0x DAO BED INDEX Treasury Proposal

Basic Summary

The following is a proposal to invest $1M, into the Bankless BED Index to diversify their treasury.

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).

Motivation

The main purpose for purchasing $1M of BED is to increase on-chain 0x DAO Treasury liquidity and utility, helping to drive 0x DAO mindshare through the marketing campaign listed below.

Buying the BED index can strengthen the partnership between 0x DAO and Index Coop. It can also establish a new partnership with the Bankless DAO, and in return Bankless DAO recognized for their educational content and their cultural influence over the industry will manage a marketing campaign with 0x DAO inside and out of the DAO to advertise 0x Protocol.

The partnership with Bankless could increase 0x DAO awareness and adoption in the Defi Space. The Bankless DAO is an inventive and leading edge DAO, 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 Token, 0x DAO and its Treasury 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.

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.

How it works

The BED index is rebalanced after the close of trading on the first Friday of each calendar month. The Fund is rebalanced in accordance with its Underlying Index

Index Maintenance BED is maintained monthly in two phases: Determination Phase The determination phase takes place during the fourth week of the month. It is the phase when the changes needed for the next reconstitution are determined. Reconstitution Phase Following publication of the determination phase outcome, the index composition will change to the new weights on the first Friday of the following month. I.e components will be added or removed.

Risk Analysis

Smart Contract Risk:

BED uses Set Protocol smart contracts that was audited by OpenZeppelin

Despite its recent launch on 07/21/2021, BED has less smart contract risks because it uses the contracts from Set Protocol.

Counterparty Risk:

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.

Liquidity Risk:

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.

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.

Market Risk:

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.

Specification

$1M of BED can be purchased via Set Protocol.

Alternatives can be taking the composites ETH, BTC, DPI units and swapping it for BED to reduce slippage costs using usdc or other stable coins which can also reduce slippage costs too.

There is the potential for a joint Bankless, Index Coop and 0x DAO Treasury funds deployment on uniswap rewards and potentially other opportunities. More on this as information comes to hand.

Bankless DAO would do a marketing campaign on twitter and other means of marketing not limited to a potential giveaway such as the gleam campaign which can track how likes, users, countries where the users are located, activity was generated through the Twitter. Along with a portion of the bankless DAO newsletter dedicated to the approval of the Bed Index and a crypto podcast Crypto Sapiens dedicated to 0x DAO.

Voting Rules

We would like to gather feedback from the community about this post and invite communities to discuss how BED purchase could benefit 0x DAO and its Treasury.

Disclaimer: The content reflected in the above text does not amount to any financial advice for commercial or non-commercial purposes. Bankless DAO is not a registered investment, legal or tax advisor or broker/dealer in any jurisdiction. All Investment financial topics and the information therein are personal opinions. The above mentioned content is only meant as educational material for general awareness. Bankless DAO is not liable for any loss or damage caused by actions taken by the reader/user based on the above mentioned content/information.

1 Like

Skimming through this I have several questions that I’ll post next week, but to get a conversation started, generally I’m curious as to what prompted this proposal to our DAO and I’m unclear on the existing partnership you refer to with Index Coop. Can you provide more information on this please?

Also, what do you mean by this phrase: “increase on-chain 0x DAO Treasury liquidity and utility, helping to drive 0x DAO mindshare” and what is the connection between the marketing campaign you describe and the “treasury investment”?

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