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Five Advantages of the DeFi Pulse Index
Five Advantages of the DeFi Pulse Index
The Defi Pulse Index (DPI) is a structured product for the emerging DeFi sub-asset class on the Ethereum blockchain. Because it is a bundled crypto-asset, you effectively own all of the underlying tokens.
7/30/2021
Index Coop
Content
1. DPI is a Structured Product
The Defi Pulse Index (DPI) is a structured product for the emerging DeFi sub-asset class on the Ethereum blockchain. Because it is a bundled crypto-asset, you effectively own all of the underlying tokens. This means you can redeem your units of $DPI for the underlying tokens at any time on the TokenSets site. This is a feature of traditional ETFs that is typically reserved only for large, institutional investors.
2. Easy to Buy
You can easily trade fiat currency for an Index Coop product directly from your web3 wallet. Popular wallet choices for purchasing DPI include Argent, Dharma, Metamask, or Rainbow. With each of these wallets, you can connect to your bank account or debit card, which allows you to exchange fiat currencies directly for Index Coop products. Alternatively, you can buy $DPI from a DEX like Uniswap or Sushiswap. Liquidity for $DPI on layer 2 will be added shortly, at which point transactions will require less gas. Finally, it is possible to buy $DPI directly from the Index Coop or TokenSets websites. More info below...
3. Permissionless
As an Ethereum-based crypto-asset, $DPI is permissionless and decentralized. This means anyone in the world with an Internet connection can purchase and hold it. This makes $DPI more accessible than traditional finance ETFs while maintaining and improving upon some of the ETFs’ core features. You can read more about the benefits of $DPI versus traditional finance equivalents here.
4. Community-Managed
Even though the exact methodology of $DPI is managed by DeFi Pulse, the Index Coop community is in charge of the various management decisions around the product. Anyone can participate in these decisions by being an active member of the Index Coop community. If you are interested in participating, join our Discord.
5. Productive
$DPI is a structured product, but it can also be used productively throughout DeFi since it is a crypto-asset. Here are a few of the productive opportunities in DeFi available to holders of $DPI:
Liquidity provision (LP): Becoming a market maker by providing $DPI and $ETH liquidity for trading activity on a DEX like Uniswap or Sushiswap in exchange for a portion of the trading fees.
Yield farming: Staking your LP position in a platform to earn an additional yield. For example, you can stake your $DPI/$ETH LP tokens on for ~10% yield.
Borrowing and Lending: Providing lending collateral for borrowing demand on platforms like and. This provides you with a stream of interest from borrowers.
Collateral Debt Position (CDP): Taking a loan against $DPI in stablecoins and using the stablecoins to farm yields.
$DPI Token Selection
The DeFi Pulse Index has a collection of inclusion criteria composed of four dimensions. Two dimensions are used to evaluate the token’s characteristics, one dimension is used to assess the project’s characteristics, and one is used to evaluate the protocol’s characteristics. The inclusion criteria are the basis for selecting which tokens will be included in the index.
To be included, tokens must be available on Ethereum and associated with a DeFi dapp. There are additional inclusion criteria that factor in supply/issuance, user safety characteristics, and protocol traction to ensure that only the highest-quality tokens are included.
Index Rebalancing
Rebalancing is performed during the third week of each month. At that time, any tokens that meet the criteria are added, and any that fail to meet the criteria are dropped from the index. All tokens are capped at 25% of the total allocation to ensure diversification across a range of assets.
What are the Risks?
As with all investments, $DPI is subject to market risk. $DPI will fluctuate in price as the underlying tokens are bought and sold. This means it is possible to lose your initial investment.
In addition to market risk, $DPI has smart contract risk. This is common for all tokens built on the Ethereum network. Smart contract risk stems from the potential for exploits or bugs in the code. However, Set Protocol has been audited by OpenZeppelin and ABDK consulting, and every line of smart contract code is open source.
While this doesn’t eliminate the potential of a hack, it does mean many people from external auditing firms and technical members of the community have reviewed the code, mitigating some of the risk.
As with any Ethereum project, there are infrastructural risks that may result in illiquidity. When the Ethereum network is clogged during periods of intense volatility, an asset may lose its liquidity since transactions cannot be processed, and the cost of processing may be prohibitive.
Finally, since crypto is so new and there isn’t currently much government oversight, there is a regulatory oversight risk. For example, a regulation deeming $DPI a security in a country like the United States could result in potential price and/or liquidity impacts.
How Do You Buy DPI?
There are three main ways to buy $DPI:
You can exchange fiat currencies directly for Index Coop product via an Ethereum wallet
Use a decentralized exchange to trade another cryptocurrency for Index Coop products
Or, buy it on a centralized exchange
To buy Index Coop products with fiat currencies:
First, you’ll need to download one of the above apps. (Metamask also has a browser extension if you prefer not to use your mobile phone.)
Next, you’ll set up your new wallet and connect your bank account
Once you’ve deposited fiat currency in your wallet you can exchange it for Index Coop products like DPI
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FAQs
Index Coop yield tokens simplify earning yield in DeFi by automating complex strategies and diversifying across protocols. They are user-friendly and cost-efficient, appealing to both new and seasoned DeFi users.
Leverage tokens automate a leveraged position by utilizing onchain money markets like Aave or Morpho to borrow funds, amplifying a user's exposure to an asset without requiring manual management. The token's smart contracts autonomously handle the borrowing, lending, and rebalancing of assets, maintaining a consistent leverage ratio despite market fluctuations. This automation eliminates the complexities of collateral management and liquidation risks, while also charging low, transparent fees that avoid expensive funding rates often charged by perps.
Index Coop is a decentralized autonomous organization (DAO) that specializes in creating and maintaining onchain structured products. Index Coop aims to democratize access to the crypto market, empowering everyone to participate in the growing digital asset ecosystem with ease.
No, yield automatically compounds and accrues to the token price. The value of the tokens you hold in your wallet will simply go up over time without the need to claim or compound rewards.
Index Coop products protect you from liquidation with automated risk management that rebalances assets to maintain a target leverage ratio that avoids liquidation.
INDEX is the ERC-20 governance token on Ethereum for Index Coop. INDEX empowers its holders to participate in decision-making processes that shape the future of Index Coop.
Yes, all Index Coop products are instantly redeemable for their underlying value at all times.
Yes, all Index Coop smart contracts have been audited by leading independent security firms such as OpenZeppelin, ABDK, Isosiro, & more. There is also an active bug bounty program through ImmuneFi. Audit information is published in the docs here.
Streaming fees (an annual fee paid continuously block-by-block), mint and redeem fees (only on leverage tokens), and borrow costs (interest paid to borrow funds from onchain markets when using leverage).