FAQs: Why PowerAgent network, ‘smart vaults’, ‘baskets’ & xCVP staking?

Why become a PowerAgent node operator/keeper?

Anyone can become a PowerAgent node operator, just by running the free software on a high-availability server they control. The PowerAgent Network is an autonomous, decentralised, general-purpose automation network. A minimum stake of 1,000 CVP is required to begin earning fees as a member of the lowest echelon of signer sets. Increasing the size of the stake moves a node/keeper up into higher echelon signer sets, where higher fees and less competition for the largest rewards can increase yields on even larger stakes.

Why stake xCVP in PowerPool DAO?

PowerPool has its own freely-tradeable governance token - $CVP (Concentrated Voting Power). $CVP can be purchased on various exchanges and optionally staked as xCVP to gain a share in the Net Asset Value (NAV) of the PowerPool Treasury, which collects steady streaming income from management fees charged to basket/vault investment token holders, 100% of which is paid out to xCVP stakers. Stakers of xCVP are also entitled to participate fully in governance of the PowerPool DAO.

PowerPool is a fair-launched DAO with no dominant founding VC investor. The mission of the PowerPool DAO is to execute the above vision to drive maximum long-term value to the $CVP/xCVP token pair. There are a number of different dynamics driving value accretion towards the CVP token.

  1. The permissionless PowerAgent automation network requires participating nodes/keepers to stake at least 1,000 CVP to join the lowest value basic signer set, and optionally over time to increase their CVP staked to move up to higher value signer sets via competitive staking of CVP to accrue increased fees in CVP. Client protocols using the automation network buy CVP over time to pay fees to node/keepers. Increasing numbers of PowerAgent network nodes and client protocols increasing their stakes and budgets while spreading across multiple (EVM-compatible) chains/layers will create continuing buy pressure for significant numbers of CVP tokens;
  2. All modular vaults and diversified baskets/indices/pools earn management fees which accrue 100% to the DAO Treasury. Buying and staking xCVP entitles the CVP staker to a share of the Treasury value, which can also benefit from capital operations like hedging;
  3. Staking xCVP entitles stakers to influence votes on meta-governance initiatives affecting other DAOS whose tokens are held in significant amounts in PowerPool baskets/vaults;
  4. Staking xCVP also entitles stakers to influence internal PowerPool product management decisions, often relating to yield optimising strategies for each token in a basket, rebalancing the percentage weighting of each token in a basket, the inclusion/exclusion of a token from a given basket, the proportion of a given sub-basket/pool in a higher pool-of-pools, and the decision to launch new thematic pools and pools-of-pools.

The proposed increase from the current no lock/redemption period for staked xCVP to a one-week minimum lock/redemption period is meant to increase the governance value of xCVP, while still allowing price aligning arbitrage between Treasury based xCVP and open market CVP by discouraging flash loans and other gaming of the xCVP governance voting process.

Why invest via actively-managed, automated PowerPool ‘smart vaults’ like $LUCY, diversified ‘baskets’ like $BNBDEFI (and soon many others)?

Crypto investing is closest to early-stage venture capital investing. It is arguably even more risky than traditional technology start-up investing because fork-able multi-chain/layer open source (not proprietary) codebases reduce first-mover advantage, cost of entry and defensibility of early competitive position. Broad diversification is the only defensible crypto investment (as opposed to trading) strategy.

Value accrual to tokens can be problematic, especially without investment vehicles built on smart vaults and automation. Maximising returns on crypto tokens involves not just passively holding the tokens, but also actively managing staking for intrinsic and extrinsic yield, as well as managing volatility via hedging with options and derivatives. Fast-changing market conditions, increasing divergence in fundamentals, and more competition for liquidity and fees will require automated vault and basket rebalancing to be attractive to the average investor.

Although product-market fit for DeFi on Ethereum L1 has been proven, scalability challenges/fee levels led established DeFi DApps/TVL/fees to migrating from Ethereum Layer 1 towards other proliferating chains/layers, all competing to attract TVL, primarily using token rewards/yields to stakers. No one knows how future DeFi TVL/fee income/token appreciation will be distributed across protocols, chains and layers. It follows that investing in a broadly-diversified, multi-chain, multi-layer portfolio ensures a better risk-adjusted return. Wherever future TVL/fees migrate to, a portfolio based on automated PowerPool pool-of-pools baskets will be positioned to capture resulting increasing fees/token appreciation while actively re-balancing to increase holdings of ‘winners’, and reduce participations in ‘losers’.

The challenge for DeFi investors (as opposed to ‘apes’, traders & arbs) is to achieve BOTH broad thematic diversification (including investing in competitors) like all good VCs do, while still actively managing the staking of underlying tokens to harvest the increasing rewards on offer from the looming DeFi ‘liquidity wars’ between alternative protocols/chains/layers. Diversified ‘baskets’ of yield-bearing DeFi tokens also reduce exposure to the inevitable ‘hacks’ that are frequent in DeFi. But as the number of tokens held for diversification and hedging increases, it soon becomes too time intensive for the average investor to manually optimise and harvest ‘intrinsic’ yield on all the underlying tokens. In addition, the available yield strategies for each token, and the proportion of each token in each basket needs to be periodically reviewed and re-balanced. This is just too difficult and time/gas consuming for almost all non-institutional investors.

PowerPool was a pioneer in automating optimised yield harvesting using, among other unique technologies, the PowerAgent autonomous, permission-less generalised automation network, combined with modular ‘smart’ vaults with wrapper/router technology to support automated re-allocations and re-balancings under the guidance of a decentralised, fair-launched asset-management DAO open to anyone. No other asset-management DAO offers the combination of automated yield optimisation/harvesting on diversified baskets/pools which are actively-managed by a DAO comprised of xCVP-weighted voting by knowledegable and interested stakers with significant ‘skin-in-the-game’.

Anyone/any protocol can propose and collaborate with PowerPool to define, promote and launch investment vehicles. Prime-minters who are the first to mint new basket tokens frequently earn additional yield for minting early. Family offices and crypto fund investors can define either closed, private or open vehicles open to the public.

...more PowerPool FAQs (toggle for answers)

Q-00.) What is the PowerAgent Network? How does this affiliated automation network support multi-chain composable smart vaults/baskets and how does it drive value to CVP?

A-00.) The PowerAgent Network is one of PowerPool’s key innovations, and is the leading EVM-compatible automation agent network. On Ethereum, there is no way to hard code for an event to occur at a specific time, so harvesting rewards/yield and many other active management tasks requires an autonomous on-chain automated network of Agents, and only PowerPool has one. PowerAgent is a system for automatic smart contract calls, allowing the protocols to harvest rewards, compound them, update pool weights, and make any other necessary on-chain activity automatically. The closest analogue to PowerAgent is Andre Cronje’s KP3R Network. Oracle networks like ChainLink, etc are not really competitors. More on the Value Proposition of PowerAgent

Q-01.) What is PowerPool’s technology advantage in modular, flexible, high-yield vault design?

A-01.) Wrapper and Router technology. Baskets/pools are composed of piTokens (generalized wrapper tokens) while real tokens are staked somewhere else using Router. This allows the DAO to change staking strategies for each underlying token in the basket/pool quickly, without affecting the basket at all. For example, the $BSCDEFI pool contains underlying CAKE tokens. Depending on market conditions, automated (using PowerAgent) intrinsic yield strategies for $BSCDEFI can change Syrup Pools for CAKE staking everyday. No other asset management project has such flexibility and automation of yield optimization options. More detail

Q-02.) Will PowerPool vaults with wrapper and router technology, and the PowerAgent automation network support various types of thematic baskets/pools and pools-of-pools, some actively-managed by the DAO, others passively-managed and some externally managed by third parties?

A-02.) YES. One of the main duties of the DAO will be to determine how each thematic pool will be managed, based on which metrics and analysis, and how and how often re-balancing/re-weighting is to be managed. The relevant mix of data sources and analytics to support fundamentals tracking will be defined individually for each thematic pool.

Externally and passively-managed baskets/pools will be supported, under the tagline 'Powered by PowerPool', but these baskets will not be part of the PowerUniverse and will require their own marketing and liquidity support. DAO members may or may not decide to invest in externally-managed pools. Nothing prevents an externally-managed pool from being included in the flagship PWRPOOL 'fund of funds' if that is what the DAO decides. Externally-managed funds will provide an interesting point of reference for internal discussions of DAO-managed pools.

Q-03.) How quickly will the future DAO governance process be able to react?

A-03.) How agile does the process really have to be? The PowerPool protocol is not intended to be a trading/arbitrage bot. The PowerPool DAO is intended to manage a family of primarily bullish DeFi and high yield investment vehicles, with a defensive DAO Treasury denominated in lower-volatility xCVP. Individual investors can easily fine-tune their own personal investment postures very quickly by adjusting the proportions of their own personal holdings, e.g. a relatively aggressive portfolio could be very quickly changed into a much more defensive portfolio, in future dealing directly for free on the PowerPool website. It should not be the function of the DAO to do collectively what individual investors can easily and cheaply do for themselves.

In TradFi, benchmark indices are rarely changed more than once a year. Experience to date has shown that even 'Top10' style crypto ‘index’ operators have struggled to reflect rapid growth of ‘forks’ like SushiSwap, Badger and other fast-moving elements of DeFi, making even apparently 'passive' management more active than anticipated, but the periodicity is still months, not days. In the past, the flexible vaults architecture used by PowerPool has dealt effectively with extreme emergencies, such as the Cover minting incident, and the reaction was near instantaneous. No DAO involvement is required to protect the funds under management.

In general, DAO platform tooling is evolving to support more delegated team/'guild' based distribution of decision-making closer to the SparkTeams most able to opine on any given subject. It is hoped that the SparkProd product development team will be continuously-developing multiple opportunistic scenario-based strategies that can be implemented by ‘flash’ DAO votes, results of which will be reported with 1-week delay. (see DAO Charter & Rules below)

Q-04.) How can we manage risks of some or all the details of our planned changes to shortlists and basket positions becoming public?

A-04.) This is going to be one of the distinguishing key capabilities of the PowerPool DAO. The PowerPool DAO will require development of specialised investment management governance platform capabilities, although other investment management DAOs may also use these capabilities to the extent they are incorporated into open-source platforms like Discourse and Boardroom.

What is the worst that could happen? The risks/gaming options scenarios from foreknowledge of DAO decisions are different for each shortlist:

  1. Shortlisted tokens in baskets - the complete listing of PowerPool whitelisted public pool tokens already launched, such as $BSCDEFI, etc. is always public, although 'decoy' tokens under discussion are usually resent on the shortlists, but with zero weightings. Discussions of proposed changes to the shortlist and the (re)-weightings are always conducted token by token. If someone proposes to add a token to the shortlist, it is possible that they and their collaborators may have already taken a big position long. But the DAO voting is confidential, the quorum and majority thresholds might not be reached, and the result announced only after at least a week delay, so a naked long, front-running position may be difficult for traders to finance large and long enough to profit. Also, the timing of DAO Treasury implementation is randomised, and sensitive to market conditions and fundamentals tracking.
  2. Proposed candidate tokens for shortlisting - there is no reason to ever release the complete listing of the candidate shortlists being tracked by the protocol. DAO Forum discussions will always be conducted on a token-by-token basis, and all shortlists are constantly in play.

As opposed to taking risky positions trying to front-run the DAO Treasury, clever tipsters successfully promoting a token to the DAO shortlists via Forum discussions will be rewarded just for successfully making a compelling proposal, with zero risk and requiring only their 1,000 xCVP initial investment, yielding a much better risk-adjusted return. The tipster will also receive their proportionate share of appreciation in the value of xCVP, with no ‘carry’ financing cost and other sources of rewards/yield still available. Driving up/down the price of the target token by front-running actually reduces the chances that the candidate token will be shortlisted within any predictable period of time.

The DAO has a key role in deciding how to manage these risks over time. PowerPool should follow the already regulator-approved example of TradFi active ETFs, which differ from fixed index-based passive ETFs. Most ETFs on the TradFi market are structured as passively managed funds, meaning they closely (and predictably) follow an underlying independent methodologist benchmark, like the S&P 500 Index. However, actively managed ETFs don't adhere to a predictable rebalancing strategy; it’s up to the portfolio manager (the PowerPool DAO) to keep the active portfolio aligned with its stated objective. Active ETF issuance in TradFi started to evolve only in early 2015, following a historic decision by the US SEC when issuers and regulators agreed on a portfolio disclosure regime that balanced the needs of investors who want to know what they are investing in with the protection of the investment manager’s intellectual property (its portfolio holdings and active portfolio decisions).

Semi-public statements on the DAO Forum visible to xCVP stakers will be limited to 1-week  delayed, after-the-fact announcements of agreed changes to shortlist composition by adding or subtracting tokens, e.g. “PowerPool DAO decided last week to add Bancor to the holdings of its flagship fund”.

In general, if the metrics and weights on the fund are dynamic and tuned by a recurring series of flash concealed result gas-free votes taken token by token, then anyone who knows the holdings of a given basket still does not know whether the DAO is bull or bear on particular token at any given point in time because they don't know how the combination of DAO sentiment and fundamentals tracking is moving the weights, or whether the token has been re-classified, until at least one week later.

All of this already exists conceptually in the TradFi US hedge fund industry for actively-manged ETFs to satisfy Regulators charged with enforcing the U.S. laws against insider trading (see historic SEC ruling ‘fine print’ in the References).

Q-05.) Wouldn't ‘star’ investment managers perform better than a DAO? Can active DAO management do better than more traditional passive, relatively-fixed weight multi-token ‘indexes'?

A05.) But crypto investment resembles early-stage venture capital investing more than regulated equities trading. There are many reasons to believe that in crypto, more active management will beat passive indices, given the volatilities and rate of change. This has proved true in the case of automated stablecoin yield optimisers like YLA and others. For yield-oriented investments, active/automated management will beat passive because the incentive-driven liquidity sloshing around is so volatile on a daily basis.

If PowerPool could identify candidate individual or collective external Fund Managers or Methodologists, the PowerPool protocol could offer to support their personal weighted shortlists and track their metrics as well. The issue is branding and marketing. ‘Star’ manager investment funds would carry the branding of the ‘star’ and most of the performance ‘alpha’ fees would/should go to the ‘star’ manager. But there is a high risk in associating the PowerPool brand too closely with volatile investment managers who may crash and burn. Externally managed pools/funds would not be part of the PowerUniverse, and would depend on their Manager(s) for marketing and liquidity support.

Other asset management protocols like Index Coop, Enzyme, Sets 2, PieDAO etc. are already addressing this style of investment management with ‘model portfolios’ that typical investors can ‘ape’ into. But without an automation network like PowerAgent, they are unable to harvest ‘intrinsic’ yield automatically by staking the underlying tokens for the benefit of token holders.

Another option related to the ‘star manager’ option would be to whole-heartedly develop the hedge fund platform functionality as a DAO, and then seek partnerships with TradFI private partnership hedge funds looking to enter the crypto space (there are now many just looking for options).  Using this ‘New Vision' documentation, it would be possible to offer TradFi hedge funds a full range of options to use the same protocol/platform as the PowerPool DAO, doing anything ranging from just buying/staking xCVP to proposing and operating their own products/strategies, to operating an separate private partnership hedge fund with its own capital sharing the platform with the PowerPool public DAO-managed investments. In other words, if PowerPool can deliver full functionality quickly, it could become a shareable platform allowing TradFi hedge funds to migrate into crypto at their own pace.

Q-06.) How are ‘exchange rates’ between CVP & xCVP calculated when staking with open market CVP, and when redeeming xCVP for open market CVP?

A-06.) The exchange rate CVP to xCVP is basically the ratio of xCVP = % share of NAV/CVP open market price. Similar to stable coins, at any given time, CVP could be trading slightly below, or slightly above the NAV value of xCVP. There are several internal accounting issues, one of which is how to denominate the DAO Treasury. As PowerPool is native to Ethereum, tracking NAV in both ETH & CVP is probably best. Staking CVP as xCVP is effectively buying a proportional share in the PowerPool Treasury NAV. Later unstaking xCVP for CVP is cashing out for the then equivalent value of CVP at the then market price. It is worth studying how Nexus Mutual does this with wNXM/NXM, because very large transactions can game the process somewhat. This is another reason for xCVP staking & unstaking fees and 1 week redemption periods.

Q-07.) Should we prioritise listing CVP on as many DeFi sites as possible; across DEX, lending, synthetics & derivative sites?

A-12.) Yes! CVP should be the first token on the ‘red list’ of opportunities to use PowerPool’s existing holdings in DeFi site governance tokens to influence other sites’ listing priorities. Multiple, broad listings for CVP across all types of DeFi (trading, lending, borrowing, synthetics, derivatives) attracts arbitrage and trading liquidity towards the CVP token. It also gives the PowerPool DAO Treasury maximum flexibility to long or short CVP to reduce its volatility and make it sought after as a widely-held and widely-listed (hedgeable) borrower collateral, playing a role in the future DeFi ecosystem similar to the historic role of the fiat Swiss Franc CHF in global financial markets.

Q-08.) How much participation in the frequent voting will we achieve and how many proposals will actually achieve the quorums and threshold results required for action?

A-06.) Participation is a challenge in DAO governance whenever too many small holders need to be incentivized to vote. PieDAO is an established player in the structured investment space, and has the most populated DAO, currently listing 4,944 members, 330 proposals, 53 unique voters and a 1.1% participation rate. That is interesting in terms of members and proposals, but voting and participation are sobering. One problem is gas-guzzling on-chain voting, with gas costs acting as a major disincentive. New gas-less voting platforms are making it possible to move voting off-chain, and complementary Forum platform modifications to support investment management via frequent ‘flash polling’ to guide weighting and shortlisting should make it possible to increase voting participation significantly.

It is the hope that publicising this new vision of PowerPool as an activist hedge fund will attract primarily sizable (quite a few institutional) xCVP stakers who understand what sort of game PowerPool is in, and therefore self-select stakers that really, truly want to play. Indeed, as professional investment managers, it is their job to play! Restricting access to some Discord channels and the Forum to only ‘Illuminati’ holding the minimum xCVP will lure self-selecting, relatively astute investors looking for a lot of data-driven signal, and minimal noise. Displaying expensively-sourced, well-analyzed data relevant to proposed initiatives and tracking outcomes achieved will also attract engagement. Focussed, rigorous (and entertaining!) Forum moderation to modulate/attenuate the signal/noise ratio will further encourage knowledgeable, sophisticated xCVP stakers to engage repeatedly. Rewards for successful proposals, for frequent voting and for voting patterns consistently supporting the most profitable positions over time are important too.

Team-based, more modular operational governance will allow the DAO and the protocol to adapt quickly despite its increasing size. Not everyone feels qualified to vote on every type of proposal. This is another reason why global voting participation rates can be so low. Delegation tooling, such as that provided by Orca Protocol, SquadDAO and others like Finance.vote extends the DAO organization further down, away from L1 gas costs, to support more specialised discussions and less formal voting. Finance.vote is a DAO developing much of the tooling necessary to address these problems. They are already conducting sentiment poll-based weighting adjustment trials on-chain. The Finance.vote whitepaper is worth reading.

The idea is to push as much operational decision-making as possible down into the SparkTeams, surfacing only technically-sound sub-consensus options on the Forum and as formal Proposals to the DAO only if and when required by the Rules of the DAO. (see DAO Charter & Organisation below)

Always ask: what is the worst that could happen?

Given the uncertainty, it is useful to imagine what could happen if the PowerPool DAO received NO guidance of any kind from xCVP stakers, i.e no one votes on anything. There is another military analogy from control theory. If an unmanned cruise missile in flight loses contact with, or suspects that its GPS locational signal is being spoofed, it switches to internally-stored terrain maps that input a ground-following path to the target, and randomises its choice of attack vector. Given that the PowerPool Treasury has a Management Board, all of whom have staked xCVP, the Management Board and a few 'anchor investors/LPs holding many of the Power Univese tokens should constitute a quorum for most voting, and effectively make it possible for the DAO to function with NO feedback from other xCVP stakers, provided that there is sufficient consensus among the members of the Management Board. Obviously that is not the ideal outcome, but allows effective operation in the worst case scenario. Anti-fragile!

Q-09.) What does fundamentals tracking involve, what can be tracked, now and in the future? How does tracking differ for different thematic pools?

A-03.) After staff performance bonuses, the biggest costs incurred by hedge funds is for purchased information flow. That is why Mike Bloomberg is so rich. Another key skill of the PowerPool DAO will be assembling and analysing actionable information to guide the DAO pool structuring/re-weighting voting process. The idea of DAO management of pool composition and weighting pre-supposes that targeted costly information has been distilled, sharing the costs across the entire DAO and all of the funds under its management. Links to custom analytics visual sources for every token on the shortlist, supplemented by data feeds sourced internally and externally from other sources will be accessible from links on the xCVP>1,000 Forum, thereby continuously increasing demand for staking at least the minimum 1,000 xCVP, and diluting the influence of xCVP whales while increasing informed participation in data-driven DAO discussions.

The issue of what data to track for the tokens on each shortlist, where to source it, how to analyze it, visualise it and even how to monetise it are typical topics to discuss in the DAO. These discussions can guide also the future development of Power Agent. Token Terminal and many others already offer these kinds of analytics as a feed. I have made a first cut of ideas to propose to the DAO. (see Data & Analytics )

Q-10.) As a data-driven, analytics-based investment fund manager, what metrics does PowerPool track, both on and off-chain?

A-10.) There are many analytics sites already tracking all manner of data which can be used for metrics, both on-chain and oracle-based. Once we accept that fixed weights on portfolio component holdings are not necessary, or even desirable, we can also conclude that fixed weights on metrics are also not required. There is no ‘correct’ or optimal set of tracking metrics equally valid across all possible thematic pools and investment postures. The role of the PowerPool DAO is to crowd-source environmental/market guidance and manage timely token (re-)classification processes to help the PowerPool protocol weigh various metrics appropriately depending on which thematic pool the token is in. The DAO process periodically signals the protocol to change weights on both holdings and metrics tracked whenever the required Quroum and Threshold majority signals a change.

Like 1960’s military nuclear attack bomber auto-pilot systems, the pilots were still needed because computing power was too limited and too much environmental information was required. Computing power is no longer so limited, but I would argue that the ‘pilots’ are still needed for the unaided crypto-investment PowerPool protocol to determine at any given time whether the outlook for a token should be considered bullish or bearish. Because it is not possible to uniformly classify/categorise all the rapidly-proliferating individual tokens, the collective xCVP stake-weighted DAO operates a 'wisdom of the crowds' the token shortlisting process and flash poll voting system to generate collective input to the PowerPool protocol regarding which tokens to track, how to attenuate re-weightings and when to ‘switch gears’ and apply different fundamental metrics. Given (quadratic) stake-weighted DAO-curated category shortlists, and flash poll-guided weighting adjustments, the PowerPool protocol can implement automated trading strategies by categories of token, managing timing and direction and magnitudes automatically within defined risk management parametric boundaries.

PowerAgent plays an important role in these processes.  PowerAgent is a truly decentralized cross-chain oracle, reporting price feeds (public and free to use by any dApp) in Ethereum, xDAI, and Polygon/Matic.

Q-11.) How to transition/migrate the existing public pool tokens like PIPT, ASSY, YETI to structured products more manageable in a low gas fee setting off Ethereum mainnet?

A-11.) The existing long-only ‘index’ products PIPT, ASSY and YETI are somewhat of a liability from the viewpoint of the ‘New Vision’. They duplicate holdings, mix long-only and more defensive tokens in the same pools, contain 'captive', unstake-able CVP, and overlap too much (all within Ethereum DeFi) to be composable, especially if another, broader and more hedge-able pool token like PPDEFI is introduced. None of these tokens has had the appeal to grow TVL/AUM significantly. Over time, under the supervision of the DAO and without slighting existing pooled token holders, these legacy product pools need to be deprecated.

Once the first thematic pools like $BSCDEFI are launched and the DAO is adapted to active rebalancing, the reconfiguration of holdings in the legacy pools PIPT, ASSY & YETI can begin, perhaps as part of launching higher-level ‘pool-of-pools’ like $EVML1, or even as part of launching the flagship 'fund of funds' $PWRPOOL. Initially, these outstanding baskets/tokens could be included in $PWRPOOL to facilitate swapping, and the residual holdings managed progressively, starting with an airdrop/dividend of the included CVP to PIPT, ASSY & YETI token holders with encouragement to stake for xCVP and join the DAO. See more detail here

The process of migrating existing PowerPool holdings from a plethora of poorly-communicated, overlapping, non-composable long-only pools (PIPT, ASSY, YETI) towards the New Vision will be a gradual process of engaging a new ‘beta version’ of Forum and Governance platform capabilities that systematically asks the DAO about existing holdings token-by-token to determine what the majority posture (and trends in that posture) towards existing token holdings is. Proposals can then be made to zero-weight holdings and/or move tokens between shortlists, to increase/decrease existing holdings via up/down re-weighting votes, etc. This process will allow PowerPool to test and refine the processes and systems that will be used in future to launch new pooled vehicles.

Q-12.) Why does PowerPool prefer to market multi-token vehicles as ‘baskets/pools’ rather than 'indexes'?

A-12.) The index funds/ETFs that dominate traditional TradFi retail share market investment options were not invented primarily to solve the problem of pooled diversification. Anyone can ‘throw darts’ and select 10 securities randomly and gain most of the investing benefits of diversification with no fees. Indices and passive index funds/ETFs were developed primarily to facilitate low-fee passive management, and make possible estimates of active investment manager performance fees/bonuses for ‘beating the index’. In general, proper indices are calculation benchmarks intended to track the ‘beta’ movement of the overall market available to passive (no fee) managers. So-called ‘beta-tracking’ broad market indices enable estimation of ‘alpha’, i.e.  superior returns in excess of ‘beta’ tracking available via pure passive holdings.

PowerPool structures and operates actively-managed pooled vehicles, and it is 'owned' and managed collectively by the xCVP stakers via the DAO. To the extent that PowerPool is charging fees to manage these pools on behalf of public investors, it is technically incorrect to refer to the actively-managed pooled baskets/vehicles as ‘indexes’.

Furthermore, proper indexes must be composed and maintained by an entity (the ‘Methodologist’) who is totally independent of the fund managers being evaluated relative to the benchmark. In TradFi, ‘index’ funds/ETFs are passively-managed funds that track an independently-managed index, and performance is calculated relative to this index. To call a pooled investment fund an ‘index’ just confuses everyone.

In crypto, the ‘beta’ or passive strategy is just to hold/stake the native coins of various chains, like ETH2. For neutral, high-yield Ethereum-based pools, the relevant benchmark is the staked ETH2 ‘risk free rate’ (rather than the US government bond interest rate) calculated as the average lending/borrowing rate available for liquid-staked ETH2 (currently about 8.5%). The performance calculation for collective Ethereum-denominated bull/bear pools should start by holding only long ETH or short iETH (inverse ETH) synthetics. The same is true of BSC-native, BNB-denominated bull/bear pools, which should begin by holding only 100% BNB/iBNB. Deviations from the 100% weighting by introducing new tokens and varying their relative weightings over time constitutes active fund management that may (or may not) be worthy of management and performance-related fees, depending on outcomes achieved. Privately-managed hedge funds, including crypto hedge funds, typically charge 2% of assets under management (AUM=TVL) plus an incredible asymmetric 20% of upside performance fees. As noted above, as a collective DAO fund manager, charging asymmetric 20% performance-based fees to its own xCVP stakers would be a contradiction.

Using the proposed PowerPool DAO-governed process of curated shortlists, rewards for approved rebalancing proposals and dynamic sentiment polling combined with extensive fundamentals tracking and rewards management to guide the the PowerAgent Network and the latest modular vaults should enable PowerPool investors to ‘beat the HODL’, i.e. achieve superior risk/volatility-adjusted returns compared to passive 100% ETH/BNB/etc. strategies that investors could easily do on their own.

Q-13.) How will free trading among all the PowerUniverse tokens work?

A-13.) PowerPool is implemented on top of Balancer v2, which is designed to manage pools of up to 8 tokens dynamically. Pools can be composed of other pools, which in turn can contain other pools. In order to allow Power Universe token holders to shape their own portfolios at minmum cost, while maintaining their TVL/AUM within PowerPool, it is proposed to allow swaps with the Power Universe to be free.

Q-14.) What are the advantages of creating a legal vehicle to represent the DAO?

A-14.) PowerPool’s PowerUniverse of automated structured investment products will be marketed to institutional investors and their nominated custodians,

For more detail on the proposed legal vehicle, please see here.