of prospective TradFi hedge fund partners looking to enter crypto, as are Millenium and Matrix.

Why are hedge funds eager to move into crypto? “Performance remains strong in 2021 after the Hedge Fund Research Index returned 11.8% in the year ended Dec. 31, the best return in a decade, data from Hedge Fund Research Inc., Chicago, showed”.

But with or without TradFi hedge fund platform partner(s), the key product development skill for the PowerPool DAO will be the ability to focus community attention on shortlists of the most interesting tokens, across multiple chains and layers, then invest in data analytics and leverage the collective 'wisdom of the crowd' to manage shortlists, investment timing and exposure limits. Currently, there is a huge wave of VC investment being dedicated to bringing TradFi real world assets onto crypto rails...but how will these future securitised token portfolios be structured and managed? PowerPool should build the platform and community anticipating this opportunity. Publicising the ‘New Vision’ should attract experts in this field to migrate towards the PowerPool, and having joined the xCVP DAO Community, within the Community they will migrate towards the SparkProd product development team.

Stock Exchange Traded Crypto Funds

FTX/Coinshares ETPs:

Crypto exchange operator FTX Trading Ltd. is joining with Europe’s largest digital asset brokerage, CoinShares International Ltd. to launch a physically-backed ETP tied to Solana, where the tokens underlying the product will be staked and returns shared with contributors. The ETP is the first product from FTX’s new institutional unit FTX Access, which launched earlier this month as a one-stop shop with advisory, trade execution and analytical tools.

The partnership provides FTX with a route into Europe’s crypto market, having launched its own unit on the continent earlier this month. Europe is one of the most mature markets for crypto ETPs, which offer a route into crypto investing without having to hold individual coins.

Staking the SOL tokens underlying the ETP provides CoinShares and FTX with additional revenue, which the providers can then share with investors by reducing the product’s management fee to 0.0% per year and also offering an additional staking reward of 3.0%.

The CoinShares FTX Physical Solana ETP will list on Germany’s Xetra exchange, alongside several other physically-backed staked ETPs from CoinShares which track tokens like Polkadot, Cardano and Tezos.

WisdomTree ETPs

WisdomTree launching Solana, Cardano and Polkadot ETPs in Europe fee of 0.95%, severely undercutting similar products from 21Shares' which charge 2.5%. So let me get this straight: they're already in a fee war over Polkadot ETPs in Europe

MVIS/Bloomberg Index; non-thematic

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