[BIP-111] Index Coop x Balancer DAO Partnership

Summary:

With the upcoming launch of multiple products utilizing Managed Balancer Pools, Index Coop is proposing a partnership with Balancer DAO that includes fee split arrangements, a token swap, and veBAL gauges.

Supplemental Resources:

• Launch the Diversified Staked ETH Index (dsETH)
• Fee Split Framework: Index Coop / Balancer Fee Framework

Motivation:

Since launching over two years ago, Index Coop has established itself as the leader in on-chain structured products. With over 90% of the market share of on-chain indices, we’ve experienced first-hand the many trends and cycles of crypto. Much like the rest of DeFi, Index Coop has yet to reach escape velocity. Our current slate of products offer users one-click access to the largest sectors of crypto. Our strategies make DeFi simple for users who don’t want to constantly manage on-chain positions.

Our DAO, however, has been limited in the type of products we can build. Our upcoming suite of products, built and bundled on Managed Balancer Pools, will unlock the advancements and efficiencies of DeFi in a whole new way. In our new partnership, Index and Balancer are positioned to bring the wonders of crypto to all users. The Index Coop team aims to bring Balancer to every corner of the finance world including institutional custodians, TradFi data providers, crypto intermediaries, DeFi money markets, on-chain aggregators, and wallet interfaces. It is time to bring Balancer to the mainstream.

In an effort to keep our partnership strong and long-term focused - with both of our communities in mind - Index Coop is proposing:

1. Product fee splits
2. OTC token swap
3. Enable veBAL gauges on select products

Product fee splits

• Index Coop is offering Balancer DAO a base of 30% of MBP-level fees for Composite MBPs. For Structured MBPs a base MBP-level fee of 50% will go to Balancer.
  • Composite MBPs will resemble existing composite, Set-based products like DPI. Composite MBPs will typically target a theme, sector, or market and generally have simpler functionality.
  • Structured MBPs will represent a new class of products that utilize the fuller feature set of Managed Pools. These structured MBPs will include tokens built in-house by Index Coop and will generally have more sophisticated functionality compared to Composite MBPs.
    • Upcoming dsETH will be considered a Structured MBP
• For a full deep dive into the fee arrangements follow this link: Index Coop / Balancer Fee Framework
• Most Favored Nation status: For any fee split arrangement Balancer gives to any party in the future, Index Coop shall have the right (but not the obligation) to receive the same terms.

Token Swap

• Index Coop is proposing a 1:1 OTC treasury swap
• 100k INDEX (currently ~$200k) for a proportional amount of BAL (a 30dma of each token to be applied upon date of formal agreement)
• Index Coop will convert the tokens into veBAL using the vested escrow contract, locking them for 1 year
• We believe in a long-term partnership and propose locking the respective veBAL and INDEX for at least 1 year
• Index Coop will use these tokens to direct BAL rewards to Index Coop Managed Pools beginning with dsETH. These tokens will be supplemented by 4,824 veBAL ($80k) obtained by Index Coop treasury investments into the Balancer Boosted USD Pool.
• Voting power for INDEX and BAL is planned to be instant, but is contingent on the technical capaiblites of the locking mechanism

veBAL Gauges

• Index Coop is proposing to set up initial gauges for the Diversified Staked ETH Index, Diversified Stable Yield Index, and future Structured MBPs

Over the past few months, we’ve been inspired by the success of BAL and veBAL. We’ve already seen with dsETH how our products could bring positive sum dynamics as protocols can add native token incentives to our products and buy/lock veBAL. The Index Coop team intends to be a major advocate for protocols getting into the veBAL game. While the INDEX token does not share these same characteristics, the INDEX token has unique and powerful metagovernance dynamics. Considering the success of the Aave swap, this partnership would add voting power at a low cost there and also gain voting power in UNI, COMP, and others that we’ve used and can continue to use for asset listings. In addition to the metagovernace power, we invite Balancer DAO to use INDEX tokens to influence the direction of product decisions including the composition of future MBPs.

Index Coop’s first managed pool, dsETH, is only the beginning. Our product team is looking forward to increased flexibility as we build future indices and even as we think about redesigning or bundling existing indices. We believe the combination of our technical teams and our added abilities to distribute tokens to custodians and possibly centralized exchanges will open up Balancer to a whole new class of investors.

Voting Specifications:

We request a vote to decide on the partnership between Index Coop and Balancer DAO.

If the community votes YES:

• The product fee arrangement as specified above will be put into place
• Index Coop and Balancer DAO will conduct an OTC token swap. BAL will be sent to the Index Coop Treasury Account: 0x462A63D4405A6462b157341A78Fd1baBfD3F8065
• Initial gauges will be set up for dsETH and DYI

If the community votes NO:

• Index Coop and Balancer teams will revisit our partnership framework without interfering with the technical development of the products

Index Coop and Balancer will continue to work closely together as we build our future slate of products. We look forward to hearing from the entire Balancer Community and we’re happy to answer any questions!