Title: Buying Bankless BED Index (BED)
The following is a proposal to invest $2M, which represents ~0.3% of PCV, into the Bankless BED Index. We also propose creating a $4M BED-FEI pool on Sushiswap.
The BED is an index, created by Bankless and Index Coop, that represents Crypto’s most investable assets, 33.3% BTC, 33.3% ETH, and 33.3% DeFi Pulse Index (DPI).
The main purpose for purchasing $2M of BED is to increase on-chain FEI liquidity and utility, helping to drive FEI adoption.
The BED-FEI pool will be the largest BED pool trading on a decentralised exchange.
Providing liquidity for BED-FEI can strengthen the partnership between Fei Protocol and Index Coop. It can also establish a new partnership with the Bankless DAO, which is well recognized for their educational content and their cultural influence over the industry.
The partnership with Bankless could increase Fei awareness and adoption, and help to make FEI the stablecoin for Defi. The Bankless DAO is an inventive and leading edge DAOs, mixing on-chain and off-chain initiatives. It was born by and for the large community behind the Bankless podcast which has strong brand and marketing channels, with 75k followers on Twitter and almost 70k loyal subscribers on Youtube.
By holding BED-FEI LP Token, we can have additional exposure to DeFi through DPI and also to Bitcoin that is one of the less volatile crypto assets. BED is a vehicle that captures equal-weighted upside from the most promising use cases and themes in crypto: store of value, programmable money, and decentralized finance. It also rebalances to keep the exposure ratio over the long term.
We are proposing a small initial amount that could be increased in the future.
In parallel to this forum discussion, we have opened dialogue with the Bankless DAO to see how we can make this proposal a real step towards a DAO to DAO collaboration and a commitment of people for a common good.
This would be the occasion for a coordinated and combined marketing campaign with the Index Coop and Bankless DAO to make sure everyone in the space is made aware of the collaboration. The ideas are plenty (for example NFTs, BANK token drop for extra PCV diversification, programmed social network communication, etc) so we can see what’s the most exciting and the most impactful for the communities.
Smart Contract Risk:
BED uses Set Protocol smart contracts that was audited by OpenZeppelin in September, 2020.
Despite its recent launch on 07/21/2021, BED has less smart contract risks because it uses the contracts from Set Protocol.
BED holders have no governance influence on Index Coop or the protocol within the index. The BED utilises TokenSets V2 smart contract that has privilege roles in many of the contracts.
There is a multisig responsible for initiating rebalances, performing meta-governance, adding / removing new protocol functionality. It does not have the ability to arbitrarily move underlying assets, mint tokens, etc. The signers are currently members of the Set team with the intention to add Index Coop community signers over time. While the multisig can’t arbitrarily move assets, it theoretically could rebalance assets into a fake token. The mitigating factors for these risks are the Set Labs, Bankless and individuals personal reputation.
Minting and redeeming BED represent the primary market of the indices, but many users can buy and sell indices on the secondary markets. The price on the secondary markets are kept at Net Asset Value (the market value of all the underlying components) through a network of market makers that redeem the tokens when price is below NAV and vice versa.
When considering liquidity, the average daily trading volume is $400,000, based on the last 18 days. However, as BED holders have the option to mint/redeem the underlying tokens within BED, it draws on the liquidity of the underlying assets and also allows for any deviation from NAV to be arbitraged away by traders. So liquidity goes beyond the secondary market for BED.
As BED is a basket of tokens, it has less volatility than the component assets by themselves.
As BED just started a few weeks ago, we calibrated the risk exposure by proposing a small deployment relative to the PCV.
$2M of BED can be purchased via an OTC deal with Index Coop with more details to emerge over the coming weeks.
There is the potential for a joint Bankless, Index Coop and Fei deployment on Polygon which could receive SUSHI rewards and potentially other opportunities. More on this as information comes to hand.
We would like to gather feedback from the community about this post and invite communities to discuss how BED purchase could benefit Fei Protocol.
- Purchase $2M of BED
- Do Not Purchase of $2M of BED
Disclosure: In addition to being a contributor to Fei Protocol @Matthew_Graham is also a core contributor at Index Coop.