[PIP-70bis] New DEFI Index (GATE 2)

Summary

As a logical next step to the product revamping initiative voted as GATE 1, this proposal details the revamp of the DEFI index, its methodology and resulting allocation. A comprehensive recap of the following considerations is also reported on the DEFI Index prospectus linked on the forum post.

Passing Thresholds

• 5% or more of veDOUGH supply must participate (675k veDOUGH)
• 60% or more of participating veDOUGH must vote FOR

Background & Motivation

The original creation of multiple indices tracking the DeFi space caused the fragmentation of liquidity across different products, with increased efforts required for their maintenance, promotion and liquidity incentivization. This proposal for a new single DeFi index arises from the intention to optimize all of the above, while revamping the PieDAO product offering with a fresh indexing product.

Proposed New Methodology

A refined methodology is proposed to select the assets to be listed in the index. While the main driving factor remains protocols’ market capitalization, this time an initial protocol categorization was implemented, followed by further considerations regarding asset liquidity and relative category weight.

Protocols were categorized based on their functionality, namely: DEXes, lending, asset management, derivatives, CDP, Infrastructure, Bridges & NFT DEXes. After initial mapping into the aforementioned clusters, a first list of indexable tokens was drawn by selecting protocols counting for at least 20% of the market capitalization of their relative category, and/or 1% of the market capitalization of the entire DeFi ecosystem.

Selection Criteria

Shortlisted products were analysed based on a number of ad-hoc acceptance criteria aimed to ensure a sound and consistent asset selection. Criteria are extensively detailed on the forum post.

Assets Allocation

A max and min allocation is applied (max cap at 10% and min cap at 1%, respectively). Additionally, each asset resulting allocation is validated or iteratively adjusted in function of its available liquidity on DEXes, in order to contain the max slippage incurred while purchasing the asset from DEXes.

Here below the proposed allocation

According to the available yield strategies on selected assets, the overall index profitability as per current market conditions would currently result in the following

Do you support the proposed methodology and resulting allocation for the new DeFi index?