Introducing the Inverse ETH Flexible Leverage Index

Allan Gulley

Feb 11 | 4 min read

Introducing the Inverse ETH Flexible Leverage Index

Index Coop launches second Inverse Flexible Leverage Index (FLI) on Polygon iETH-FLI-P

Just like other FLI tokens, iETH-FLI-P is a structured ERC-20 product that enables traders to automate leveraged exposure in a completely decentralized manner. However, inverse FLI tokens target a short -1x exposure to the underlying asset, with a flexible leverage ratio for optimal rebalancing outcomes.

Paired with the ETH2x-FLI-P token, active traders can now master the ETH market on Polygon! The FLI suite is built in collaboration with Scalara (formerly Pulse, Inc.) to minimize the risks and costs associated with maintaining collateralized debt positions. iETH-FLI-P is now available to be minted on TokenSets Polygon with an initial supply cap of 250k tokens. In this post, we share information on the four benefits of iETH-FLI-P, the methodology and fees, liquidity, how to buy and frequently asked questions.

4 Benefits of iETH-FLI-P

Leverage is one of the most popular use-cases for DeFi. However, legacy processes for creating leverage positions in DeFi are not for the faint of heart. Users must monitor health ratios, manage collateral and debt positions, and risk liquidation during downturns. For example, volatile Bitcoin price action caused $10b worth of liquidations earlier this year. Using FLI tokens is a simpler and safer alternative to manual leverage methods. There are 4 major benefits to using iETH-FLI-P:

Decreased (though not eliminated) risk

Lower fees

Ease of use

Composability with DeFi protocols

1. Decreased Risk

Leveraged products are inherently risky. iETH-FLI-P decreases that risk for you by programming the leverage ratio to recenter automatically at predefined intervals. This allows the product to absorb major volatility spikes, and rebalance in a flexible manner to ensure collateral levels stay above liquidation thresholds. FLI tokens also utilize an emergency de-levering mechanism — referred to as ‘ripcord’ — as another safety layer in case of black swan events. Additionally, because FLI products are over-collateralized, there is a better risk profile compared to products that use synthetic leverage.Another benefit of FLI tokens is their redeemability. They are the first fully-collateralized leverage tokens that can be minted or redeemed for the underlying components, which in this case are USDC and borrowed WETH. This allows token holders to handle the underlying asset and debt position however they would like, rather than simply exchanging the token for a separate, singular asset.

2. Lower Fee Burden

FLIs also minimize gas costs associated with rebalancing by utilizing a unique algorithm that increases rebalancing efficiency by an order of magnitude. Additionally, the token’s 1.95% (annualized) streaming fee is considerably less expensive than alternatives on centralized exchanges that can charge upwards of 10% annually, and there is also no slippage due to composable entry and exit. Also, because iETH-FLI-P is a Polygon-native token, it can be easily minted with negligible fees through the TokenSets website.

3. Ease of Use

Best of all, the Flexible Leverage tokens are exceedingly easy to use. Simply buy and sell like you would any other token thru the Index Coop app or Slingshot for collateralized debt management abstracted into a single token! iETH-FLI-P rebalances your leverage position for you, so liquidation risk is lower and constant monitoring is not required.

4. Composability

Because iETH-FLI-P is a fully collateralized ERC-20 Set token, it can be integrated into a number of different DeFi protocols and platforms to expand its utility and use cases.Under the hood, iETH-FLI-P is also built on Aave Polygon, the borrowing/lending protocol that enables the creation of over-collateralized debt positions.

iETH-FLI-P Methodology

Like all Index Coop products, iETH-FLI-P follows a strict methodology. Pulse, Inc. has published a detailed breakdown for FLI — Introducing the Flexible Leverage Index — and TokenSets has also shared technical details.

Initial parameters for iETH-FLI-P:

Underlying Asset: USDC

Borrow Asset: WETH

Target Leverage Ratio: 2.0 (-1.0 short)

DeFi Lending Protocol: Aave Polygon

Maximum Leverage Ratio: 2.2 (-1.2 short)

Minimum Leverage Ratio: 1.8 (-0.8 short)

Rebalance Interval: every 4 hours

Recentering Speed: 2.5%

Fees

iETH-FLI-P will have a streaming fee of 1.95% (195 basis points) and a 0.1% mint /redeem fee.

How to Buy

iETH-FLI-P: Slingshot (DEX Ag) | Index Coop | TokenSets

Liquidity

The Index Coop has seeded the following pools on Uniswap v3 Polygon:

iETH-FLI-P / WETH

iETH-FLI-P / USDC

Frequently Asked Questions

How do you Issue or Redeem a Leveraged Set?

How do Leverage Tokens Work?

More Resources

Flexible Leverage Index — Pulse, Inc

Understanding the Risks of Owning FLI Tokens

Disclaimer: This content is for informational purposes only and should not be construed as legal, tax, investment, financial, or other advice.

Sign up for our newsletter

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.

Introducing the Inverse ETH Flexible Leverage Index

Allan Gulley

Index Coop launches second Inverse Flexible Leverage Index (FLI) on Polygon iETH-FLI-P

4 Benefits of iETH-FLI-P

1. Decreased Risk

2. Lower Fee Burden

3. Ease of Use

4. Composability

iETH-FLI-P Methodology

Fees

How to Buy

Liquidity

Frequently Asked Questions

More Resources

Sign up for our newsletter

Product

Resources

Connect with us

Introducing the Inverse ETH Flexible Leverage Index

Allan Gulley

Index Coop launches second .css-722v25{font-weight:var(--chakra-fontWeights-bold);}Inverse Flexible Leverage Index (FLI) on Polygon iETH-FLI-P

4 Benefits of iETH-FLI-P

1. Decreased Risk

2. Lower Fee Burden

3. Ease of Use

4. Composability

iETH-FLI-P Methodology

Fees

How to Buy

Liquidity

Frequently Asked Questions

More Resources

Sign up for our newsletter

Product

Resources

Connect with us

Index Coop launches second Inverse Flexible Leverage Index (FLI) on Polygon iETH-FLI-P