Indexes are the key infrastructure of any advanced market. It is the easiest way to invest in the whole market or its sector by buying a single (and very liquid) asset. When it comes to Defi it is not an exception. The demand for indexes comes with the industry growth and now the race for indexes began. Liquidity and number of assets related to protocols with a solid user base and value proposition to the market are growing. Investing in the properly composed index looks like the easiest opportunity for investors to invest in the space and own a diversified portfolio of assets in a single token.
Decentralized indexes are the future of Defi
PowerPool is the most innovative project on the market so far. Currently, the CVP community launched four products: PIPT, YETI, ASSY, and YLA. Power Index can be just the first step to build a whole ecosystem of different indexes consisting of governance tokens. This index is a multipurpose product. Smart Pools have attractive features such as adding or removing tokens, pausing swaps, and of course adjustable weights/fees. All governance token holders providing assets to this pool receive additional value as they can not only farm tokens but also participate in governance of different protocols. In addition to the CVP rewards, farmers can take part in fast, cheap governance proposals all in one place across their entire portfolio, boosting engagement that wasn’t there before.
Indices are complex product, targeting various audiences of Defi users. From the one side, it is a classic financial ETF product that can be used for investors and traders to seamlessly operate with a basket of assets. From the other side, it is a very solid solution for performing the mission of PowerPool - pool governance tokens and establish a meta-governance layer within web3.0. Other use cases include a market for exchanging governance tokens for one another with deep liquidity, yVault-style fund management strategies, and usage shares of pools (BPT tokens) as governance token-based collateral in various Defi products.
Power indices are ETF-like indices that use composite protocol assets to their advantage. Indices generate cash flows for index token holders by staking assets in native protocols and allow CVP holders to participate in polls in composite protocol governance systems through meta-governance system integration. The indices are completely community driven and generate cash flows for CVP holders through “community fees”.
PIPT (Power Index Pool Token) is issued by the smart contract when anyone provides liquidity to the Power Index. It is the contract (the pool), which stores 8 governance tokens and allows:
- to operate with a basket of 8 tokens using only one asset — PIPT. You can store this token and trade it;
- to swap these 8 governance tokens between each other;
- to use other functions (voting, etc).
Why do PIPT functions refer to as magic ones?
- You can hold the portfolio of assets in one token.
- Holding PIPT you own future cashflows.
- You can influence the markets of 8 governance tokens holding PIPT.
- You can participate in the governance of 8 protocols holding PIPT.
- You can short a portfolio of 8 tokens using derivatives based on PIPT.
ASSY and YLA are product of PowerIndex v2: Unlimited ETFs & Automated Portfolio Strategies. Existing ETF/public portfolio products have limited options for creating ETFs and derive profits from that. Moving from holding a static basket of tokens to any type of D(AMM) pool is shifting the paradigm of capital management from passive holding to an active trading strategy. PowerIndex v2 is Unlimited ETF — the product that allows users to create complex automatically-traded portfolios or ETFs. PowerIndex v2 Unlimited ETF is a financial lego that enables the creation of automatically traded portfolios and ETFs with an incredible level of flexibility:
- Automatic trading strategies and rebalancing based on a Dynamic AMM. PowerIndex holds gainers and does not buy back assets that are falling in price, showing decent results of the product.
- Generating APY from pooled assets.
- Meta-governance, if assets in the pool have governance functions.
- Integrations with smart routing systems such as 1inch and Balancer to attract more trading volumes and associated fees.
- Permissionless nature - anyone define the basket, trading strategy, launch a pool, and attract liquidity to it.
Powerpool is committed to servicing all segments of the defi market and becoming the go-to solution for retail investors interested in a passive investment strategy. To meet this the development strategy has been updated. Users join or exit indices with only USDC or ETH by leveraging ZAP contracts: supply and withdraw liquidity using a one click transaction; minimal gas costs: ERC20 transfer + cost of approval transaction. ZAP allows users to take advantage of complex strategies without the laborious process, or paying for them, by allowing users to deposit USDC in one click. ZAP allows users to pay only a tiny fraction of actual gas costs ~1.5% of gas or 68 times less!
YLA (The Yearn Lazy APE index) is composed of the Yearn Vaults’ LP tokens. Yearn vaults are investment products based on automated capital management strategies. Holding a portfolio of Yearn Vaults can be even more attractive since it allows to diversify income and risks across Yearn’s investment products. Advantages for Yearn ecosystem:
- Create a diversified dynamically-weighted portfolio of Yearn v1 vaults;
- Create a single entry/exit point into ecosystem of Yearn v1 vaults that can help onboard new users to Vaults;
- Solve the issue of poor secondary market liquidity for Yearn v1 vaults and offer an additional income opportunity to LPs based on swap fees.
Advantages for PowerPool:
- Increase brand awareness by launching a brand new product for Yearn v1 Vaults LP token holders;
- Attract TVL into PowerPool while creating additional cashflow streams to the community treasury based on protocol fees. Yearn v1 vaults’ $210m TVL offers an attractive opportunity to the Powerpool ecosystem.
“The essence of the indices ... is in the opportunity to invest in the industry. Believe in Defi - take PIPT. If you believe in Yearn - take YETI. No need to think, choose, take risks, just the average portfolio is collected when buying an index” Dmitry Getmegone for Incrypted
The index offers additional features such as meta-governance (using pooled tokens for votings) and swapping tokens, improving the efficiency of capital usage and attracting additional users and attention to the product. The underlying GTs of the index have a similar market behavior and a high level of price correlation, which results in a low level of Impermanent loss. The risk for liquidity providers in this case is lower than in the lending market. In the Power Index model, it is possible to create a kind of “liquidity loop”, where the positive experience of participants in the liquidity mining program will attract even more liquidity. The index is entirely community-curated: CVP holders can add, remove GTs, or change their shares in the index via governance proposals. It will help the community to keep Power Index up to date, keeping its composition relevant and adapting it to market changes. Adaptability and ability to change fast is the main feature of any Defi product that is aimed to have a long life on this market.
Future vision
Indexes are definitely the next big thing in Defi. People will use indexes not only for holding a token basket, but also for receiving cashflows via Vault strategies, voting in composite protocols, and swapping tokens. In the future indexes will be not a simple financial instrument but the whole ecosystem, including governance, trading, and re-balancing on the basis of community needs. We defined it as a “Smart Index approach”. PowerIndex is the first index on the market to completely utilize this novel “Smart Index” approach.
