What is INDEX Token Metagovernance?

Index Cooperative Governance Lead, mel.eth, explains one of the most unique and misunderstood qualities of the $INDEX token: Metagovernance.

What is Metagovernance? Video Transcript

Chavis: Metagovernance is, without a doubt, one of the most unique and least understood things about the Index Coop. In today's video, our governance lead, mel.eth, explains more about what it is, how it works, and why you should care about it. But let's dive in. Maybe start at the beginning. What is metagovernance?

[00:00:30] mel.eth: Metagovernance, drawing from an existing parallel of say maybe BlackRock or Vanguard and stocks, is voting in another DAOs initiatives, using the governance power we have in our products through the aggregation of those tokens in our vaults. What we do is we essentially port that governance power to index token holders so that our community can go and enact, at least in our view, some of the objectives of our community more broadly in the ecosystem.

[00:01:00] Chavis: Do you know how we actually access the meta governance? Do each of these protocols specifically grant us the right to do it? Or is this something that's done permissionlessly?

[00:01:30] mel.eth: This is something that's largely permissionless. Effectively, governance rights are conferred with the physical tokens. Where those tokens sit, are where the governance rights naturally accrue. Our vault, where most of those tokens sit, we take that governance power and forward it, this is for safety reasons so that we're not actually pushing ledger buttons within our vaults.

We forward that to another address, which we can do using some of the, well, it's a little bit of governance on-chain voodoo, but mostly through snapshot. And some of the more on-chain protocols. We forward that out. And then, a committee of, it's effectively a multisig, that executes these votes in the participant protocols. We, the index holders, vote. That vote then is executed by a committee in the participant protocol.

[00:02:00] Now, different protocols have different implementations. We use snapshot, some are on-chain. And in that way, we need to have some flexibility around how we execute in those participant protocols. Not entirely permissionless, not entirely automated. However, we do execute the will of the index token holders.

Chavis: Why should someone care about this? Because that's the fundamental it is this, but what is that, if you apply a little bit of imagination, mean?

[00:02:30] mel.eth: I think it's a spectrum. I think on that spectrum safety would be the one end. How do we protect and sustain this thing that we're building? And then at the other end, like you said, we can really get creative with this stuff. We can maybe go beyond just voicing an opinion in another protocol's initiatives.

[00:03:00] We might be able to put some forth our ourselves. With our view of the ecosystem, we might be able to initiate say big, broad cross-functional endeavors that would have positive sum impacts for multiple protocols. And in that way, we all grow together. That's largely where I see it going.

Chavis: And we've actually done that with, I read recently a really cool debrief on the use of metagovernance with the Aave protocol involving FEI I'm pretty sure.

[00:03:30] mel.eth Correct. Yeah. What we did there, we helped FEI effectively get FEI listed on Aave. And I think that was very positive sum for both protocols. Aave having robust assets listed on their protocol is good. And FEI being a stablecoin, that's been very well received by the ecosystem. Being listed on Aave is good for FEI. This visibility is good for us. I think these are exactly the types of positive sum initiatives.

[00:04:00] We did do this for ourselves as well with DPI getting DPI listed on Aave. And then we took that a couple steps further with getting DPI listed on the Polygon market and then again on the Aave Arc market as well. Yeah, all of these things are viewed as positive sum and they're initiatives that basically spraying up within the Index Coop forums. And we're driven to execution and largely, success.

[00:04:30] Chavis: to break that down a bit more of what actually happened when FEI used the metagovernance to list their token. Aave requires proposals for any changes like that, the person or entity proposing needs to hold a certain amount of Aave in their wallet. And this is a gating system to make sure that the people putting forward proposals have some amount of stake in the Aave community already.

[00:05:00] mel.eth: Correct. Aave proposals are gated via an amount of on-chain token to go ahead and propose. We have enough within DPI alone to propose. And so, yes, we can start that process effectively of that listing. In the way that we did it, constructed it, we baked in sort of the proposal and then the voting in that way, rated onset within the process. Rather than starting the process and then leaving the vote itself up to Index community token holders, just to have an end-to-end process that made sense. And we voted on that holistically and then executed.

[00:05:30] But yes, the physical or the operational consideration is we propose something on our forum as an initiative. Then we go over and do that thing once it's approved by our community, in the proposal sense. The metagovernance votes that come up ad hoc, just whatever other DAOs consider to be useful, we go and express an opinion.

[00:06:00]But the genesis of those ideas is within those community forums. And then we just basically agree or not. And we try and communicate with those DAOs to the extent possible to understand what they would like to happen. And really, we see our operational assistance in this regard as just largely being good ecosystem partners. Chavis:Is Aave the only protocol that we hold enough to make proposals on? mel.eth: We also have Balancer, Yearn, Compound, [crosstalk 00:06:23]. Chavis:That's a pretty hefty amount of big hitters in the DeFi ecosystem. [00:06:30] mel.eth:Yeah. Yeah. We have a very large amount of voting power accumulated through our indexing products. Yeah. Uniswap would be the other one. And it's strange that I missed that one because that one has been very top of mind lately. We are very close. I would say we're 80% of the way there I believe in being able to propose on Uniswap. [00:07:00]I think this is going to unlock, what I will call it a good amount of value, but it's also really going to spark the conversation on what's the appropriate way to use this power, because it is a great amount of power within the ecosystem concentrated within the Index Cooperative community. Chavis:I actually don't know the answer to this. Do any of the other products partake in metagovernance? Do we collect voting rights from say data or from MVI or products out into the future? [00:07:30] mel.eth:It's a good question. Currently, metagovernance is only enabled for a portion of the products within DPI. We do have the ability to unlock metagovernance for other tokens within other products. I would say that's less available in data. However, one that's very visible and well known at this point is ENS. There is interest in unlocking metagovernance for the ENS token within data.

[00:08:00]Now, GMI, which is DeFi innovation, those actually do get quite interesting. Some of those DeFi 2.0 protocols in GMI could be leveraged say once GMI AUM hits some points that again, those hurdle rates start to make some sense and really exercising that power will come into play. I do think that at a certain point, through GMI, we will be shaping what some of those other DeFi 2.0 protocols are doing. Maybe in terms of where they're pointing their liquidity or incentives to incentivize that liquidity. Chavis: I find it a bit curious that with all the Curve, Convex talk the last few months, that metagovernance has been a relatively quiet narrative. Do you have any thoughts on that? [00:08:30]mel.eth:I think there's a lot to be said yet on metagovernance as a conversation. I think that when it comes to, if you compare value and maybe strategy, or voting, or decisions. The value conversation is one that happens daily and it's really the conversation within the DeFi ecosystem.

[00:09:00] Governance, the decisions that get made that conversation is ongoing, but largely, within DAOs, I think it's largely viewed as some of these things need to happen in secret to be strategically useful. But I would say working up the taxonomy of understanding hasn't quite happened in the same way that value has. Because I think it's a call and response process in a way. In that gaining awareness and then that understanding, being able to speak to these things in terms of what can be done, and some of the more technical aspects of how to make those connections I would say we have a handful of people that truly understand the development side of say snapshot. Say, unique voting strategies, things like that.

[00:10:00] Whereas there are probably thousands of people that are capable of going in and hacking a smart contract in what a largely conflatable way. And so I think that this, the conversation does need to happen and it's starting. We're seeing more functional experts emerge. We're seeing more people interested in these things. We're seeing a lot of negative governance impacts floating up to the top. We've seen some visible governance hack in the recent months. And so, I think that as these things increase from a value perspective, I think we're going to see this strategy and voting perspective really come into play. Chavis:How do you see metagovernance shaping up over the next whatever timeline, one year, two years, five years into the future? [00:10:30] mel.eth:I think that in terms of looking forward, I think that we're going to see some alliances form over the next year, maybe two. I think that we're going to see DAOs effectively becoming more political in their stances towards automation, towards decentralization. But also perhaps other things, like ESG initiatives. [00:11:00] I think we're going to see more governance hacks. I think we're going to see this conversation develop on both sides. I think that we're going to see some DAOs get captured. I think we're going to find out maybe the limits of what governance can and can't do in relation to what people are willing or unwilling to do for a DAO. And I think those conversations are going to be incredibly interesting.

[00:11:30] But ultimately, I do think that we're going to see this consistent push in two directions. And the conversation will become, is it necessary to centralize to make good decisions? Or can we, in a distributed fashion, craft these decentralized organizations in such a way that these decisions can get made at the node level and still push us forward effectively and strategically through an entire ecosystem? [00:12:00]And I think that that conversation developing is truly one of the more remarkably interesting things about this space. It's incredibly nascent and it's why I'm here for that conversation, because I think that is going to truly be where the big brains are. And not that I think I'm one, but I want to be with the big brains. Chavis:Well, mel, is there anything else in that you'd like to talk about or explore that we didn't already?

[00:12:30]mel.eth: I think we did a pretty good job of covering it. I would say the way I'm thinking about these things currently is that governance is a conversation. It's a conversation that doesn't begin in the forum typically. And it's a conversation that doesn't end at the end of the vote. Largely these things need to go out, get executed, there's knock on effects. And we learn a lot with every subsequent vote. It's how to keep that conversation going in a positive way, because really at the end of the day, strategy at a DAO is distributed. Anyone can come with an idea. Anyone can post that idea, get some traction or not. And then we, as an organization can move just as a human body would move when the brain gives a set of instructions. [00:13:00]And so, the way I think about it is brain cells, nodes. At the end of the day, we all need to move in the same direction in a coordinated way, sometimes at speed. And sometimes we need to do it with style, but really, governance is how we do it. And in a distributed organization, this is what we have, and these are the challenges we're working through. And we're going to keep doing it. [00:13:30] Chavis: today's video. If you like the content, we release videos every Tuesday, so like and subscribe to not miss a beat. None of this was financial advice. See you next time.

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