Amendment to the original index proposal
Dated: February 19th 2021

Issue

The original index proposal included relatively large monthly rebalances which, in practice, would result in undesirably high slippage. Below, we've identified the core drivers behind the large rebalances in the initial index and also proposed a way to fix the issue.

Solution

We identified that the large rebalances were primarily driven by two factors: the original index included relatively few assets and, in some instances, allowed for the addition of new assets with a large (20%) weighting directly from the beginning.
To eliminate such large rebalances, we propose a rule where the portfolio weighting of an individual asset can only change a maximum of 5% during a rebalance or inclusion -- with the excess weighting being distributed to other assets pro-rata. We also propose to eliminate the 20% max. weighting per asset to reduce the number of constraints that affect rebalances.
While restricting, these proposed changes do not fundamentally change the nature or performance of the TTI, i.e. it still favors the most widely used and fairly valued assets.

Next steps

Should this amended proposal of the TTI pass the DG1, our team would be:
  • Open-sourcing the index. We would build an open API with an accompanying dashboard through which the members of the Coop would be able to inspect the index and all its component parts in real-time. We encourage Coop’s members to contribute by opening issues and merging pull requests.
  • Adding new assets to Token Terminal. By adding new assets to Token Terminal, we continue to expand the eligible asset universe of the index and thereby also decreasing its potential overlap with the Coop's other products, such as the DPI. Examples of assets that will become eligible for the TTI in the near future include 1inch, KeeperDAO, and Perpetual Protocol among others.
  • Preparing the product together with the Coop. This includes making the necessary adjustments that enable the on-chain implementation of the TTI.

Simulation of the amended TTI between Dec & Feb

Note: we've included Cream, DODO, and Rarible as new assets to this amended version of the TTI.
Portfolio weightings per asset between December and February 18th
Portfolio rebalances per asset between December and February 18th.
Portfolio allocations per asset between December and February 18th.

Examples of potential future assets for the TTI

1inch (1INCH)

  • Revenue type: trading fees
  • Latest daily volume on Uniswap: $7.4M
  • Price to sales ratio (P/S): stable
  • Latest circulating market cap: $486,788,028
https://terminal.tokenterminal.com/dashboard/1inch

KeeperDAO (ROOK)

  • Revenue type: arbitrage profits
  • Latest daily volume on Uniswap: $9.4M
  • Price to sales ratio (P/S): stable
  • Latest circulating market cap: $227,632,700
https://terminal.tokenterminal.com/dashboard/KeeperDAO

Perpetual Protocol (PERP)

  • Revenue type: trading fees
  • Latest daily volume on Uniswap: $2.3M
  • Price to sales ratio (P/S): stable
  • Latest circulating market cap: $142,571,923
https://terminal.tokenterminal.com/dashboard/PerpetualProtocol