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Introducing the Market Neutral Yield ETH ($MNYe) Token
Introducing the Market Neutral Yield ETH ($MNYe) Token
Our first yield product on Optimism - Market Neutral Yield ETH ($MNYe).
8/3/2022
Index Coop
The Index Coop is excited to announce the launch of its first yield product on Optimism - Market Neutral Yield ETH ($MNYe).
Built using Set Protocol’s integration with Perpetual Protocol on Optimism, MNYe automates a continuous basis trading strategy that returns a price-neutral yield to token holders. Basis trading, also known as cash-and-carry arbitrage, is an established strategy for achieving price-neutral profit by arbing the difference between an asset price on the spot and near-term futures markets. In DeFi, perpetual swaps – also called perpetuals or perps – can be used in lieu of futures, with the caveat that perps have no settlement date.
MNYe takes simultaneous long spot (ETH) and short perpetual (vETH) positions. By maintaining a fully hedged position, the product has no net price exposure to the underlying asset.
The yield is generated through the funding rate, or periodic USDC payments made between traders based on the difference between perpetual and spot prices. In the case of the ETH perpetual market, there is generally a positive funding rate, which means that longs pay shorts. MNYe captures these funding rate payments three times a day by maintaining a -1x short perpetual position.
It is worth noting that volatility over the short term may cause the funding rate to become negative, translating to a negative APY for certain periods of time. However, over the long term, the funding rate for the ETH perpetual market is predominantly positive.
MNYe has several key features:
- management of underlying spot and perp positions are automated
- ERC-20 token that can be freely integrated, issued, redeemed, and exchanged across DeFi
- abstracts a sophisticated trading strategy into a single token
Automation
MNYe uses a series of smart contracts and keeper systems to monitor and maintain short perp exposure and long spot exposure to ETH. Using USDC as collateral, short perp exposure is set to a target leverage ratio of -1.0x, with a minimum leverage ratio of -0.95x and a maximum leverage ratio of -2.0x. If the active leverage ratio breaches either bound of the safe range, MNYe will automatically adjust the short and spot positions while maintaining a delta-neutral position. If levering up, MNYe increases the short perp position within Perpetual Protocol, withdraws some USDC collateral, and acquires more spot ETH through Uniswap v3. If delevering, MNYe decreases the short perp position, sells spot ETH for USDC thru UniswapV3, and deposits USDC to collateralize the position in Perpetual Protocol.
In addition to managing the delta-neutral position for token holders, MNYe also auto-compounds realized yield every seven days. Assuming a positive funding rate over a seven day period, MNYe withdraws USDC funding from the collateral position to acquire more spot ETH, and then deposit the remainder back into the short perp position. MNYe holders do not have to claim or manually compound - simply hold the token and watch interest accrue to the token’s NAV!
Composability
Like all Index Coop products, MNYe is an ERC-20 token that can be freely integrated and exchanged throughout DeFi. MNYe could be used as collateral, as a component of a yield aggregator, and many other use cases. MNYe can also be minted (or “issued”) and redeemed permissionlessly through the Index Coop app. If users prefer to create new tokens or redeem existing ones rather than buy or sell on secondary markets, they can flash mint new MNYe tokens with USDC or ETH.
Accessibility
The basis trading strategy executed by MNYe is one of the highest yielding, price-neutral strategies available today. Historically, this strategy could only be executed manually on dedicated exchanges and by sophisticated traders. However, by tokenizing this strategy and abstracting away the management, anyone with a web3 wallet can buy MNYe and capture some of the highest yield in DeFi.
More Information
Fees: MNYe will have a streaming fee of 0.95% (95 bps), no mint fee, and a redeem fee of 0.30% (30 bps).
How to Access:
Buy / Sell:
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Mint / Redeem:
Liquidity
The Index Coop has seeded a MNYe / USDC pool on Uniswap v3 (Optimsim) with a 0.05% trading fee, which can currently support a $150k MNYe purchase with less than 1% slippage.
Token holders are also able to provide liquidity through this Arrakis vault, which manages the Uniswap v3 LP position parameters for you. Please note that this is a third party service and that the Index Coop does not control this pool. More information is available in the MNYe Easy Issuance & LP Guide.
Additional Resources
For more information on Index Coop, please visit: Discord | Twitter | Website
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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).