On-chain Structured DeFi Products are baskets of digital assets that trade on an exchange. On-chain structured DeFi products, like Index Coop’s DeFi Pulse Index, which tracks the performance of decentralized financial assets across the market, are built on the blockchain. Off-chain products, like the Bitwise 10 (BITW) which tracks an Index comprised of the 10 most highly valued cryptocurrencies, are not settled on the blockchain.
On-chain structured DeFi products use the blockchain they’re built on to leverage several features that make them transformational:
You can buy, sell, and trade your on-chain assets anytime because DeFi removes the middleman between you and the assets you own (including their underlying tokens). Because you are the custodian of structured products and their underlying components, not the bank, you enjoy 24/7 access to do what you want with your assets. Markets are open 24/7. DeFi is always on. What does this mean? You can buy or sell your tokens on the weekend!
Additionally, on-chain indices are fully collateralized and redeemable at any time for the underlying assets. For example, if you hold $BED, at any time you can redeem BED tokens in return for their allocation of the underlying collateral (33.3% BTC, 33.3% ETH, and 33% DPI). Learn more here.
On-chain products are verifiably liquid. Because of the mechanics of automated market makers like Uniswap, you can always be assured that you can offload your tokens into sufficient liquidity. Furthermore, you can estimate trade impact based on the amount in the pool. Index Coop takes this even further by using flash minting. Minting is done automatically via a smart contract. At any time, an individual can mint new units of an index like $DPI getting the deepest liquidity of each specific token within the index. Our website will automatically route your trade for the most optimized outcome ensuring minimal price impact.
DeFi applications can be stacked together like money legos to facilitate new primitives that can execute more complex transactions, leading to much faster innovation cycles and new financial creativity.
DeFi takes passive products a step further, allowing individuals to use tokens as collateral on money markets. Take DPI as an example. You can earn an extra yield on DPI through protocols like Aave or Beta Finance. This makes your index products passive while also adding sustainable yield on top.
Another composable DeFi primitive is the ability to add liquidity to any asset pair. Providing liquidity to facilitate trades, a transaction usually limited to a small group of the most capitalized institutions is open to everyone. For example, providing liquidity to a DPI/ETH pair allows you to earn extra yield from trading fees while still maintaining exposure to your desired assets. There are inherent risks associated with strategy, but LPing has quickly become a superpower for DeFi users looking to earn an extra return on their coins.
DeFi protocols make important decisions through governance. From simple decisions like parameter changes or impactful votes like rate modifications, governance votes are the bedrock of innovations in DeFi. One of the most important governance votes is the addition of new assets as collateral on money markets. Finally, with the emergence of vote locking mechanics like Curve, liquidity incentives are even based on governance voting. On-chain indices provide holders with voting power in the protocols of underlying tokens. For example, DPI holds large blocks of voting power in the biggest protocols. This voting power is represented by the INDEX token, allowing INDEX voters to propose changes and actively build up the ecosystem.
On-chain DeFi structured products have a variety of cost-related advantages.
Index Coop specializes in on-chain structured DeFi products with the goal of making crypto index products simple and accessible to everyone. If you’re looking to hold on-chain digital assets, consider these index tokens:
Index Coop is a decentralized autonomous organization (DAO) that powers structured decentralized finance (DeFi) products and strategy tokens using smart contracts on the blockchain. We offer a suite of sector structured products, leverage and inverse products, and yield-generating products. We aim to create products that are simple to use, accessible to everyone and secure. Our products are built on Set Protocol, a twice-audited, self-custodial DeFi tool that allows for the creation and management of Ethereum-based (or ERC-20) tokens. Among users, partner protocols, and our composable products, Index Coop maintains one of the largest partnership networks in the DeFi ecosystem.
You can also earn or buy Index Coop products directly via your favorite decentralized exchange.
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.
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