Jul 30 | 4 min read
The Defi Pulse Index (DPI) is a structured product for the emerging DeFi sub-asset class on the Ethereum blockchain. Because it is a bundled crypto-asset, you effectively own all of the underlying tokens. This means you can redeem your units of $DPI for the underlying tokens at any time on the TokenSets site. This is a feature of traditional ETFs that is typically reserved only for large, institutional investors.
You can easily trade fiat currency for an Index Coop product directly from your web3 wallet. Popular wallet choices for purchasing DPI include Argent, Dharma, Metamask, or Rainbow. With each of these wallets, you can connect to your bank account or debit card, which allows you to exchange fiat currencies directly for Index Coop products. Alternatively, you can buy $DPI from a DEX like Uniswap or Sushiswap. Liquidity for $DPI on layer 2 will be added shortly, at which point transactions will require less gas. Finally, it is possible to buy $DPI directly from the Index Coop or TokenSets websites. More info below...
As an Ethereum-based crypto-asset, $DPI is permissionless and decentralized. This means anyone in the world with an Internet connection can purchase and hold it. This makes $DPI more accessible than traditional finance ETFs while maintaining and improving upon some of the ETFs’ core features. You can read more about the benefits of $DPI versus traditional finance equivalents here.
Even though the exact methodology of $DPI is managed by DeFi Pulse, the Index Coop community is in charge of the various management decisions around the product. Anyone can participate in these decisions by being an active member of the Index Coop community. If you are interested in participating, join our Discord.
$DPI is a structured product, but it can also be used productively throughout DeFi since it is a crypto-asset. Here are a few of the productive opportunities in DeFi available to holders of $DPI:
Liquidity provision (LP): Becoming a market maker by providing $DPI and $ETH liquidity for trading activity on a DEX like Uniswap or Sushiswap in exchange for a portion of the trading fees.
Yield farming: Staking your LP position in a platform to earn an additional yield. For example, you can stake your $DPI/$ETH LP tokens on for ~10% yield.
Borrowing and Lending: Providing lending collateral for borrowing demand on platforms like and. This provides you with a stream of interest from borrowers.
Collateral Debt Position (CDP): Taking a loan against $DPI in stablecoins and using the stablecoins to farm yields.
The DeFi Pulse Index has a collection of inclusion criteria composed of four dimensions. Two dimensions are used to evaluate the token’s characteristics, one dimension is used to assess the project’s characteristics, and one is used to evaluate the protocol’s characteristics. The inclusion criteria are the basis for selecting which tokens will be included in the index.
To be included, tokens must be available on Ethereum and associated with a DeFi dapp. There are additional inclusion criteria that factor in supply/issuance, user safety characteristics, and protocol traction to ensure that only the highest-quality tokens are included.
Rebalancing is performed during the third week of each month. At that time, any tokens that meet the criteria are added, and any that fail to meet the criteria are dropped from the index. All tokens are capped at 25% of the total allocation to ensure diversification across a range of assets.
As with all investments, $DPI is subject to market risk. $DPI will fluctuate in price as the underlying tokens are bought and sold. This means it is possible to lose your initial investment.
In addition to market risk, $DPI has smart contract risk. This is common for all tokens built on the Ethereum network. Smart contract risk stems from the potential for exploits or bugs in the code. However, Set Protocol has been audited by OpenZeppelin and ABDK consulting, and every line of smart contract code is open source.
While this doesn’t eliminate the potential of a hack, it does mean many people from external auditing firms and technical members of the community have reviewed the code, mitigating some of the risk.
As with any Ethereum project, there are infrastructural risks that may result in illiquidity. When the Ethereum network is clogged during periods of intense volatility, an asset may lose its liquidity since transactions cannot be processed, and the cost of processing may be prohibitive.
Finally, since crypto is so new and there isn’t currently much government oversight, there is a regulatory oversight risk. For example, a regulation deeming $DPI a security in a country like the United States could result in potential price and/or liquidity impacts.
There are three main ways to buy $DPI:
You can exchange fiat currencies directly for Index Coop product via an Ethereum wallet
Use a decentralized exchange to trade another cryptocurrency for Index Coop products
Or, buy it on a centralized exchange
To buy Index Coop products with fiat currencies:
First, you’ll need to download one of the above apps. (Metamask also has a browser extension if you prefer not to use your mobile phone.)
Next, you’ll set up your new wallet and connect your bank account
Once you’ve deposited fiat currency in your wallet you can exchange it for Index Coop products like DPI
Disclaimer: This content is for informational purposes only and should not be construed as legal, tax, investment, financial, or other advice.
Disclaimer: This content is for informational purposes only and is not legal, tax, investment, financial, or other advice. You should not take, or refrain from taking, any action based on any information contained herein, or any other information that we make available at any time, including blog posts, data, articles, links to third-party content, discord content, news feeds, tutorials, tweets, and videos. Before you make any financial, legal, technical, or other decisions, you should seek independent professional advice from a licensed and qualified individual in the area for which such advice would be appropriate. This information is not intended to be comprehensive or address all aspects of Index or its products. There is additional documentation on Index’s website about the functioning of Index Coop, and its ecosystem and community.
You shall not purchase or otherwise acquire any of our token products if you are: a citizen, resident (tax or otherwise), green card holder, incorporated in, owned or controlled by a person or entity in, located in, or have a registered office or principal place of business in the U.S. (a “U.S. Person”), or if you are a person in any jurisdiction in which such offer, sale, and/or purchase of any of our token products is unlawful, prohibited, or unauthorized (together with U.S. Person, a “Restricted Person”). The term “Restricted Person” includes, but is not limited to, any natural person residing in, or any firm, company, partnership, trust, corporation, entity, government, state or agency of a state, or any other incorporated or unincorporated body or association, association or partnership (whether or not having separate legal personality) that is established and/or lawfully existing under the laws of, a jurisdiction in which such offer, sale, and/or purchase of any of our token products is unlawful, prohibited, or unauthorized). You shall not resell or otherwise transfer any of our token products to any Restricted Person. The transfer or resale of any of our token products to any Restricted Person is not permitted. Click here to view the list of Tokens Restricted for Restricted Persons. You shall read the Terms of Service and use our Website in compliance with the Terms of Service.
Information is for educational and illustrative purposes only. The Index Cooperative is not engaged in the business of the offer, sale or trading of securities and does not provide legal, tax, or investment advice. Cryptocurrencies and other digital assets are speculative and involve a substantial degree of risk, including the risk of complete loss. There can be no assurance that any cryptocurrency, token, coin, or other crypto asset will be viable, liquid, or solvent.No Index Cooperative communication is intended to imply that any digital assets are low-risk or risk-free. The Index Cooperative works hard to provide accurate information on this website, but cannot guarantee all content is correct, complete, or updated.