We’re delighted to announce today that Indexed Finance is the recipient of a grant from the newly-formed Balancer Grants DAO.
The purpose of this grant is to assist the development of an upgrade of the Indexed protocol to support Balancer V2: a move which will ultimately enable increased liquidity via the Balancer Smart Order Router, simplify the handling of lending out underlying assets through Nirn via a dedicated asset manager, and enable the wider integration of our existing and future index pools into the Balancer ecosystem.
Indexed applied for a US$150,000 grant, the first tranche of which — US$50,000 — has been approved and partially disbursed. This grant is milestone-oriented, with the following deliverables:
- The Indexed Metaoracle
At Indexed, we’ve been using an oracle that tracks the prices of tokens using their Uniswap V2 ETH pairs, but this has been a significant restriction on which tokens we can add to our indices.
We intend to address this by building a metaoracle framework that provides the most accurate on-chain prices possible by aggregating data from multiple sources, namely: Balancer V2 oracle pools, Sushiswap, Uniswap V2/V3, Coinbase’s signed price API and Chainlink price feeds.
The result will allow us to score and weight a much wider range of assets in our index pools, and will prove a useful tool for any DeFi project that requires access to a reliable oracle for token prices.
2. The Nirn Asset Manager
Balancer V2 introduced asset managers capable of lending assets to other protocols or depositing them into vaults so that pools can generate passive revenue from their capital rather than have them sitting idle. In order to get the most out of this feature, capital must be deployed to the protocol which gives the best interest rate for each asset. While this can be done manually, it is much more efficient for rates to be optimized in aggregate.
We intend to create a Nirn asset manager for Balancer V2 pools which automatically handles the deposit and withdrawal of eligible assets held by pools into their corresponding Nirn vaults. The Nirn asset manager will provide all Balancer pools access to the best interest rates on Ethereum lending markets without any additional effort.
3. The Balancer V2 ETF Base Pool
The Indexed fork of Balancer V1 allows our index pools to rebalance without active management and with minimal use of external markets, by allowing controllers to set target compositions which are then rebalanced toward over time. Particular highlights are the manner in which new assets are introduced — whereby an oracle is used to price swaps on the token until it reaches a set threshold, after which it is enabled for normal trades — and the post-swap hook that automatically shifts the weight of a current asset in the aftermath of a swap within the pool in the same direction.
The various features supported that the base framework support are both unique to Indexed and ideal for ETFs, as they allow for a portfolio to be rebalanced to an arbitrary new composition without swapping on external markets, requiring a bot to do regular maintenance calls, or giving permissioned access to any individual.
We intend to port the same logic over to a custom Balancer V2 pool, enabling anyone who wishes to create Indexed-style passive ETFs to utilise our work.
We’re very grateful to the Balancer Grants Committee for their patience and willingness to discuss technical details and vision over the past few weeks, and look forward to working with both them and the wider Balancer DAO!
The announcement from their side of this grant can be viewed here.