A quick look at the development, success and shortcomings of the DeFi index DPI

Theblockresearch researcher Eden Au recently reviewed the development of the DeFi index DPI, as well as its successes and shortcomings.

The main conclusions of Golden Finance are as follows:

1. The DeFi Pulse Index (DPI) has a market value of US$200 million, becoming the de facto DeFi index.

usTjld0mQpzrsi6T4XTez2iPflSbHkJy1fh5kTV3.png

2. The market value of DeFi in the encryption field is still very small (1.8%), although it cannot be ignored, so many investors want to seek opportunities to participate in the DeFi market.

But how do you make more of a market with unlimited tokens and products, and incalculable smart contract risks?

M0pWZ3qemMhDhwhW18liXGRjcBQDuDM8tkkyHcP3.jpeg

3. Diversification is the key.  

Structured products (for example, indexes and on-chain asset management agreements) provide a once-and-for-all experience and allow investors to passively access *selected* DeFi tokens (see figure below)

MIHYVZU6eLsAkSLJaNb2FoF0X82TWBY0Vt9bXwIS.png

4. DPI is by far the most liquid and most popular DeFi index, which was launched by indexcoop in cooperation with SetProtocol and defipulse.

It reached $200 million TVL in one year (this can be regarded as its market value)

chAdWxRDckxGNXqmVtrhNS1tKzCn2rYT9qY2Rlxk.jpeg

5. Its constituent stocks are weighted by market value. Index reorganization is carried out on a monthly basis. The fixed percentage distribution without Balancer style eliminates investment losses, and since market value (mainly) is related to price, the extent of rebalancing (i.e. slippage) is limited.

qh0FMUj29GyIGruruDcUM1zym2FrKkPK4KbyZ7ig.jpeg

6. DPI tokens can be issued (or redeemed) without permission by depositing (or claiming) its basic components.

However, since July 2021, it has been trading at a considerable premium. Currently, the market premium is 2%.

0AHpN5VkF8iPZlSzNz0AaX7lJeCOlzDB3QejAMAg.jpeg

7. High gas fees prevent arbitrageurs from keeping premiums low, because recently, many investors have increased their exposure to DPI. Since July, the supply of DPI tokens has increased by 34.8%, even without liquidity mining incentives.

tYu8V1QTDoyTvyVis1bE9R8XDw5yrapAGeNgNHrZ.jpeg

8. Despite the increase in interest, the price of its tokens is declining relative to ETH , because most of the constituent tokens are considered “DeFi 1.0”

Why? a) DPI excludes most other public chain native tokens, so it cannot directly capture the growth of the multi-chain DeFi ecosystem

HGR3voz4bMtULLUB2swMbghmZSZQ9BDahLMV0j3K.jpeg

9. b) Tokens can only enter the DPI index if the underlying agreement has existed for at least 180 days.

It protects DPI holders from facing higher risk bets in DeFi, but if the current DeFi protocol can be popular, it may be unfair to exclude all new tokens.

10. To be fair, its conservative token entry standards may be a key factor in its success.

It is * not * the subject in the pursuit of inflation, but to provide low gas, while capturing Ethernet Square value on the head DeFi token.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/a-quick-look-at-the-development-success-and-shortcomings-of-the-defi-index-dpi/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.