Macauley Peterson

The term &#8220;RWA&#8221; — for Real-World Assets — in the DeFi context is sometimes considered confusing and controversial.



For one, in finance and banking, &#8220;RWA&#8221; typically refers to &#8220;Risk-Weighted Assets,&#8221; which are used to determine capital requirements under regulatory frameworks.



Even within DeFi, the concept can encompass a wide variety of asset types, including real estate, commodities, and bonds.



Nevertheless, it’s a part of the current crypto cycle narrative that is here to stay.&nbsp;



Read more: <a href="https://blockworks.co/news/empire-newsletter-crypto-natives-real-world-assets">Empire Newsletter: Crypto natives dig themselves in to the RWA space</a>



To provide a simple way to access the category, Index Coop has added a Real World Asset Index Token to its growing suite of DeFi-native products.



The product is developed in partnership with Fortunafi, a leading methodologist in the DeFi space.&nbsp;



Initial components of the index are slated to be Maker (MKR), Ondo Finance (ONDO), Ethena (ENA), Centrifuge (CFG), Canto (CANTO), and Maple Finance (MPL), projects which provide a cross-section of RWA-linked investments, from real estate tokenization to US Treasurys to the tokenized futures basis trade.



Like the High-Yied ETH index before it, Index Coop is employing Product Revenue Tokens (PRTs) to attract early investors. PRTs entitle holders to a share of the revenue generated by the RWA Index and are distributed through a presale over the next 30 days.​



Read more: <a href="https://blockworks.co/news/index-tokens-for-diversified-eth-yields">Index tokens offer new path to diversified ETH yields</a>



The presale serves as “a demand signal” and the RWA index will only launch if the presale is successful​​. That worked well for Index Coop’s prior experiment using PRTs — hyETH launched last week and <a href="https://dune.com/index_coop/hyeth">currently</a> has about $5 million in TVL and is yielding about hyETH is yielding around 9% APY, lower than initially forecast as demand for leverage has subsided in recent weeks.



PRTs are designed to align incentives by rewarding early depositors more generously, but one of the lessons learned from hyETH is that Index Coop should focus on more than just TVL, Crews Enochs, ecosystem growth lead, told Blockworks.



With the new iteration, Index Coop is “trying to incentivize other behaviors which add further value to the product,” such as market liquidity, securing oracle services and integrations with other DeFi dapps such as borrowing and lending markets, Enochs said.



Initially both RWA and hyETH are on Ethereum mainnet only, but they are eventually expected to branch out to layer-2s, with hyETH access to be provided by <a href="https://blockworks.co/newsletter/research/issue/post_4fdc7a9f-1231-4ca2-9cb0-bbdec8175ae9">Chainlink’s CCIP-based Transporter</a> bridge.



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Index Coop RWA basket builds on hyETH experiment

Bessie Liu

Index Cooperative, a DAO focused on designing simplified tokens to help buyers create their own crypto portfolio, has recently launched a money market index, icSMMT, to diversify its users&#8217; stablecoin holdings.



The Money Market Index token (icSMMT) is built on Index Protocol, a fork of Set Protocol v2, an Ethereum virtual machine protocol designed to translate asset management strategies into ERC-20 tokens. Its purpose is to help users with large stablecoin holders to diversify their assets, the pseudonymous kindeagle, a product marketing manager at Index Coop, told Blockworks.



“As we saw with the USDC depeg, there is inherent risk in DAO[s], protocols and those in crypto holding a single stablecoin asset,” <a href="https://twitter.com/thekindeagle">kindeagle</a> said.



The Money Market Index is an ERC-20 token incorporating six different yield strategies from protocols Notional, Aave, Morpho and Compound for the three most popular stablecoins: USDC, USDT and DAI.



Each position will be representative of specific lending markets through <a href="https://blockworks.co/news/tokenized-vault-standard-ethereum">ERC-4646 vaults</a> — a tokenized vault standard that leverages protocol composability instead of secondary market liquidity.&nbsp;



“Along with diversification, we&#8217;re seeking to include stablecoin yield strategies in the Money Market Index that are decentralized, transparent and long-term sustainable,” kindeagle said.



icSMMT is designed so that each stablecoin will be distributed across two protocols with the highest historical lending rates. They note that token holders are expected to earn an annual percentage rate (APR) of 2%-4% in real yield.&nbsp;



Although there is no set purchase amount for icSMMT, the recommended minimum is around $500,000 due to the high gas prices associated with minting the token.&nbsp;



<h2 class="wp-block-heading">Diversification of DeFi strategies&nbsp;</h2>



Index Coop is not the only team that has been looking at ways to diversify DeFi yields.&nbsp;



Origin Protocol has recently revealed OETH, an ERC-20 token that can help its holders earn rewards almost immediately through its positive rebasing mechanism.



OETH is designed in a way so that staked ether can be spread across various strategies, operators and jurisdictions, similar to icSMMT.&nbsp;&nbsp;



Underlying collateral used to mint OETH will be paired with ETH and used as liquidity for multiple Curve pools, the company said.&nbsp;



“With OETH, you can earn additional yield on top of the native staking yield that is available from trusted liquid staking derivatives without wasting hundreds of dollars maintaining your position,” Josh Fraser, co-founder of Origin Protocol, noted in a press release reviewed by Blockworks.



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Index Coop’s Money Market Index Wants to Diversify Your Stablecoin Holdings

Casey Wagner

<div id="highlights-block_61b0ba054b422" class="highlights">
 <ul>
 <li>Index Coop sets its sights on becoming a premier asset management platform</li>
 <li>A new strategic funding round will help the DAO to expand product and its team </li>
 </ul>
 
</div>



The Index Cooperative, the decentralized autonomous organization (DAO) with more than $400 million in assets under management, is not run like a typical asset management platform, but its leaders are confident it can rival the big names. 



“Index Coop is laser-focused on becoming one of the largest asset management platforms in the world within the next five years,” Simon Judd, head of business development for Index Cooperative, known as Index Coop. 



In the crypto space, DAOs are member-owned communities that lack a centralized leader. The structure is known for its collaborative nature but is not usually seen in an asset management setting.&nbsp;



For Index Coop, there are seven elected community members who are responsible for setting long-term strategy for the fund, Judd said. There are also a variety of different working groups that handle operations, including governance, marketing and engineering.&nbsp;



“The DAO structure provides tremendous flexibility and allows us to scale quickly,” Judd said. “Because the DAO is both the designer and the user of the products we are able to ensure that we are launching products with a compelling product-market fit.”



Index Coop has raised a strategic funding round led by Sequoia Capital India, Blockchain.com Ventures and White Star Capital, bringing its total funding to $10 million, the DAO announced Wednesday. Galaxy Digital co-led an earlier funding round of $7.55 million with 1kx.



The new round of funding will go toward expanding its offerings in portfolio products to other Ethereum virtual machine-compatible networks, such as Polygon, the DAO said. The raise will also help Index Coop to hire more specialized, full-time contributors and integrate Index products with layer-2 blockchains, Judd said.&nbsp;



“Investor interest in the past few months has seen a massive increase — climbing from just under 5,000 total index holders at the start of the year to over 30,000,” Judd said. “We have also seen a massive increase in our TVL — with a high of $500 million in the past month from a starting point of $5 million this time last year.”&nbsp;



Index Coop currently offers investments in six different indices, including the <a href="https://www.indexcoop.com/dpi.html" target="_blank" rel="noreferrer noopener">DeFi Pulse Index</a>, which tracks the performance of various decentralized assets, and the Metaverse Index, which holds tokens that operate in virtual environments, such as Decentraland and Sandbox.&nbsp;



“One particular standout has been our Metaverse Index that has returned almost 300% since inception this spring,” Judd said. “Something we are seeing is the need for broad sector-based indexes that capture important themes such as Metaverse, Defi, or DATA.”&nbsp;



The <a href="https://www.indexcoop.com/mvi.html" target="_blank" rel="noreferrer noopener">Metaverse Index</a>, which tracks 15 tokens, was down 6.28% as of 9am ET to $253.76 a share.&nbsp;



Judd is looking forward to establishing Index Coop as a world-class asset management platform.&nbsp;



“Over the past 40 years, passive asset management has provided a powerful platform for millions of families to invest safely and effectively,” <a href="https://www.coindesk.com/business/2021/11/26/el-salvador-buys-100-more-bitcoins-as-crypto-market-falls/" target="_blank" rel="noreferrer noopener">he said</a>. “We are deep believers in the power of passive asset management and hope to bring safe and effective crypto investing to millions of families.”&nbsp;



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DAO Index Fund Aims to Compete with Biggest Asset Managers in the World

Sam Reynolds

<div id="highlights-block_6101bfa08f4c3" class="highlights">
 <ul>
 <li>Over the past year, the growth of DeFi has been explosive. But this is largely from retail interest. There are a few hurdles that need to be overcome before institutions can have a larger involvement.</li>
 <li>BitGo and Index Cooperative recently announced their plans for an index funds of DeFi investment opportunities, custodied at BitGo — one of the first digital asset trusts.</li>
 </ul>
 
</div>



Thomas Chen, director of BitGo, one of the world’s first digital asset trusts, admits that DeFi and yield farming aren’t elegant experiences. He saw a gap that needed to be bridged — and Index Coop was the one to build that bridge.



With MetaMask, a <a href="https://metamask.io/" target="_blank" rel="noreferrer noopener">popular Ethereum blockchain wallet</a> that integrates into most browsers, all the risk is centralized to you and your computer. Chen recounted trying to explain to a family member how yield farming and MetaMask worked, and even they didn’t quite feel comfortable jumping in. And an institution that manages hundreds of millions of dollars? They are going to need a better solution.&nbsp;



“When these macro funds are looking at DeFi, it’s really scary,” he said in an interview with Blockworks. “They aren’t going to allow a trader with a MetaMask wallet to interact with a 10 million dollar portfolio.”



Likewise, institutions, with their research and due diligence desks, aren’t going to be too keen on committing to a single DeFi protocol — or two. Given the need to spread out risk, they are going to want something akin to a stock index.&nbsp;



“So there are two issues to solve,” Chen said. “How do they get exposure, and how do they get security on that exposure?”



<h3 class="wp-block-heading">Beyond MetaMask</h3>



Enter the Index Cooperative, a DAO that creates listed digital asset indexes, such as its flagship product, the DeFi Pulse Index (DPI).



Similar to how the equities world has the S&amp;P 500 or the Nikkei 225, the DeFi Pulse Index aims to create a token product that tracks some of the best-known DeFi protocols — what Mike Taormina from the Index Coop, calls “blue chip DeFi.”



“We noticed with retail investors — and we&#8217;re also seeing this with institutional investors — that you get into the space first. You’re interested in bitcoin and then you get your toes wet in ethereum,” Taormina said. “And we&#8217;re seeing that DeFi is now emerging as that third, next, must-have theme in a crypto portfolio.”



But holding these assets on a MetaMask wallet isn’t going to work, which is why DPI has teamed up with BitGo to offer support for their index tokens within BitGo’s digital vaults.



Much like large institutions of any type have internal controls that require two or more signatures to send out capital, BitGo has something called “multi-sig wallets” that require approval via multiple key signatures to make a transfer.&nbsp;



BitGo’s digital vaults are the access point, DPI is the product, Chen explained.&nbsp;



Taormina cited a recent Goldman survey that said 45% of the bank’s clients were interested in crypto.



“Well you can dip your toes in with bitcoin, then you go down the rabbit hole into DeFi,” he said.&nbsp;



<h3 class="wp-block-heading">A sense of stability</h3>



Certainly other stakeholders are trying to get institutional capital into DeFi as well, though they might be taking a different approach.



In May, <a href="https://cms.blockworks.co/vesper-joins-forces-with-blockforce-to-create-defi-fund/" target="_blank" rel="noreferrer noopener">BlockForce Capital</a>, which is structured as a hedge fund investors would be familiar with, announced a partnership with Vesper Finance to give BlockForce’s investors exposure to Vesper’s token and the subsequent investment opportunities that come along with it.&nbsp;



Chen added that institutional investors are going to approach the space with a much different mindset than their retail counterparts, to demonstrate the significance of more institutional dollars flowing in via the BitGo-Index Coop partnership.



“Once you see institutions come in with a longer investment horizon timelines, it really brings a sense of stability into the ecosystem,” he said. “Right now it&#8217;s frankly dominated by retail investors or crypto native hedge funds that are just chasing yield and that money.”



Want more investor-focused content on digital assets?&nbsp;<a target="_blank" href="https://cms.blockworks.co/events/digital-asset-summit-2021-2/" rel="noreferrer noopener">Join us</a>&nbsp;September 13th and 14th for the Digital Asset Summit (DAS) in NYC. Use code ARTICLE for $75 off your ticket.&nbsp;<a target="_blank" href="https://cms.blockworks.co/events/digital-asset-summit-2021-2/" rel="noreferrer noopener">Buy it now</a>.