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Why Buy On-chain Structured DeFi Products
Why Buy On-chain Structured DeFi Products
What are On-chain Structured DeFi Products?
5/22/2022
Index Coop
Content
Why Buy On-chain Structured DeFi Products
On-chain structured DeFi products are composable, liquid, have governance power, and can be used as DeFi collateral and bought, sold, and traded quickly and efficiently because they’re managed by their owners instead of financial intermediaries.
What are On-chain Structured DeFi Products?
On-chain Structured DeFi Products are baskets of digital assets that trade on an exchange. On-chain structured DeFi products, like Index Coop’s DeFi Pulse Index, which tracks the performance of decentralized financial assets across the market, are built on the blockchain. Off-chain products, like the Bitwise 10 (BITW) which tracks an Index comprised of the 10 most highly valued cryptocurrencies, are not settled on the blockchain.
Benefits of On-Chain Structured DeFi Products
On-chain structured DeFi products use the blockchain they’re built on to leverage several features that make them transformational:
1. Self-custody
You can buy, sell, and trade your on-chain assets anytime because DeFi removes the middleman between you and the assets you own (including their underlying tokens). Because you are the custodian of structured products and their underlying components, not the bank, you enjoy 24/7 access to do what you want with your assets. Markets are open 24/7. DeFi is always on. What does this mean? You can buy or sell your tokens on the weekend!
Additionally, on-chain indices are fully collateralized and redeemable at any time for the underlying assets. For example, if you hold $BED, at any time you can redeem BED tokens in return for their allocation of the underlying collateral (33.3% BTC, 33.3% ETH, and 33% DPI). Learn more here.
2. Liquidity
On-chain products are verifiably liquid. Because of the mechanics of automated market makers like Uniswap, you can always be assured that you can offload your tokens into sufficient liquidity. Furthermore, you can estimate trade impact based on the amount in the pool. Index Coop takes this even further by using flash minting. Minting is done automatically via a smart contract. At any time, an individual can mint new units of an index like $DPI getting the deepest liquidity of each specific token within the index. Our website will automatically route your trade for the most optimized outcome ensuring minimal price impact.
3. DeFi Composability
DeFi applications can be stacked together like money legos to facilitate new primitives that can execute more complex transactions, leading to much faster innovation cycles and new financial creativity.
DeFi takes passive products a step further, allowing individuals to use tokens as collateral on money markets. Take DPI as an example. You can earn an extra yield on DPI through protocols like Aave or Beta Finance. This makes your index products passive while also adding sustainable yield on top.
Another composable DeFi primitive is the ability to add liquidity to any asset pair. Providing liquidity to facilitate trades, a transaction usually limited to a small group of the most capitalized institutions is open to everyone. For example, providing liquidity to a DPI/ETH pair allows you to earn extra yield from trading fees while still maintaining exposure to your desired assets. There are inherent risks associated with strategy, but LPing has quickly become a superpower for DeFi users looking to earn an extra return on their coins.
4. Governance Power
DeFi protocols make important decisions through governance. From simple decisions like parameter changes or impactful votes like rate modifications, governance votes are the bedrock of innovations in DeFi. One of the most important governance votes is the addition of new assets as collateral on money markets. Finally, with the emergence of vote locking mechanics like Curve, liquidity incentives are even based on governance voting. On-chain indices provide holders with voting power in the protocols of underlying tokens. For example, DPI holds large blocks of voting power in the biggest protocols. This voting power is represented by the INDEX token, allowing INDEX voters to propose changes and actively build up the ecosystem.
5. Cost Advantages
On-chain DeFi structured products have a variety of cost-related advantages.
Some off-chain providers have a minimum investment in order to gain exposure to crypto themes. This puts creating a diversified crypto portfolio out of reach for many customers. Because there are no minimums, Index Coop customers are able to easily purchases crypto index products in both small and large amounts.
NAV deviation has historically been a problem with several off-chain iproducts, like Grayscale Bitcoin Trust (GBTC). For example, for most of 2020 and 2021, the price GBTC was at a large discount compared to spot Bitcoin prices. On-chain structured products offer better price discovery.
Off-chain crypto providers often require holders to pay for custody, making them more expensive than on-chain structured products. On-chain structured products are available through self-custody, meaning holders do not need to hold or pay others for custody.
On-chain Structured DeFi Products by Index Coop
Index Coop specializes in on-chain structured DeFi products with the goal of making crypto index products simple and accessible to everyone. If you’re looking to hold on-chain digital assets, consider these index tokens:
: An index that tracks the performance of decentralized financial assets with significant usage that show a commitment to ongoing maintenance and development.
: An index of crypto’s most popular assets—BTC, ETH, and DPI—in equal weight, BED seeks to give safe, passive exposure to the most promising use cases in crypto: store of value, programmable money, and decentralized finance.
ETH 2x Flexible Leverage Index (ETH2x-FLI)
: An untraditional cutting-edge product, ETH2x-FLI enables holders to get leveraged exposure to Ethereum using collateralized debt in a single token without having to manage collateralized debt positions or monitor liquidation risks.
About Index Coop
Index Coop is a decentralized autonomous organization (DAO) that powers structured decentralized finance (DeFi) products and strategy tokens using smart contracts on the blockchain. We offer a suite of sector structured products, leverage and inverse products, and yield-generating products. We aim to create products that are simple to use, accessible to everyone and secure. Our products are built on Set Protocol, a twice-audited, self-custodial DeFi tool that allows for the creation and management of Ethereum-based (or ERC-20) tokens. Among users, partner protocols, and our composable products, Index Coop maintains one of the largest partnership networks in the DeFi ecosystem.
How to buy Index Coop products with fiat currency:
First, you’ll need to create an Ethereum wallet like Argent, Metamask, Gemini, or Rainbow.
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
or the
.
You can also earn or buy Index Coop products directly via your favorite decentralized exchange.
>>Click here to buy DPI Tokens
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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).