FLI, Pronounced “Fly”

Flexible Leverage Index (FLI) are structured ERC-20 products that enable traders to automate a target leveraged exposure in a decentralized manner.

The FLI series is the second collaboration with the team at DeFi Pulse (Pulse, Inc.)—designed to minimize the risks and costs typically associated with maintaining collateralized debt. Today, a flagship ETH2x version is available on TokenSets (for non-U.S. users) with an initial supply cap of 50,000 units.

Leverage is one of DeFi’s killer use-cases. However, traditional DeFi leverage workflows are not for the faint of heart—users must monitor health ratios, manage liquidation risk, and avoid penalties. FLI was created to make leverage safer and simpler to maintain.

Four Major Benefits of FLI Products

The Flexible Leverage Index uses a novel strategy built on Set Protocol and Compound, abstracting collateralized debt management into a simple ERC-20 index token. While initially launched for ETH, FLI can be adapted for other assets on lending protocols, such as wBTC, YFI, and LINK.

Benefits include:

• Decreased (but not eliminated) risk

• Lower gas and fee burden

• Ease of use

• Composability with other DeFi protocols

1. Decreased Risk

Leverage is inherently risky. FLI mitigates some of that risk by automatically maintaining target ratios and flexibly rebalancing over time. This helps ensure collateral levels stay above liquidation thresholds—even during major volatility spikes. FLI also includes an emergency deleveraging mechanism for black swan events.

Additionally, FLI is the first fully collateralized leverage token that is redeemable into its components (e.g., ETH, USDC), offering a stronger risk profile than synthetic leverage products.

2. Lower Fee Burden

FLI reduces your fee burden through a unique rebalancing algorithm that improves efficiency significantly. The token carries a 1.95% annualized streaming fee—much lower than comparable centralized exchange products—and has no slippage due to its composable nature.

3. Ease of Use

The Flexible Leverage Index is extremely easy to use: simply buy and sell it on TokenSets or Uniswap. Rebalancing happens automatically, eliminating the need to constantly monitor your position for liquidation risk.

4. Composability

Because FLI is a fully collateralized ERC-20 Set token, it can be integrated into a wide variety of DeFi services. This composability opens the door to broader use cases and more flexible strategies.

FLI Methodology 101: What’s Under the Hood?

Index Coop products follow strict methodologies. You can dive deeper via DeFi Pulse’s introduction to FLI and TokenSets’ technical documentation.

Initial parameters for ETH2x FLI:

• Underlying Asset: ETH

• Target Leverage Ratio: 2x

• DeFi Lending Protocol: Compound

• Max Leverage Ratio: 2.3x

• Min Leverage Ratio: 1.7x

• Recentering Speed: 5%

Fees

• Streaming fee: 1.95% annualized

• Mint/Redeem fee: 0.1%

• Revenue split: 60% Index Coop / 40% DeFi Pulse

Glossary

• Borrow Rate: Cost to borrow from the lending protocol over the last epoch

• Epoch Length: Time between rebalances

• TLR (Target Leverage Ratio): Long-term leverage target (assets / debt)

• CLR (Current Leverage Ratio): Actual current leverage ratio

• MAXLR: Max allowed leverage ratio after rebalance

• MINLR: Min allowed leverage ratio after rebalance

• RS (Recentering Speed): Rate at which CLR moves back to TLR over time