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DeFi Is the Answer to the FTX Crisis | 11/23 Newsletter
DeFi Is the Answer to the FTX Crisis | 11/23 Newsletter
Inside this week's newsletter, the FTX meltdown is an opportunity to clarify what DeFi is, who we are, and what we stand for.
11/23/2022
Index Coop
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DeFi Is the Answer to the FTX Crisis
In the aftermath of the FTX meltdown, it's up to the people, projects, and protocols in DeFi to communicate better and make crypto more accessible and secure for everyone. As painful as this moment is for those who devote their time and effort to DeFi, it is also an opportunity to show who we are and what we stand for. It's up to us to ensure that DeFi is understood and evaluated based on its own merits. If we are indicted for the sins of centralized finance, then we have failed to differentiate our work and communicate its importance. The path to a better financial future hangs in the balance.
Inside this week's newsletter:
The FTX meltdown is an opportunity to clarify what DeFi is, who we are, and what we stand for.
Calculate your icETH yield and better understand how its been generating double-digit APYs
icETH's sustainable yield is making headlines
— The Index Coop team
DeFi Is the Answer to the FTX Crisis
For those of us building in decentralized finance (DeFi), the events of the last two weeks are singularly disheartening. Innocent users were harmed and, in some cases, lost their entire life savings. As the scope of fraud, negligence, and malfeasance at FTX is revealed in court filings and leaked documents, the crisis has already undermined the credibility of our entire ecosystem.
It is a bitterly ironic turn of events since the vision of DeFi is a financial system where what happened at FTX is not just improbable but impossible.
This loss of credibility is because the general public does not know that the misuse of user funds at FTX—where FTX apparently secretly transferred user funds to Alameda Research—would be impossible with a true on-chain decentralized protocol. Where FTX apparently concealed its insolvency with creative accounting, such opacity would be impossible on an open, immutable blockchain.
It would be impossible for a true permissionless DeFi protocol to selectively discriminate against users as FTX did when the exchange transacted with Bahamian residents last week as it was collapsing. And, perhaps most importantly, where FTX users face the possible total loss of funds, such a calamity would be impossible for users of a self-custodied DeFi protocol.
We must communicate the difference between DeFi and centralized finance. The DeFi community may know that FTX was not a DeFi project, but new users, mainstream media, regulators, and politicians, for the most part, fail to make a distinction.
Understanding Your icETH Yield
Our Interest Compounding ETH Index (icETH) token is one of our most popular products, recently boasting APYs in the 8.4% to 26.9% range. In this bear market, there has been increased interest in icETH because it is a simple way to access sustainable yield. However, under the hood, it's a fairly complex product.
Holders of icETH have asked some questions about the product recently. We want to answer all your questions about icETH and provide a helpful calculator to estimate your icETH yield.
In this Q&A, you'll get an in-depth understanding of the following:
Where icETH's yield comes from
How icETH works
How yield accrues to icETH
Why the price of icETH is sometimes less than ETH
A calculator to estimate your icETH yield
Security and risks associated with icETH
The best ways to buy icETH for trades of different sizes
icETH's Sustainable Yield Making Headlines
CoinDesk CoinDesk reported a recent change to Lido's liquid staking protocol that increased the rebasing oracle limits from 10% to 17.5%. As a result, increased rewards began to flow to icETH via its underlying token, stETH.
"These increased rewards have led to related borrowing strategies offering yields of as much as 25.5% on the Interest Compounding ether product (icETH) offered by Index Coop." - CoinDesk
DefiLlama Thanks to some work from our engineering team, icETH is now visible on the DeFi TVL and analytics website, DefiLlama. The current yield of icETH is available via a live feed. DefiLlama's data is fully open-source and maintained by a team of passionate individuals and contributors from hundreds of protocols. They track over 2069 DeFi protocols from over 155 different blockchains.
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FAQs
Index Coop yield tokens simplify earning yield in DeFi by automating complex strategies and diversifying across protocols. They are user-friendly and cost-efficient, appealing to both new and seasoned DeFi users.
Leverage tokens automate a leveraged position by utilizing onchain money markets like Aave or Morpho to borrow funds, amplifying a user's exposure to an asset without requiring manual management. The token's smart contracts autonomously handle the borrowing, lending, and rebalancing of assets, maintaining a consistent leverage ratio despite market fluctuations. This automation eliminates the complexities of collateral management and liquidation risks, while also charging low, transparent fees that avoid expensive funding rates often charged by perps.
Index Coop is a decentralized autonomous organization (DAO) that specializes in creating and maintaining onchain structured products. Index Coop aims to democratize access to the crypto market, empowering everyone to participate in the growing digital asset ecosystem with ease.
No, yield automatically compounds and accrues to the token price. The value of the tokens you hold in your wallet will simply go up over time without the need to claim or compound rewards.
Index Coop products protect you from liquidation with automated risk management that rebalances assets to maintain a target leverage ratio that avoids liquidation.
INDEX is the ERC-20 governance token on Ethereum for Index Coop. INDEX empowers its holders to participate in decision-making processes that shape the future of Index Coop.
Yes, all Index Coop products are instantly redeemable for their underlying value at all times.
Yes, all Index Coop smart contracts have been audited by leading independent security firms such as OpenZeppelin, ABDK, Isosiro, & more. There is also an active bug bounty program through ImmuneFi. Audit information is published in the docs here.
Streaming fees (an annual fee paid continuously block-by-block), mint and redeem fees (only on leverage tokens), and borrow costs (interest paid to borrow funds from onchain markets when using leverage).