IIP-187: Launch ETH2xBTC and BTC2xETH on Arbitrum

Title: Launch ETH2xBTC and BTC2xETH on Arbitrum Status: Proposed Author(s): @anthonyb.eth Reviewer(s): @MrMadila Created: 16 December 2024

1 Abstract

The Index Coop core team proposes that the DAO launch two new automated leverage tokens on Arbitrum. These automated leverage tokens will be built on Index Protocol and utilise Aave V3 to achieve specific target leverage ratios.

• ETH2xBTC (2x Long ETH, 1x Short wBTC): 0xE7b1Ce8DfEE3D7417397cd4f56dBFc0d49E43Ed1
• BTC2xETH (2x Long wBTC, 1x Short ETH): 0x77F69104145f94a81cEC55747C7a0Fc9CB7712C3

This proposal seeks approval $INDEX holders to add these products to the Index Coop DAO. Upon a successful vote, the operator role will be transferred to the Index Coop Arbitrum Product Controller Safe.

2 Financials

2.1 Fees

Symbol	Annual Streaming Fee	Issuance/Redemption Fee
ETH2xBTC	3.65%	0.10%
BTC2xETH	3.65%	0.10%

2.2 Fee splits

Index Coop will earn 100% of the revenue from these new leverage tokens but may enter into revenue-sharing agreements with third parties when appropriate and compliant. Index Coop will also cover 100% of the gas costs associated with rebalancing.

2.3 Product Costs

The cost to Index Coop to launch and maintain these products is negligible in terms of capital outlay and ongoing expenses due to extremely low gas costs. The protocol has already been deployed to Arbitrum, including the internal smart contract infrastructure.

3 Specification

3.1 Range-Bound Methodology

The Index Coop Leverage Suite will utilise a range-bound methodology.

For users familiar with the legacy FLI products, please read here for the differences between range-bound and flexible leverage methodologies.

3.2 Token Parameter Settings

3.2.1 ETH2xBTC

Parameter	Value
Name	Index Coop 2x ETH Short 1x BTC Ratio
Symbol	ETH2xBTC
Chain / Lending Protocol	Arbitrum / Aave V3
Collateral Asset	aArbWETH
Collateral Asset Address	0xe50fA9b3c56FfB159cB0FCA61F5c9D750e8128c8
Underlying Collateral Address	0x82aF49447D8a07e3bd95BD0d56f35241523fBab1
Debt Asset	Variable Debt WBTC
Debt Asset Address	0x92b42c66840C7AD907b4BF74879FF3eF7c529473
Underlying Debt Address	0x2f2a2543B76A4166549F7aaB2e75Bef0aefC5B0f
NAV at Launch	$1,000
Issuance Module	DebtIssuanceV3
Fee Module	StreamingFeeModule
Leverage Module	AaveV3LeverageModule
Target Leverage Ratio	2.00
Minimum Leverage Ratio	1.752229
Maximum Leverage Ratio	2.282806
Ripcord Leverage Ratio	2.50
Ripcord Incentive	0.25 WETH
Rebalance Interval	Range Bound
Recentering Speed	0.10%
Epoch Length	max
Initial Token Supply Cap	27,000
DEX	Uniswap V3
Pool	WBTC/WETH 0.05%
Pool Address	0x2f5e87c9312fa29aed5c179e456625d79015299c
TVL	$55.8m
Slippage Tolerance	0.50%
Max Trade Size	100 wETH
Ripcord Slippage Tolerance	2.00%
Ripcord Max Trade Size	250 wETH

BTC2xETH

Parameter	Value
Name	Index Coop 2x BTC Short 1x ETH Ratio
Symbol	BTC2xETH
Chain / Lending Protocol	Arbitrum / Aave V3
Collateral Asset	aArbWBTC
Collateral Asset Address	0x078f358208685046a11C85e8ad32895DED33A249
Underlying Collateral Address	0x2f2a2543B76A4166549F7aaB2e75Bef0aefC5B0f
Debt Asset	Variable Debt WETH
Debt Asset Address	0x0c84331e39d6658Cd6e6b9ba04736cC4c4734351
Underlying Debt Address	0x82aF49447D8a07e3bd95BD0d56f35241523fBab1
NAV at Launch	$1,000
Issuance Module	DebtIssuanceV3
Fee Module	StreamingFeeModule
Leverage Module	AaveV3LeverageModule
Target Leverage Ratio	2.00
Minimum Leverage Ratio	1.752229
Maximum Leverage Ratio	2.282806
Ripcord Leverage Ratio	2.50
Ripcord Incentive	0.25 WETH
Rebalance Interval	Range Bound
Recentering Speed	0.10%
Epoch Length	max
Initial Token Supply Cap	11,000
DEX	Uniswap V3
Pool	WBTC/WETH 0.05%
Pool Address	0x2f5e87c9312fa29aed5c179e456625d79015299c
TVL	$55.8m
Slippage Tolerance	0.50%
Max Trade Size	3.5 WBTC
Ripcord Slippage Tolerance	2.00%
Ripcord Max Trade Size	8.75 WBTC

3.3 Governance

Any material changes to the methodology will be communicated externally and subject to an $INDEX token vote.

3.4 Liquidity Analysis

The underlying assets, WETH and WBTC are all extremely liquid.

4 Product Liquidity

Users can directly issue and redeem leverage tokens via a dedicated Leverage Suite app site; there will be no dependency on secondary market liquidity for leverage tokens.

5 ‌Methodologist Background

The Index Coop core product team has proposed leverage, trade and risk parameters, which this IIP will confirm.