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Understanding Index Coop Pt 1
A deep dive into DeFi's most well run DAO
As you may or may not know, I’m a bit of a fan of IndexCoop and how they run things. Why? Well because it’s one of the world’s first large scale decentralised organisations that coordinates human beings at a macro scale towards a very clear, defined goal. DAOs are all the rage, many larp about how they’ll change everything but few are studying and solving the execution challenges that you need to pull it off. This article is going to be a deep dive into the contributor experience on Index and how the whole thing comes together.
What is Index?
It’s a network responsible for creating financial products that bundle multiple assets together into indices. Long way of saying ETFs on the blockchain. At the time of writing this, the index currently has $185m+ of financial value locked in its financial contracts and thousands of users using their products. By some metrics of success, you could argue that they’re clearly onto something here. They currently have two kinds of product offerings:
DeFi Pulse Index // ETF Tokens
Their DeFi Pulse index is the most famous and well-known one. It’s essentially a collection of many DeFi tokens weighted by market cap to provide diversified exposure to those who don’t want an active approach to getting into DeFi. Perfect to recommend to your friends. As the price of these tokens increases they keep rebalancing which means from a tax perspective the index itself is going to be rebasing itself rather than an individual buying or selling. Not giving tax advice here just FYI. Their other ETF token is called the metaverse index but a lot smaller in size ($5m) so not too much of a focus for this article.
ETH FLI 2x // Flexible Leverage Tokens
Their second product type is essentially flexible leverage indices that allow users to get a certain amount of leveraged price exposure to a token type without the user having to manage the leverage themselves. This is beneficial for everyday users who want exposure to leverage in markets without having to manage liquidation risk given their rebalancing algorithm will take care of it for you. So in essence it gives the option of leverage to everyday retail people without the financial knowledge needed to operate, manage and understand leverage at a deeper level. This has been their second product offering gaining traction with their 2x ETH leverage token having a market cap of $45m.
So, what’s different?
Good question. The key thing that makes IndexCoop different is that anyone from around the world can actually contribute to this network trying to succeed to create these new tokenised products. It’s worked so well to the point where they don’t have just one community working group but actually a few. The way I like to describe it is like an open network where anyone can join, contribute and be a part of to add value but also seek some sort of employment for the value they create to the network. This article is going to be focusing in on how someone can go down the rabbit hole of becoming a contributor to Index and how each step of the process is well thought out and carefully planned out.
It’s pretty standard in crypto that Discord is where things go down when you join into a community. So anyone who visits their Discord immediately comes into what looks like a pretty crazy place with plenty of things going on. However what makes it easy for newcomers is the “introductions” channel where people can write a little description about who they are, what they’re into and why they joined.
Upon joining you’ll get a message from one of the community members who will show you how you can learn more:
I decided to go a layer deeper and check out what this form is about and how it works, so I clicked into it.
As I clicked through the form I got asked a bunch of questions about myself, timezones, what I’m interested in and how I think I can add value to the coop. The purpose of the form from what I gathered was to understand who the person behind the screen is and why they’d like to contribute. Now because I’m doing this write-up on a Friday night in Sydney because we’re in lockdown I’ll need to cheat the user experience write up here!
As per their docs here: https://docs.indexcoop.com/new-joiners there’s a step 2 to get further involved once you’ve filled out the onboarding form and it refers to an orientation call so you can meet the real humans behind the Index itself.
I decided to dig into the orientation call slide deck to see if I could understand more about what’s going on and was very pleasantly surprised to understand the science behind the chaos. The first key slide in the deck is essentially context setting for understanding everything you need to know about the index and how it works. I’m not going to go through all the slides but only the key ones that will help understand how Index works.
The first interesting slide that stuck out to me was the following slide below. Essentially the previous 10 slides were providing context as to what they’re doing and then when you reach this slide it actually quizzes you about your knowledge to make sure you’re engaged and tuning in. I love this attention to detail in the contributor experience and is great for keeping people engaged in what would otherwise be an hour of just tuning out of a call.
Okay, so fun aside. This is where we get into some interesting logistics. Index breaks down the kinds of contributor bands to get more involved and outlines what each level of commitment really entails at its core. The descriptions are clear and cater to different types of individuals with different life situations. In my mind, this is how DAOs beat regular companies given they allow a much wider band of “part time” people to add value without necessarily creating organisational overhead.
Now, this is probably my favourite slide in the entire deck because it confirms something that I covered in last week’s article: DAOs need strong leadership structures and that all we’re doing with blockchains is allowing anyone to join structures that are huge in size and can propagate far and wide.
If the above diagram doesn’t amaze you then it should! This is literally a blueprint for how the future of organisations is going to be in the context of a decentralised realm. My only caveat here is that “index token holders” hides some of the true power structures at a deeper level but that's okay since each core area has a product owner/leader clearly defined and responsible for the goals of that function. This brings me to the next point about key roles and responsibilities. Here are ALL the working groups involved, what they do, how you can get involved and the key person responsible:
Clear roles and responsibilities in a decentralised network - literally amazing. For newcomers, there’s also a slide that also shows the five key resources needed to onboard and gets up to speed. I’m honestly pretty certain that most centralised companies don’t have onboarding experiences as advanced and sophisticated as Index.
Lastly, the way compensation is handled is highly unique and ensures a sort of non-game ability for the system. Working group leaders will compensate you based on your perceived impact. Some may view this as a negative but personally, I think it helps filter for those who are opportunistic and those that actually add concrete value. The methodology is super clear and expectations are well set to avoid disputes since they’re not promising any ranges and finding people who truly care about the work they’re doing.
Unfortunately, I’m at the limit of how much Substack will let me write in a single post so I’ll need to wrap up fairly soon now. However, going through and understanding how Index creates a unique contributor experience that’s far more sophisticated than 99.5% of any DeFi community out there. There’s one more that I know of but I’ll cover another time ;) So what are some key takeaways that I took away from this exercise:
Onboarding contributors is an experience you need to design and really care for. It’s not something you just hope happens and it’ll fall in place.
DAOs need a hierarchy with structure and leaders. Flat organisations are a myth and cause more harm for coordination. This is human beings 101.
The core team, contributors and community are just people’s commitment on a spectrum. The higher the flexibility of commitment you can enable the more effective and distributed your DAO becomes. Most teams are binary or tertiary where 0 = core team member, 1 = contractor, 2 = community cheerleader. These are too absolute and eliminate a whole spectrum of people.
Building a contributor framework takes time and hard work, not something that happens overnight. Contributors are not community members but rather start as community members.
There’s still plenty more that I want to unpack and learn. If you enjoyed this breakdown and would like to learn more in a part 2 then like, share, subscribe and I’ll take that as enough article-market fit to create a part 2 :)