Benchmarking/Competitive Analysis

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 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.

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

Index Coop has already captured the public attention with their independently-managed Ethereum DeFi market-cap weighted ‘index’ DPI, the speculative long-term 'metaverse' high growth pool token MVI and the auto-leveraged-exposure tokens like ETH2x-FLI and BTC2x-FLI, DPI2X-FLI and soon BED (Bitcoin, Ethereum & DPI) and BED2X-FLI (sponsored and marketed by Bankless DAO). It all makes tremendous sense for retail diversification. (except for the no rewards part...they are trying to earn yield on a proportion, but gains go to DAO, not pool)

Index DPI is leading the TVL/AUM shift to structured products:

The DPI shortlist is periodically re-weighted by DeFi Pulse, the independent Methodologist:

Notice that DeFi Pulse enforce a 25% maximum cap on any one token, thus artifically limiting the weight of Uniswap, whose market cap would otherwise command a much higher weight.

Index are now starting to look to generate yield (we need to review this in detail):

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

DeFi Pulse Index $DPI is consistently one of the most traded tokens on Uniswap, regularly doing $10-15m in volume now.

Index Coop have not (yet) addressed the defensive, yield and volatility (hedged) public pools space. But they are fast moving towards a Sortino ratio based managed volatility for mainstream investors space. To preempt them, PowerPool needs to move first and fast in this space according to the New Vision.

Index Coop have been aggressive in 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 weight to the voting rather than depending only on Aave voters.

Tracking Benchmarks

In part due to an arbitrary 25% max cap on the weighting for Uniswap/UNI (over which Index Coop have no control because they outsource methodology to DeFi Pulse), the DPI token price has significantly under-performed the ETH HODL strategy:

Launching BED Index with Bankless:

Index Weekly Reporting on Twitter:

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).

Fees are charged for the management of the index products and split with partners who are incentivized to help grow and promote the product with their audience.

Index Coop has been aggressively organising a broad team:

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:

Index are moving DPI liquidity to Sushi on Polygon

Llama/Index are proposing more structured funds for DAOs

iROBOT Index. Very interesting, where aims to become the 1st decentralized Robo-Advisor.

Between 100 selected tokens and through calculating it's Annualized Sortino Ratio, composes a pool of 10-15 assets.

https://gov.indexcoop.com/t/iip-71-launching-the-robot-index-irobot/2321

StakeDAO is a much broader-range structured investment provider, which makes it more difficult to organise and to market. Sample StakeDAO marketing tweet:

“Why Stake DAO? Say bye-bye to the bankers and put the profits back in your hands

100% of Stake DAO strategies revenues are shared with xSDT holders”

Here is their latest vision statement in Medium post format (still too broad and unfocussed IMHO)

StakeDAO has 10,000 followers on Twitter:

They have already decided to divide themselves by product, rather than function. They are investing in recruiting to product teams: StakeDAO recruiting video link

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. Potential uses of funding:

Incentives for new contributors: Stake DAO needs to be able to scale its contributor headcount and attract the top talent. Stake DAO needs to be able to compete with compensation packages offered in the current market, which are becoming increasingly competitive.

Talent retention: The Foundation enables the team to provide competitive compensation packages to retain the industry’s top talent and avoid the poaching of contributors by other projects.

Bootstrapping adoption: The Foundation will be a vehicle for the development of the Stake DAO ecosystem, funding community-directed initiatives that spur the platform’s adoption and, at times, incentivising relevant internal and external products (such as on third-party lending platforms like AAVE).

Strategic Initiatives: The Foundation may direct funds towards strategic mergers and acquisitions of third-party protocols to expand the product suite, improve existing products, and expedite the progress of our mission.

Marketing: The success of Stake DAO largely depends on its ability to retain and grow its user base and liquidity reserves - marketing plays an essential role in this function. SDT held in the Foundation can be allocated to marketing initiatives that promote awareness about the Stake DAO platform and its mission.

Operational costs: The Foundation may use funds to service costs attributed to maintaining Stake DAO products and services. For instance, server costs and audits.

According to the PieDAO Product Roadmap, PieDAO is approximating PowerPool in terms of functionality. 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.

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 reweightings. 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.

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:

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.

Index Coop is looking to for developers to help add more functionality to SETs:

Bitwise Index methodology - not thematic