AMA | Felix Feng of Set Protocol

Transcript

bankless nation welcome to this special ama with felix fang the ceo and founder of set protocol we have never actually had someone from set on uh bank list so we're really excited about this today felix thanks for spending the time how are you doing sir uh oh thanks for having me i'm actually surprised you never had well was anthony ever on this uh well anthony's been on but you know anthony talks about a lot of different things so he's uh he's talked set a little bit but um but yeah like you know not an officially dedicated set episode so this is gonna be exciting for the community i think okay perfect yeah i i believe so as well and yeah i think it's gonna be a lot of

fun and i'm doing great and ready to ready to answer questions maybe add some humor to it if i can and uh it'll be fun well this is this is fantastic timing because set has rolled out a ton of uh brand new products in the last few weeks uh and i think starting with the partnership with defy pulse and the index token the dpei index token i feel like that's where we should start can you kind of explain some of the background with that and david do you mind if before we get into that do you mind if we just um tell everyone who's watching on youtube that of course you can send your questions this is an ask me anything for felix and set so you can add your questions to youtube we will pick them up and we will ask them

of felix also if you are a bankless member you can ask those questions in the bankless discord to get a little bit of a prioritization and we will ask felix those questions yeah sorry sorry for interrupting david you want to you want to start with that again yeah yeah yeah so felix you guys have produced the first index in defy so kind of tell us about what your thought process before that was an actual like real project your thought process around like uh indexes did you guys know that when did you guys know that you guys were going to turn to making indexes good question um set i mean most people might not know but set has actually been all about indexes since the very beginning when set was created we conceived the

idea of a basket of tokens a token that represented many tokens essentially an etf and we were building these products in 2018 but the bear market hit and nobody want to trade you know the the the long tail of coins anymore and everything consolidated back into bitcoin ether and stable coins and as a result uh the company's strategy and the products that we created shifted to reflect what the market wanted uh which was more trend trading strategy or very simple rebalancing products that helped protect against downside and since we are now seeing a d5 resurgence and resurgence of activity in ethereum we

realize that the index products are now appealing again so that's when we were also doing a re-architecture of our entire protocol so we built an entire new version of a protocol it's called b2 we haven't talked about it at all but it supports so much new stuff uh including indices including guild farming products including a lot of other things that you you can imagine uh such as you know trend trading strategies and all the stuff you do before with some more power and we have to pick a beach head first we there are so many things that we can build but we have to pick one place to start and when we saw that there were so many d5 tokens out there that it was really difficult for people to even pick which ones to buy and there

were so many retail users that wanted general exposure but couldn't do so like we we we saw that the the index opportunity for dfi tokens to be a huge opportunity and a few months back uh we were chatting with d5 pulse and they had a really great idea for doing the specifically a d5 index branded under the d5 pulse uh kind of methodology and that was when we realized hey we can do something together we can take the two best brands uh one in asset management and one in in in tracking d5 and and providing data around d5 and we can build a really really amazing and great product and that's really what uh what divine false index was uh and that

was launched about three three weeks ago and it's been getting a ton of traction since uh the first day that we launched it got to a million dollars in aum and you know since then it's no we we recently launched the index uh co-op uh cooperative which is essentially kind of a community around managing and creating indices and we launched a yield farming component too and that helped boost that to about 6.5 million dollars right now and there's almost 10 million dollars of liquidity on uniswap so this is one of the most in the traditional etf world uh etfs and indexes are some of the most widely liquid and traded products and we're starting to see some of that

emerge in defy too so that's a little bit of back story that's cool felix so before we get into some of the community questions i just want to um like for some listeners they they are if they've been reading bank list they've definitely been exposed to to set but for someone's someone that's new i think this defy index kind of illustrates the sorts of things that set can do like um i think of set as kind of a defy native a crypto native etf of sorts um maybe felix you can like check me on that is that kind of what it is uh and then what are the differences maybe even for folks that aren't

familiar with an etf maybe you could explain that and talk about how the similarities or or differences with set and then we can get into the um the d5 index itself and what's comprised inside of that index yeah it makes sense so i think at the highest level set is an asset management protocol so it enables people to own essentially a set token which is a erc20 token that represents some sort of portfolio in which you can implement some sort of asset management strategy indexing is one type of strategy that can be implemented on set uh another type of strategy that we launched uh recently

was i feel yield farming products which will automatically harvest uh uni uh and crops you can implement some sort of automated trading strategies in the future you can do leverage trading as well so there's uh and and and users can simply buy one of these tokens whether on una swap or minting it on a primary market themselves and own it and automatically and automate some sort of strategy without needing to do any work on their end so that's kind of what set is about and and the relationship between kind of the one of these like and a product and set is that the the product itself the set token can be generated and run by a third party so uh historically we've

created some products called uh robo sets which are totally managed via smart contracts and oracle inputs then earlier this year we launched something called social trading which is enabling third-party traders to essentially run strategies on set and then i think the final iteration which we recently launched was essentially enabling the community uh to aggregate the wisdom of the crowds if you will to manage a collection of uh potent products and the first one that was launched was an index co-op which is focused around index related products and and and to give you a little bit of context uh you know etfs are exchange created products in a traditional like financial

world uh they're one of the most widely adopted products in in the whole world and you probably own some without even knowing it uh most people who uh have a 401k or retirement account are automatically allocated into some sort of index fund or etf uh so you're you might be already investing in these and not know it and and this is a massive industry 23 of equity assets are tied into etfs and they're some of the most liquid and widely traded products in the world um and you know the biggest companies around this are are names you probably heard of before like blackrock or vanguard these are you're managing

upwards of 10 trillion of assets and the etf industry has been booming uh in the past 20 years or so so we think it's a pretty big deal uh to to this etf stuff and that there's a ginormous mark in the traditional financial world and that hasn't fully translated in into crypto yet and that's kind of what uh what what index co-op was about is building the community uh around uh evangelizing growing and creating the best crypto index products uh in the world very cool all right okay so now we have the baseline of of what a um a set token is it's kind of like the like it's kind of like an etf only it is basically crypto native and it's a collection of

some assets sometimes those are managed a bit more actively by an individual in the community and sometimes those are just kind of indexed related sometimes those are algorithmically traded so there can be all sorts of different strategies for each of these sets right so um can you tell us going back to like v2 so actually i think um set was maybe our fourth tactic that we ever published on bankless and i recall it was something called like um you know use a money robot to manage your money because basically you're probably going to screw it up yourself it's sort of the etf the vanguard argument right like you should be buying index funds because

um you know your your own investor psychology will kind of short-circuit your your your investment process right so that was like the fourth tactic we ever put out on bankless um and even then that was about a year ago set was was humming you guys were fairly mature you had some products but you've added so much since then can you tell us what's like everything and we'll go through all of kind of the elements that are in this new v2 felix uh absolutely um man it has been a long time uh since the initial tactics and uh yeah i mean when we i think a year ago one of the really awesome things that we launched was the the trend trading strategies yes i remember

that was essentially a strategy that used a technical indicator such as a 20-day moving average the 26 uh exponential moving average or or the rsi to automatically make trades uh based on kind of momentum and these things were back tested to be uh to work extremely well in the long in the long run so if you're holding for kind of the three year time frame this would be something that would help you accumulate uh ether or or crypto over time and it would and essentially it would like you said automate kind of this process what which would normally take a ton of time take a ton of technical know-how and a ton of stress if you will because it doesn't let you sleep on that because

you're paying attention to all the charts and the numbers every day and most people screw it up anyway don't they you're gonna screw it up anyways so this allows you to just buy a prop to essentially like oh no own a set and then you essentially can set it and forget it so you can own one of these products you can put it away and it'll just automatically implement the strategy for you uh and it's done extremely well in the bear market it's some of the rsi sets have helped people double their ether uh at some points and it's uh you know it's it's a very viable long-term strategy as long as the crypto markets are pretty uh it gets nonsensical if you will or like they're still immature so uh there aren't people who are front-running these trades sophisticated

actors who are doing these these things so that's where these strategies still are very viable um so that's where we began and we we got a lot of momentum uh coming through launching these strategies and we launched a whole family of these trend training strategies and and with social trading we really opened up the strategy creation side of things to a whole bunch of more people and and the architecture and the technology behind set ended up being very geared towards these strategies and when we started seeing a bull market happen and people wanted to trade other assets people wanted to use margin people wanted to do x y and z we realized that the v1 of our protocol wasn't extensible to be able to handle all that so we started to re-architect

our protocols so that it can do anything it can incorporate any type of integration it can handle any type of strategy that we can imagine at the time so we made it we created a new protocol it's called set protocol v2 which is super extensible it's very modular uh it you know can add any type of functionality and as a result like it can handle a lot of this new kind of integrations that we're seeing and we have we just have to decide like what we want to start with so it was the the etfs that we started with with the deep pulse index then a week later it shows how rapidly we can move we launch a few yield farming products uh we launched like

essentially a few days after uniswap announced their uh their their their their token or their uni token and their yield farming associated with it a few days later we launched a yield farm product so at this point we're ready to uh this protocol is ready to launch a whole bunch of different strategies and right now uh the focus is really on indices uh as we think that there's a big market for that and there's a big big appetite for for users to get exposure to these to these products very cool so all of those things are built on set so i guess diving into them a bit more modular so like the the d5 index if i buy the d5 index what am i buying exactly and how often does it rebalance

good question so what the defy index is is a is a set token that tracks uh an index that has been generated by d5 pulse uh they have a methodology for index you can find it on their website uh it's called pulse.inc and it has a a pretty sophisticated criteria of one asset inclusion like which tokens can get up get included into the index there's a whole bunch of criteria such as it has to be listed on d5 pulse there has to be a minimum of five percent of circulating supply uh there it has to be a team that is pretty much pre-reputable and the contracts need to be audited uh and you know there's a

number of different criteria as well and it has the the methodology for how you would weight uh the composition of the tokens so it's something that's pretty sophisticated and well thought through and currently the index is comprised of 11 tokens weighted by by market by circulating supply of the market cap so includes tokens like wi-fi includes tokens like lend and compound maker uni a lot of the big names that you know are included as index and this index's aim is to be the most representative index for defy tokens and what you're buying essentially is or you're investing in is essentially a token that tracks this index uh and it's

not a synthetic product it's not a derivative so you can if you own this index you actually have can get access to the underlying through an issuance and creation mechanism so to be able to mint one of these indexes what you do is yeah like a a party actually has to take all 11 of the tokens and like deposit them to a smart contract and in return you get the set token and if you own the set token you can always redeem which is burning that token and retrieving all the underlying so you have the peace of mind that everything that the index represents is actually held in a smart contract and you can audit this all yourself and i just want to point out real quick the problem that this solves basically is

because uh go try to keep up with d5 right like david and i do it it's a full-time job to understand these assets and what what's going to be big next and that sort of thing just just like it's a full-time job to invest and trade in the stock market so what index does like this is it gives you exposure to a rotating range of assets that that pop into this top it's top 10 right felix and you can kind of just set it and forget it if you want exposure to defy you don't have to research every single asset that's kind of the value proposition that i see i think david's got a question here yeah and the the timing of your guys's release of this i thought was pretty pretty cool because

you guys released it right before the uni token came out and so therefore the uni token wasn't included in the in initial index but since uh uni then moved itself into the top 10 the index then therefore included it which is pretty cool because that's exactly what ryan said it just automatically updates with the tokens that should be included but felix can you kind of talk to us about the behind what what happened behind the scenes there with the uni swap before it was included to becoming included like how did that process go yeah so what you're describing so what you're describing is the process of rebalancing so in a traditional etf world a rebalancing is is simply the act of

either readjusting weights so uh you know some in a centralized world some sort of party would be you know selling some of the the overweight assets uh maybe into reserve assets such as us dollar or directly into an underweight asset so for example uh you know and how this would work for at least the d5 pulse index and theory is like okay so right now you're gonna essentially have an addition of uni that currently is zero percent of the the weighting and there's a number of other assets that are overweight uh if a post uh if you were to model out like how much uni is required so it would try to sell a proportionate amount of mkr of comp of of all the tokens uh and then

and by uni as a result right so the idea is that like that's kind of how the re-weighting actually works and the rebalancing itself uh initially was handled kind of through like a few uh a number of transactions and the idea is that like in the future anybody can call a smart contract to help perform and and re-weight the rebalances as well in a trustless way in a trustless manner very cool very cool we have a question from jake schravinski in the bankless discord uh can defy pulse change its methodology and therefore thereby change the composition of the index in real time and in other words to what extent are token holders relying on d5 pulse to manage the index that's a good question um so

so one of the questions that i didn't answer was how often does it rebalance is once per month so how the index co-op works is that uh d5 pulse is the index methodologist they're the ones that create the methodology and then translate that methodology into weights of like what the rebalance would be each month so they only submit the weights each month and then the and then the co-op or the organization or sorry the community uh can look at the weights that have been submitted and validate and verify that the weights are correct and reasonably mapped to the index so if ever there's a large addition or or a deletion like the community can can can review that to make sure nothing is

wrong and that it actually does reasonably map to index the main thing that this is trying to protect against is what if a methodologist created a rebalance that was 100 made of for example pickle uh and they wanted to pump the price of pickle and sell everything else that's something probably a big problem with something very malicious so that's the role of the community around kind of the index co-op is to ensure that some of these things for example don't happen uh so uh there there is a check and balances uh that like d5 poles even though they they are submitting the weights they cannot unilaterally update the weights uh you know and and perform a trade and and harm everyone as a result so so d5 pulse

is acting as the oracle to a like a privileged oracle perhaps to the governing token holders of of the um of the co-op is that right correct okay so it's the it's the the responsibility of re-weighting the actual index belongs to the co-op not to divide pulse okay cool right right so that's one of the main things that the co the co-op was responsible is for is the actual rebalancing so none of the parties involved like you know d5 poles or any of the methodologists have custody they simply serve as an oracle of like what the next methodology would be and thus they are you know not as privy to actual the actual risks of you

know quote management so okay so the like the answer to jake's question is is basically if d5 pulse got evil really wanted to pump pickle tokens right there there's a check in the system which is the the co-op basically that would kind of rain them in so that that appears to be a primary function of the in-dot indexed cooperative um so like how does that managed and and what other functions does the index cooperative have because that's new in v2 right felix this this notion of an index cooperative is there some kind of like token governance that manages it and who are the members of this cooperative uh good question so just to make it really clear there's a clear there's a

distinction between set protocol and then the cooperative the cooperative is a as a separate entity like separate from the protocol and this is an entity that is essentially uh a community that governs uh the creation and maintenance of indexed products and the set protocol is simply a technology provider it's essentially a prime brokerage if you will that serves a number of these different entities so the set protocol provides the infrastructure for the set it provides technology uh to be able to perform rebalances it performs some of the other you know kind of administrative functions for helping to create coordination between uh you know

between the strategists or the methodologists and actual users and and any other third parties involved and the cooperatives role is a few things one is to add and remove and maintain like new indices so the d5 pulse index is the first uh kind of index in the index cooperative but it's not the only one uh members can add other ones over time so if you were interested if the community was interested in maintaining for example nft index that is something they can do if they believe that the market opportunity uh was was large enough uh they believe that they can benefit enough that that's something that might be interesting or if they believe that

that was a product that exists that's something they can do if they wanted l2 index that's something they could add if they wanted a different type of uh deep index that's also possible as well and how do they add up felix so it happens through a decentralized governance so initially some of these ideas they're already being proposed in a discord channel for the index co-op and if there's enough steam for any of these ideas they get moved into a proposal that they can be generated on discourse and if there's enough steam and traction and social consensus around there it can be moved into uh you know some sort of off-chain voting like on snapshot and if that goes through then community members can do on-chain voting

eventually and and and vote these uh type of products and so i think that's kind of the idea of like how the club works and and they collectively make these decisions uh together uh to know for for a benefit of trying to grow uh the index i got it so in the end vote like the actual on-chain process right so there's this all this off-chain governance as we might think of it but is there some kind of a token vote at the end of this where the index co-op members just kind of vote and you know make or is there no token at this point for that uh so there is a native token called indexed like all capitals i-n-d-e-x it's

a governance token with intention of allowing community members uh to actually vote on these decisions and and to bind it based on the ownership um so yes there's a token uh kind of involved and it you know a lot of the smart contracts are utilized are the same ones used by compound governance and uniswap governance so a lot of the mechanics are the same in terms of how proposals are generated eventually some sort of quorum is required some minimum number of tokens required to create a proposal so a lot of those dynamics also apply here so who owns that token at this point what's like the distribution like yeah good question so initially this is a this is a token where the distribution

is very a community uh heavy and community weighted uh so initially there was an air drop that was given to all existing d5 pulse index holders uh that was a uh that was basically airdrop to anybody who believed in a product early it was not announced or anything like that so these are users that probably are much more heavily aligned with actually governing the the protocol and being being involved the second part is that there is a liquidity mining program that was that went live yes about uh 21 hours ago essentially it's a program that incentivizes people to to to take their d5 pulse index and ether and add liquidity to uniswa there was a lack of liquidity before so

now we're there's incentive uh for you know people to essentially earn these index tokens for providing useful work to uh to the system a third allocation is for index methodologists so index methodologists are one of the the keys to the success of this uh of this co-op and being able to track the best uh methodologists you know if for example like no some names that we that that the co-op would be excited to really have might be um might be like you know bit wise or you know any or coin market cap or or masari or any of these any of these players might be a interesting service provider

as a methodologist and there's essentially based on the amount of contribution that is provided they these service providers and methodologists can earn some of these index tokens by providing useful work so i think that's kind of the the the notion and the principles is that those who provide useful work and and and actually contribute will can get can earn some of these uh index uh governance tokens over time very cool very cool didn't know that yeah this is pretty good like like we said at the beginning great timing for this ama so felix uh when the uniswap airdrop happened to everyone people started like looking around because so many uh protocols had a token at that

point like if uniswab had a token like people were gonna scope the field and see like all right who else is gonna do a token and there were very few protocols left that hadn't done token and one was set and the other one was diy dydx and then maybe people thought about instadap too as well as a tokenlist protocol that still had opportunities for a token is it fair to consider this index token as sets token or is it something you know more parallel to it um it is probably the latter so this is this index governance token is not the the set token just to be very clear it's actually a token governing uh a community that has built a product on top of the set protocol infrastructure

so this is a token that is as the name of the token describes index it's only concerned with index related products and index related uh matters uh set protocol is something much broader in terms of the infrastructure that it provides it it serves and and and what types of matters it's responsible for so this is yeah this is something different right okay so that's that's why it's getting airdropped to the index holder or the the dpi token holders and not any other holders of the of the set uh set tokens right the uh the money robots or the social traders uh so that's that's pretty cool and so and i also thought it's pretty cool that the uni-swap retroactive airdrop model also got

copied so quickly right off the bat makes a perfect use case for this one as well and so you said you mentioned something like liquidity mining uh is also um the way the rest of the token gets uh distributed out into the hands of people uh and and so i'm assuming the the value proposition of this token is just kind of like all the other value propositions of all the other tokens where there's maybe some management fee for managing the rebalances or producing new indexes and so this these token holders are incentivized to put out as many indexes as they deem the market would want and then charge a small fee on like maybe the rebase or not the rebase the rebalance i got got rebasing stuck in my

head uh the rebalancing and then also the the management is is there any fee uh included for the managing of the dpi token or is that something that is left to the governing token holders um at the end of the day like the the power of the governance is for the community so the the communities to decide that said in a traditional uh financial world uh etf companies like blackrock or like vanguard they typically monetize via some sort of expense ratio which is essentially a management fee they can that might be charged on an annual basis or they do securities lending so they can take some of the stocks that are in the etf and lend them

to hedge funds for for interest so those are some of the ideas that you know traditional etf companies would do and some of those might be translatable over into the crypto kind of context wait let's let's go into that a little bit more so if we wanted to copy that same business model where there are assets on a balance sheet inside an etf but then somebody like blackrock takes those assets and then lends them out behind the scenes and pockets that pockets that interest rate is that how it works um it depends on the actual company itself some of the uh the providers will share a significant portion of that interest back to the the holders uh sometimes they'll take a percentage of

that and pocket it themselves uh some of them will take the entire interest uh kind of rate earned and taking the sales i think the there is a challenge because it is a lot more operational overhead and work to actually do that uh even the best providers for for example vanguard can only lend out forty percent of the total uh amount so it's not like they can lend out everything you know there's definitely a supply and demand dynamic that comes with it but it is like pretty interesting in in d5 because there's lending markets for so many uh different assets and there's not only lending opportunities but there's farming opportunities as well there's staking opportunities for example snx potentially could be staked and you can

earn more snx over time so there's you know there's a whole whole world out there that the community can decide uh to to embark on if it made sense and you know they can just help decide some of the economics if it made sense so i'm starting to see a lot of overlap with this this product and both a little bit of of uh yearn and balancer in the mix as well right so balancer is a pool of eight possible tokens that people can trade and use as liquidity like uniswap and then and then iron or urine is like this thing that goes out and seeks yield in d5 right and i see a little bit of both of that in this product as well where there are assets that are inside of a pool and then also those same assets can go

and be leveraged in d5 for additional return so there seems to be some overlap here maybe let's go into some compare and contrast so with balancer you have eight tokens in a pool and one of the unique things about balancer is that you can trade against these tokens and then the fees for people that are looking for liquidity go into the pool are the and when the assets are inside of an index are they able to be leveraged for liquidity by people outside of the index looking to to trade those assets um good question i think that's one of the main distinctions and differences between set and balancer set sets essentially index products and vehicles map and primitives map a lot more

closely to traditional uh kind of index products so they don't rebalance uh constantly or all the time or re-weight all the time or suffer from potential and permanent loss as well so i think that you know and the rebalancing only happens at specific times in this case in cases that are determined by the index methodologists uh in the d5 pulse index scenario uh it is just you know monthly but others might be less frequent like quarterly or or or by annually um and uh and you know and essentially there's there's no liquidity that's provided uh through this through this scheme uh that said it is possible for liquidity to be provided but that's not something that

uh that that currently exists but something can be added by community over time okay yeah that that makes a ton of sense and and that's just not really what the use case of of these uh you know indexes of tokens are really meant for uh balancer is unique in the sense that like it is supposed to be tracking the uh the market at that one specific point in time but but that is also allowing other people to trade against the the balance or pool which the set doesn't allow so that's kind of the advantage of holding a set but in in theory i think you could make an index where you maybe you have the len token you have you know a lot of d5 tokens in there and then you can put them into balance or pools in the back

end where we kind of like what we were just saying where you uh blackrock or some index management company can lend out assets uh that are contained inside of the etf which is kind of like in wires camp or yearns camp where you know maybe it's really advantageous to have an index with you know maybe there's a bunch of more uh synthetic asset platforms so there's a synthetic asset set and one of those assets is synthetics maybe another one is uma maybe there's others coming down the line and in this particular set there could or in this particular excuse me this uh index the the part there could be a strategy baked into the index to also be staking synthetics at the same time is that is

that correct uh that that is correct and potentially yeah definitely possible right yeah so that sounds really something similar to to wires camp so it sounds like you guys are or not you guys but the uh the uh index co-op is starting to get into uh you know the the yield maximizing game where it seems to be like each each index is its own index but it also could have a strategy baked into it as well which could make it more or less you know lucrative for the people investing uh correct um i think one of the cool things is the composability of the define ethereum i think that uh any products that you know any uh constituents that supported by index

that there's a y vault for like you can like you can actually put that into a y vault and maximize the yield on it so if there was you know for example an oracle uh index and it had link in it you can put the link into a link y vault and then it can and and urine can do the work of actually you know generating a yield for it so i mean it's definitely composable in that sense and i think that would be to the benefit of the index holders to uh to potentially utilize and get the additional yield given uh that the risk is is is is manageable and that they understand uh what what they're getting cells into in in those situations i think i think it's going to be interesting to see uh the index co-op and wire play off of each other because

you know iron could leverage the index co-op and the index co-op could leverage wiring at the same time and so i think there's going to be a very strong like stitching of these protocols that's going to be pretty cool to watch totally yeah i um i want to get some community questions but i have one last one on this uh because it's so fascinating felix so can there be multiple index cooperatives right so could somebody like fork the index cooperative or come up with their own and um start using that instead how would that even work uh absolutely i mean i think that's something that we've seen in in in crypto and in d5 a lot is essentially forking so people can take the smart contracts and concepts and and make their own um and that's completely possible because

everything is open source uh no set protocol is available to everybody the contracts under the index dial can be copied as well so that's something that can that can be done similar to how sushi swap for example for unit swap um so that's yeah not out of caution there can be multiple ones uh that have different philosophies or or goals or whatnot uh and i think you know that's something we might see uh some more of in the future uh and maybe we have consolidation as well i think one thing that we haven't seen is like forks kind of merged together like in the traditional like world like you have a lot of m a like protocols buying other protocols the only example we've seen so far is like tron buying bittorrent but

we haven't seen in d5 like other things buying other things but just a lot of divestitures if you are splitting up so i think that one of the predictions i have is probably that in the next year we'll see a lot more like consolidation so like protocols actually like absorbing other communities or other protocols so very cool right so multiple index cooperatives spinning up uh pursuing their own strategies maybe at some point in time bigger ones acquire the smaller ones or they merge together as kind of like super dals very interesting future i want to get to a question that's coming in from discord from qaz qaz asks any plans to rapidly onboard more retail users any plans for a mobile

app i see you guys as the next etoro would that assumption be correct or are you targeting institutions um with the index co-op uh no indexes are one of the most widely traded and owned products uh in the world and this is something that really is meant for wider spread consumption uh by by retail so it is to the interests of the index co-op to be able to spread the indices as far and as wide as as possible so that means centralized exchanges that means other wallets it means potentially even yeah uh and as many it means as collateral and as many use cases as

possible so being collateral for maker dao collateral on ave or on compound those are things that would be advantageous uh you know for not only retail users but also other personas such as funds funds may be interested in like hedging so if they own a bunch of relatively illiquid let's say defy tokens and they believe that the market was going down uh they don't want to sell their tokens for tax purposes also liquidity they can hedge uh using the default index so there is use cases not only for institutions but also for retail so this that's why indexes are so widely adopted because there's something for everybody it's interesting here because qazi is is asking if you guys he said he sees you

as the next etoro and is that assumption correct what's interesting though felix is um you know what set becomes is almost like this this asset production factory this asset production protocol right and your assets can be anywhere in d5 they could be on uniswap they could be on balancer they could be in a in a wire and strategy they could be listed on coinbase or binance all over the place right which is a bit more which is a bit different than an etoro which like an etoro also has kind of like a a user interface and um all of these other things what do you think about the comparison between a set and a etoro are you guys defies etoro or do you see it a little

differently um a little bit differently uh we can see how people may think that set is you know the deep by etoro because some of the social trading products that were launched earlier this year and it seemed like set was building a platform for a bunch of social traders and people can follow others so that made a ton of sense uh though you know i think with set protocol it really is meant to be infrastructure in a primitive uh you know set token says just happens to be the first ui that supports it but anybody can build a user interface and when it comes to some of these indices people are actually acquiring them by many on different interfaces people are using argent or xerion or zapper a whole bunch of different like d bank or other

types of wallets people are actually acquiring these products in so especially when they're listed on balance or unit swap per se there's automatically integrated so uh i think we i think kind of the way that you described it makes a lot more is kind of how we think about it as well is that set is really kind of a an asset uh kind of production factory if you will like they're creating these tokenized strategy or it's a framework and a primitive for creating tokenized strategies and they're represented that can be traded anywhere and we're less of you know building an app or you know a user interface that people can that can use that's something that that anybody else can do given that this is you know supposedly kind of

indestructible kind of infrastructure so are sets traded on centralized exchanges today have any exchanges uh adopted them um there for the d5 pulse index i think is on one or two of the the smaller ones at the moment and uh it is to the advantage of the of the index cooperative to try to get this get these things listed more broadly yeah and how long until we see that do you think just your you know gut prediction i guess is this gonna take like is this gonna happen soon weeks are we talking months or years uh i have no idea uh i mean business development like you know by other people uh you never really know uh so uh i mean but part of it is the volume and the a

and and the popularity and kind of this white and how widespread uh it is so the the greater that is the more exchanges may uh may favor and prioritize uh you know listing something like this it would be interesting if exchanges start to get into their own index cooperatives as well um interesting dynamic there interesting yeah yeah definitely you look like you're gonna have something future if exchanges were creating their own indices and and interacting with the index cooperative uh to to to try to grow it and and and make it happen so uh felix a second ago you were talking about how you want to get uh these indexy indices into uh you know collateral and make or collateral and

you know all d4i applications right and you know i know maker dow is very uh particular and risk averse to adding collateral right because each collateral needs its own kind of risk assessment right it's an and there needs to be some due diligence with what that risk is and i think you could make the argument that with an index it's a lot less risky because it's an index right it's diversified it's spread out across many different assets and so the chances of it blowing up are reduced because it has less dependency on one particular asset however there's also composable risk right because with many different assets a lot of these assets a lot of these protocols are stitched together in the background and then there's also the straight up contracts that produce these

things in the first place so what's your take here how do we balance the fact that it's diversified but there's also composable risk how do you balance that out when we when we want to get these things as collateral and into something like maker yeah that's a really good question um i think that the maker already uh i mean if you think about maker and it's in its set of collateral it's kind of already a basket if you really think about it right anything that's added in in its entirety is is a basket and it wants to minimize the the risk as much as possible and you know if it were to add every single asset in the index itself it would expose itself to just as amount just the same amount of risk right so i think with the dpi index it like you said

diversifies that risk like it would be taking the same risk except you can do it in a much smaller way so i think overall like even though there is composable risk like the risk of the entire asset blowing up is much lower in in in aggregate so i think that it would make really great collateral on maker uh you know obviously the risks and the volatility and it needs to be analyzed a lot more closely there probably needs to be a lot more data uh around how the index has traded and how rebalances happen uh but other than that like we uh no we think that it could be really great collateral so felix this is a follow up on what we were talking about before from a member of the community who asks does the

introduction introduction of index the token box out a possible set token in the future um i mean the index token is just for the index uh kind of community and for for indices and there could be other types of uh you know community tokens for other kind of verticals uh that said uh i think set does need to be some sort of kind of decentralized infrastructure since it's serving all these communities uh so it definitely uh it's not out of possibility it's good to know within the realm of possibilities okay so there's another question coming in uh

from the youtube uh let's see maybe this is just a good follow-up why did set have to partner with the co-op index at all uh why couldn't set uh why couldn't set just launch set and and have govern indices on set is your answer gonna be a bit more or less the same or is there another uh another aspect to talk about there um i think that there i think this is something i mentioned earlier but want to drive in as a point again is really the delineation between the set protocol and and commute and and the folks that are and the communities are running the actual strategies like set is meant to be more like a prime brokerage uh in the traditional world the prime brokerage is like goldman sachs morgan stanley jp

morgan they serve the the the funds of the world right they serve the black rocks they serve the hedge funds etc as a service provider and a technology provider so that's kind of what set is is really set protocol is it's really kind of uh the biggest prime brokerage if you will in in in d5 and then uh the index co-op is is separated like and as a prime broker you're not really running a fund like or strategies itself that's not the job of that uh it's more to help provide services and intermediate uh and you know the index co-op is is really responsible for the strategy uh generation the methodology generation and for the spreading of the actual kind of uh

the strategy itself so here is a question felix from a youtube listener um i would like to create a set but i've been told by a few lawyers that the set tokens representing the trader strategies are indeed a security common enterprise investment dependent on a third party is that the case any uh have you do you have any regulatory clarification on what these sets actually are yeah so i think there's a few things here um i mean the first is like well is i mean i'm not a lawyer by the way so this is not one goal or anything like that uh so i i i can only provide my own opinions or what i understand uh and you

know definitely you all should consult your own lawyers before before doing anything um but i guess in the in terms of social trading i think maybe that's what the uh the the the the questioner was was asking about i think there's a few things like one is is underlying assets uh kind of a security and i think that most of the assets on on token sets are just like bitcoin ether usd uh which i think most people can make an argument it's not a security and sufficiently decentralized uh and then essentially the trader uh isn't really doesn't ever have custody they can't like take the money and run they don't control the money all the execution is done via dutch auctions uh

which is a very fair and open way to do a trade and provide a price and uh simply the trader is just providing a signal it's just data like everyone's just an oracle right it just happens that oracle is a trader that decides when to trade and and that's it and that's what that's how kind of etoro and social trading works is that the people like people just expose like what they traded and then people just follow other people it's kind of like you know if david hoffman you're like oh i'm gonna buy wi-fi and then you just told ryan and ryan's like oh i want to do that too so you just follow him like that's kind of what it is i take david i take all of david's investment advice that was a real conversation [Laughter] well that's what social training is and

that's what we're just enabling more in a scalable manner okay here's another question coming in from a youtube watcher um hey guys is it possible to create quote nft index unquote of the top 10 nft projects uh absolutely anything that's an erc20 token can be included into a set or an index what about actual nfts themselves maybe maybe there's like a set of nfts that have 10 tokens each but they're erc 721s is there is there room for innovation here um yeah i think one of the cool ideas that people have is to wrap

uh you know 721s into erc20s so you can have fungible or partial ownership of a 721 and that could be put into a set i think the main thing is just liquidity uh if you a lot of people wanted this nft index like can you get more of it right and you can't really get more of it uh because it's it's you know it's an energy to pick the number so i think that's kind of the main thing is like does it scale can it be something that's really big um that becomes a more challenging question i think the cardinality of the constituents needs to grow a lot like you can grow the number of nfts in the in the set but you can't grow like each nft you can't like clone each

nft like then it wouldn't be an nft anymore sure so there's a question from a bankless member discord asking any plans to host the site with ipfs and i want to like dovetail that question with a broader uh recent twitter conversation i know where this is gone where there was some debate you may have caught it felix other others may have as well of whether um d5 projects are decentralized or not um and like so of course we've talked about often that um look decentralization is a is a spectrum but there are indeed some projects on ethereum that are don't have an off button they are decentralized their founders could not

stop them even if they tried right uniswap is an example of that um how about set are there still central are there centralization vectors here um like what aspects are not decentralized at this point what can be turned off yeah good question um i think that like in general there's like this concept of progressive decentralization which is you're kind of moving towards like full decentralization over time and i think that in general projects should minimize amount of governance and central points as much as possible and i think the first kind of uh thing that's being done is really the

index co-op where it's the first thing that will be fully uh kind of decentralized and where everything will be essentially owned by the community so uh you know people can build other sites and uis that host um and and and places that acquire the set tokens themselves uh people they're the ones that are gonna govern the actual parameters of like how of decisions that end up being made so it will be you know totally out of our control like uh uh kind of like what happens there and it'll be totally dictated by the community got it all right so uh another another question i'm gonna uh reformat a little bit but um what are the most

popular sets today and uh have any of them surprised you felix um the most popular one right now is the d5 pulse index uh you know that's the the one people have loved a lot and uh you know people are pretty excited about it and adoption is growing significantly and quickly um other products uh for example were in the past have been some of the trend trading strategies so the eth rsi uh has been quite popular as something as a tool that people have used to weather uh the the long long bear market um one of the social traders uh bytree has a pretty popular uh set it's called the bitcoin demand set which will trade

based on fundamentals uh kind of underlying bitcoin and then one that has been growing a lot more is uh there's anonymous uh trader called cryptocat uh he or she created a set called uh the greed and fear index so uh basically if the market is very fearful uh it would buy and if it's uh if it's no greedy it would sell and that's actually one of the better performing ones uh right now so that's been getting some inflows are we fearful right now um i'll have to look at territory i'm not sure right now yeah it feels a little fearful here lately at least in uh in d5 world um felix do you have any advice for people

who are buying uh sets and this is an investment advice but i'll give you like a scenario so sometimes i i see people in crypto um buying indexes of some sort uh or buying rsi strategies this sort of thing uh and then getting upset a couple weeks later when they don't immediately perform and then going and trading and selling them do you have any general advice is it important when you're looking at a set to like have a longer term orientation because my understanding is the purpose of a money robot to trade for you is so that you don't make dumb human mistakes but if you then take a whole bunch of these set protocols and then start

trading them like it doesn't seem like you're doing the same thing right and maybe it's even worse so i don't know if you have any thoughts on that but um i think just people need some practical advice there i guess um i mean at the end of the day uh sets are just a tool uh they you know don't completely solve the problem but they just it just automates behavior that you would already do yourself so i mean that's just clearly the way to think about it like and human behavior can you know that's at the end of the day what it takes for you so if you uh yeah so i mean i think that's the easiest way to think about it's just it's not gonna change like who you are on your decisions and so it's it's

really up to you to decide how you wanna operate it's just yeah the automated trading is just things that you would already do yourself but makes it a lot easier and it does it automatically for you indices just make it a lot easier to get a basket than needing to buy all 10 11 tokens and pay all the gas and do all the work and all the hassles so and sometimes you're delegating to a third party to provide oracles or signals about how to make adjustments uh but at the end of the day it's kind of your decision to do whatever and kind of i guess the the user is what owns the the outcome as a result of those decisions well a very wise trader once told me that you can copy somebody's strategy but you can never copy their conviction and i think when we're talking about

money robots you can definitely not copy a robot's conviction because that's what the the product is right that's what the product product is offering it's offering pure strategy but you know you can't get the conviction from it unless you are actually that convicted uh felix thanks for coming on we have two last questions one um one about set and one just about a general defy uh prediction when we close out this year uh in three months oh gosh three months how much value will be locked in d5 oh and d5 um and no no one ever knows these answers but i'm just gonna say uh what is it right now it's 11 so

let's just say 20 billion 20 billion all right nine more billion three months i like it i like it a lot and uh one more question with set uh are you guys hiring any jobs uh we we are we're uh hiring yeah we have an open rec for a smart contract engineer and we're always looking for really uh talented smart people uh you know even if we don't have a job description so get in touch via twitter or telegram or discord and yeah we'd love to talk to you cool if you guys think that you can provide set value hit felix up absolutely felix thank you so much for coming on the ama it's been great to have you in front of the bank list community i guess maybe just last thing

anything uh anything else special coming up you guys have been releasing like mad over the past uh you know three weeks or so anything special you want to drop that we should be on the lookout for in the next weeks to months um yeah i don't we we frankly are just trying to catch up on our breath right now so uh no we do not have uh we don't know what's uh yeah can't say anything there very good well thanks for joining us for this ama it's been exceptional to have you felix appreciate it thanks all right one last note for the bankless community david you have an event coming up and we want the bankless community represented to make sure that um we get

an audience for you uh what is that event what are you gonna be talking about yeah coindesk is throwing an ethereum event which is pretty interesting usually they've been kind of only a little bit into ethereum but now they're going all in uh and so coindesk uh invest ethereum economy october 14th is going to be a ton of d5 people there uh and i am speaking about why ether is such a uniquely compelling asset so something i feel very equipped to talk about so that's going to be a fun talk vitalik is also speaking there and a bunch of your favorite d5 protocols are also going to be speaking there as well defy dad as well we all love him so check them out there is a link in the youtube show notes and you can also use the code bank list to get 25 off of your

ticket if you want to get first row seats for me to shill eth to coindesk well thanks everyone this has been another episode of bank list of course risks and disclaimers everything we talked about is risky this is defy this is not financial advice of course but we are glad you are on the bankless journey with us it's not for everyone but thanks for hanging with us this has been an ama episode with bankless