Overview
Index Coop is a decentralized cooperative that creates, maintains, and governs structured DeFi products — primarily index tokens that provide diversified exposure to crypto sectors through a single ERC-20 token. Built on Set Protocol's infrastructure, Index Coop has become the de facto provider of on-chain index products in DeFi.
Key products include:
- DPI (DeFi Pulse Index): Market-cap weighted index of major DeFi governance tokens (UNI, AAVE, MKR, SNX, COMP, etc.), created in partnership with DeFi Pulse
- MVI (Metaverse Index): Diversified exposure to metaverse and gaming tokens
- ETH2x-FLI (Flexible Leverage Index): Automated 2x leveraged ETH exposure, rebalanced to maintain target leverage
- dsETH (Diversified Staked ETH): Index of liquid staking tokens providing diversified ETH staking exposure
- Various structured products: Yield-bearing indices and thematic sector exposure
Index Coop represents legitimate financial infrastructure for DeFi. The methodology is transparent (published index methodology documents), governance is decentralized (INDEX token holders vote on product parameters), and the products serve a genuine need — providing diversified exposure without the complexity of managing multiple token positions.
Smart Contracts
Index Coop products are built on Set Protocol's smart contract infrastructure (SetV2), one of the most audited and battle-tested tokenized portfolio frameworks in DeFi. The contracts handle token basket management, rebalancing, minting/redeeming, and integration with external protocols (for leveraged and yield-bearing products). Set Protocol's contracts have been extensively audited by Trail of Bits, OpenZeppelin, and others, and have operated for years without major exploits. The FLI (Flexible Leverage Index) contracts are more complex, managing automated leveraging through Aave/Compound, but have also performed reliably.
Security
Security is a strong suit for Index Coop. The Set Protocol foundation provides battle-tested smart contract infrastructure, and the products have operated through multiple market cycles including extreme volatility without system failures. The FLI products maintained their leverage targets during market crashes (including May 2021 and 2022 bear market), which is a genuine stress test passed. The primary security risk is composability — products like ETH2x-FLI depend on Aave's lending markets for leverage, introducing dependency risk. However, the track record is strong across years of operation.
Yield Generation
Index Coop products generate yield through multiple mechanisms: intrinsic yield from underlying tokens (staking rewards, protocol revenue), automated rebalancing that captures sector rotation, and explicit yield strategies in products like dsETH. The DPI itself doesn't generate yield beyond component token appreciation, but newer products explicitly target yield generation. ETH2x-FLI provides leveraged exposure that amplifies ETH returns (and losses). The yield generation is genuine but secondary to the core index product value — diversification and simplicity.
Adoption
Index Coop has achieved the most meaningful adoption of any DeFi index product. DPI has been integrated into numerous DeFi protocols (as collateral, as trading pair, as treasury asset) and is recognized as the standard DeFi index. Total AUM across products has fluctuated with market conditions — peaking at several hundred million during bull markets and contracting during bears. The products are listed on major DEXs and aggregators, and DPI is available on some centralized exchanges. Adoption is real but cyclical — demand for DeFi indices correlates strongly with broader market sentiment.
Tokenomics
INDEX token provides governance over Index Coop — holders vote on new products, methodology changes, treasury allocation, and protocol parameters. The token captures some value through streaming fees (management fees on index products), but the fee rates are low (typically 0.95% annually for DPI) and AUM is modest, limiting revenue. INDEX has underperformed relative to the products it governs, creating a disconnect between product quality and token performance. The tokenomics work but lack aggressive value accrual — INDEX is more of a governance token than a yield-bearing asset.
Risk Factors
- Cyclical demand: Index product AUM fluctuates dramatically with market cycles
- Weak INDEX token accrual: Governance token captures limited value from modest fees
- Composability risk: Leveraged products depend on external lending protocols
- Regulatory uncertainty: On-chain index products may face securities classification
- Competition: Traditional finance increasingly offering crypto index products
- AUM concentration: DPI represents the majority of Index Coop's total AUM
- Gas costs: Ethereum mainnet gas limits retail participation in some products
- Rebalancing costs: Index rebalancing during high volatility can create slippage
Conclusion
Index Coop is one of the most legitimate and useful projects in DeFi. The 5.8 score reflects genuine financial infrastructure — transparent methodology, battle-tested smart contracts, real products serving real users. DPI is the gold standard for DeFi index products, and the FLI products provide automated leverage that would otherwise require active management. The score is moderated by cyclical adoption, weak INDEX token economics, and the structural challenge that crypto index products are most popular when they're least needed (in bull markets when everything goes up). Index Coop is building essential DeFi infrastructure that the space will need as it matures — the question is whether INDEX token holders benefit proportionally.