Decentralizing Blackrock - Mike Taormina (Index Cooperative) - TOKEN2049 London

thanks everyone for uh for coming and listening to me speak and for token2049 for having me um my my name is mike taramina i'm co-head of institutional business for um the index cooperative i'll get into what that is in just a moment first let's take a look at this diagram i saw a lot of these over the last 10 years this is made by cb insights a market intel firm around the vc space based in new york and it's around the unbundling in this case of bank of america or finance all of the various startups that are focused on specific aspects of these large incumbents and they put together you know this is fintech they put it together for unbundling harvard unbundling ups unbundling dupont for ed tech and logistics and chemicals and where i think the teens were all about unbundling due to crypto innovation i think the 2020s are going to be all about decentralizing models and that's exactly what we're going to talk about today decentralizing blackrock which is decentralizing asset management now not to go after blackrock it's their victim of their own success in many ways that's why they're up here that's why bank of america was up there they are the world's largest asset manager managing over nine trillion dollars at this point of aum their ceo has been at the helm since 1988 almost my entire life they do pretty much everything in the asset management space and so what we're wondering is how can a decentralized model kind of turn what they're doing on its head can it be done so a little bit about me real quick i've hit all three stops of the finance highway i've worked in traditional asset management at jpmorgan i then spent the next 10 years in fintech startups most notably co-founding my own common bond a student refinancing platform but now i'm home now i'm home in d5 at the index cooperative and so what is that right the index cooperative is the leading source of on-chain crypto index funds we're a decentralized community of content and growth marketers of technologists crypto experts and tradfy fintech refugees like me all working to make crypto investing simple safe and accessible for everyone the way that we do that is through a product suite that is growing every month that appeals to the different types of folks that are in the crypto space right now on chain we have three products that offer thematic exposure to key crypto themes so the first is our flagship product the d5 pulse index dpi gets you exposure to decentralized finance we have the metaverse index which gets you exposure to entertainment sports music all of the things that are coming onto virtual worlds we have the data index is our newest product that gets you exposure to web3 applications that are going after uh web 2 in in all things data so decentralized oracles decentralized queries um decentralized file storage etc we have a product that we did with bankless called the bed index that gets you exposure to bitcoin ethereum and decentralized finance via our dpi product in an equal weighted fashion and then we also have products for active traders and that's where our fly series comes in we have a product for bitcoin and product for ethereum where you get 2x leverage on chain you buy a single token and you get the experience of having a collateralized depth position on compound you don't have to worry about it you buy the token we take care of it for you all in our products today have over around 400 million dollars of total value locked or aum to use a traditional metric and if you look at us versus the rest of the space it's very early but we are the leader in the space we are winning and so i think it made sense for us to come out here and talk about what a decentralized model looks like so the question i've posed to myself is how does a decentralized model compare and out-compete with legacy competitors we're not talking about going after what blackrock is doing we're not going to start doing real estate funds as far as i know right not anytime soon we're more thinking about when they come into the crypto space and they are increasingly how are the models how does our decentralized model going to stand up not just as an alternative but as a preferred option and so that's the question at hand and i'd argue there are five ways that we out-compete the legacy competitors the first way is through decentralized technology we use sep protocol to power all of our products okay set protocol actually birthed index cooperative a year ago this week they're a vc backed fund a pc back startup in san francisco and their technology if you think a lot of talk today is about you know fractionalizing nfts into in many components well set kind of goes the other way so they take the standard ethereum erc20 tokens and aggregate them into a single token what does that do for you that means you just have to purchase one thing to get exposure to many of the underlying components you can save on gas you don't have to worry about picking winners you get diversified exposure and you can launch many products on set any any one of you can go on to set and launch a product but the vision of seth's ceo and co-founder felix feng was that a community behind the products launched on set would give it their best chance to be leaders in the space and that's where index cooperative comes in second reason why we're going to out-compete the legacy competitors as they come on chain is the user experience so what can they offer today the legacy legacy competitors limited partnership funds you heard just a half hour ago talk about etfs trusts right that's what most people are familiar with that's how we've been doing it for decades we argue that we have a much better user experience versus those what do you usually get with those they're high fees you can only get in or out at certain times um or the market might not be open so you can't get out you compare that to and one other thing i'd argue is that sometimes we've seen this there's a disconnect between the net asset value and the market value of the underlying assets it's a problem right sometimes you might be buying at a premium or selling at a discount let's compare that to our user experience it's cheaper it's more liquid in that you can get out at any time so if their news news breaks in china on a sunday night you can get out in the next block you can't do that with the legacy product right and the other thing is that you are in control at the end of the day of the product it is self-custodied so d5 pulse the methodologist for um the deep the dpi product our flagship product they can't access the funds we can't access the funds you are the only ones that access the funds it's very different from a centralized model another thing that's interesting is because you can because you have control over the assets you can actually redeem them for the underlying at any time imagine going to um you know the to any of your brokers like e-trade or schwab with a spy share and unlocking it for the 500 underlying components you couldn't do that but if you have a dpi token you can actually unlock it for the underlying 17 components that are in the index today the uniswap ave compound synthetic etc the third reason we are natively integrated into d5 right this takes um this is this adds a benefit in that we we know all the players in the space we understand the space really well so we attract some of the best methodologists to work with us that's why we have the product with with bankless that's why we work with d5 pulse and we have others in the pipeline that are known entities in the space they know the products so our likelihood of creating something that actually resonates with the end user is really high the other thing is that we have a partnership team that goes around to create extrinsic extrinsic opportunities for productivity what does that mean that means that you can take your dpi and you can blend it out you can create leverage you can stake it you can yield farm with it and that's because we understand these integrations intimately the fourth reason why we're going to out compete the legacy competitors is meta governance and this is turning corporate governance and shareholder proxy voting on its head what does meta governance mean so for all of the dpi that's purchased as we accumulate more and more ave compound uniswap tokens those tokens are voted on not by a 50 person team at blackrock but by all of the holders of the index token everyone who has the governance token for our community that's pretty powerful so it self selects people who are very engaged in steering the course of these really important defy initiatives and proposals so we might even propose something if we wanted to list we wanted to list dpi on ave we can make that proposal we can put that proposal up there we're not going to be able to vote it in the rest of the community needs to do that but that's a way for us to kind of put more value in our products but then we also play a role in steering how a lot of these protocols are going to be managed you know going forward and that really speaks to the number one reason why we're going to out-compete the legacy competitors and that is our community right we have effectively super fans who own the product talk all day about the product they're in the audience right now um and that's something that a blackrock just can't i'd argue just can't compete with because there's so much passion you know behind what we're doing and because it's global it's spreading right so we're word is getting out on our on our product suite and it's all really thanks to the community so five reasons why we're gonna win we have decentralized technology that puts ownership in your hands at the end of the day that technology powers a better user experience we're intimately integrated into the ecosystem so we attract the best methodologists talents we create the best products that allows us to perform our meta governance function and actually help steer the course of the dfi ecosystem and all of that is powered by a community which is our number one asset so as far as what's next i'd argue three things if you want to talk to us we have a booth in the other room if you want to become a product methodologist if you want to actually join the community and contribute the door is always open and if you want to partner with us if you list or integrate d5 products we would love to talk to you thank you very much for your time and i'll see you at the booth excellent thank you so much for that mike really uh interesting to see what you guys have built and what you're executing it's an impressive total value locked as well and uh as i am active in your community i see all the amazing contributions and on the governing side of stuff do we have any questions in the room yes sir are you curious on the index would that be like free available for everyone every one user every project user so can you say that again oh yeah would the index be free for everyone to use uh you get it to the what's the business model right that's how i took the question right so the business model is each of the products has a has a streaming fee you could think of it like an expense ratio does that answer the question one sec sir let me make sure you're mic'd up so for example um i'm developing this other product with other people and i want to like use a free index would this product be like fitting into that category i'm sorry i'm getting like a little feedback here i'm sorry about sorry um so i'm developing a product yeah like a synthetic token so would that with this product be like free available for us to use it's different from synthetics okay in that these are using set protocol you actually have erc20 tokens you know what we'll we'll i'll take this offline and we can we can talk about that at the booth um how do you deal with an index being created and then auto rebalancing depending upon the price of maybe each of one of those tokens in that index how does that work got it right so we'll take dpi for example so the way that our any of our products work there's three key players there is the methodologist that creates the rules for the product there is set that powers it that's the technology and then you have the community behind it that is promoting and doing all sorts of stuff like my group with institutional business so let's take dpi and how does that work once it's launched so every month the methodologist will look at the entire screen of defy tokens apply the methodology rules and come up with a new asset allocation this happens in dpi's case on a monthly basis it can happen more or less frequently it depends on the product the new allocations are posted the third week of the month and then those are executed on chain the first business day of the of the new month and then do you think in the future that that monthly will go weekly daily hourly i mean will we start to see those those times come down or do you think there'll be need for that based on what's in the product pipeline right now um and our aspirations in general to just make things more and more automated yes i would assume that we would be doing that we have looked at products that would be rebalancing as much as weekly and so maybe it does get down to when we're doing it on a daily basis i'm sure you're busy enough with a lot of other things bringing it down to weekly and uh daily and early i'd say right it's all thing you have a question sir i like your t-shirt do you have any more questions okay let's go i'll go use purser hi there um i was wondering how open the protocol is for example could you make a personal index that other people could invest in absolutely it's completely permissionless anyone can go to set protocol and create you know i can go create mic coin i guess the thing is people are unlikely to buy it and that's the difference depends who you are that's that's true that's actually true so that's why we work with methodologists that are known in the space so when they create a product there is some brand behind that product that's why we we worked with bankless to create that crypto starter product right sounds good thank you you got it uh how does it work with the proof-of-stake tokens which are inflationary and there might be bonding period involved how does it work with proof-of-stake tokens that are inflationary i think if i understand that that question correctly like part of the methodology for say um dpi is that it doesn't disadvantage passive holders so there are certain tokens that do have an inflationary component to them we actually steer away from having that because it's to the disadvantage of a passive holder did you have a question there just a question about the governance so with the methodologist is the idea that the methodologist proposes a methodology and then the community people vote on it you got it right so there's there's a whole pipeline so someone will come to our forum or to our product team first ideally we'll talk through the product we'll give them some feedback we'll discuss how it aligns with you know what we think is a strong product it'll then get posted to the forum people will thrash it they'll love it like we'll have a big fight about it it's a lot of fun then it goes up for a vote and the vote is basically do we want to look into this more and oftentimes that first vote is a yes like we really are passionate about these products so we want to we want to dig in deep then it's a question of okay how can we ensure that there's sufficient liquidity we start thinking about things like what my group works on which is you know centralized exchange listings making sure it's supported at custodians etc we have our marketing team that works on the launch and so if it gets through to the second gate and gets at least 60 of the token holders in favor it'll get launched right thank you um could you does it hold non-fungible tokens for example or our digital assets so we have we do have some nft exposure in our metaverse index and there is a product any of you can can check this out you can go to our forums and see like what we're what we're hatching uh there's a product in the in proposal called uh jpeg you know jpg all right so aims to get at the nft scene thank you