Introducing Indexed Finance (NDX)

Announcing the beta release of Indexed Finance.

Indexed Finance
7 min readDec 17, 2020

Indexed Finance

Indexed Finance is a project focused on the development of passive portfolio management strategies for the Ethereum network.

Indexed is managed by the holders of the governance token NDX, which is used to vote on proposals for protocol updates and high level index management such as the definition of market sectors and the creation of new management strategies.

Tokenized ETFs

The DeFi ecosystem is rapidly growing in users, total value locked, and the number and variety of assets. As with every growing financial market, the optimal strategy for the average user is to invest in a diverse range of assets. One way to do this is through an exchange-traded-fund (ETF), which is a portfolio that has tradable shares representing ownership of the underlying assets.

Index funds are a particularly useful type of ETF, as they are passively managed using preset rules that, in their typical form, assign weights to assets proportional to their market caps. Index funds allow anyone to easily increase or decrease exposure to a market by trading a single asset, and they consistently out-perform actively managed funds and most individual stocks.

While there has been some recent progress, there are few passively managed ETFs on Ethereum. Indexed Finance is looking to create new and better options for users by building tokenized, passively managed portfolios, and we’re beginning with index pools that track various sectors of the market.

Index Pools

We’re beginning with a system for deploying and passively managing on-chain index pools that adjust to the market over time. We decided to begin with indices because they have historically been the most reliable vehicle for generating returns in growing markets, and we think they can help users gain passive exposure to DeFi.

Unlike traditional index funds, these indices are not static portfolios which simply hold assets until quarterly rebalance days. Index pools are multi-asset AMMs that track particular market sectors, represented as lists of tokens managed by NDX governance. As AMMs, they can generate revenue beyond the growth of their underlying assets, and they can rebalance through swaps which generate fees rather than through large orders on external markets.

The index pool contract is based on Balancer, with some modifications that allow the pool to have target weights for underlying tokens and to adjust the portfolio’s composition toward the targets over time as swaps are executed. This removes the necessity for traditional rebalancing, where a fund has to execute massive trades with external markets to change its composition.

Targets are set with a modification of the traditional market-cap-weighting formula used by most index funds. The formula used for these pools weights tokens by the square root of their market cap, allowing them to be much more representative of DeFi markets where a list of 10 tokens can have an order of magnitude difference between the highest and lowest market caps.

Like traditional index funds, index pools are passively managed. The governance organization has the ability to decide which assets represent a given market sector, but the tokens within that sector are selected and weighted based on their market caps, not governance decisions.

If you want to learn more about how the pools rebalance their tokens, select constituent assets and change which tokens they hold, please see our documentation.

First Pools
The first two pools we’ve launched are CC10 and DEFI5. CC10 is an index pool that tracks a broad range of ERC20 tokens and has a target size of 10, while DEFI5 tracks a more narrowly defined category of tokens and has a target size of 5. For further details on these categories, you can look at their eligibility requirements and included tokens:


The NDX governance organization will be responsible for:

  • Upgrading proxy implementations as needed.
  • Deploying new index pools.
  • Managing the token categories which indices select from and creating new ones.
  • Approving pool controllers that implement new management strategies.
  • Setting configuration values such as swap fees.


Currently, index pools only have swap fees which go directly to the liquidity providers; however, it is possible for the NDX governor to set an exit fee on the current index pools or any future pools to generate passive revenue for the treasury.

NDX Token Distribution

NDX is the governance token for Indexed. The initial supply of 10,000,000 NDX will be distributed as follows:

  • 20% will go to the founders, investors and future team members, subject to vesting periods.
  • 5% will be used to reward keepers who update the Uniswap oracle and trigger periodic updates on the pool controller.
  • 25% will be available for liquidity mining beginning in late December 2020.
  • 20% will be distributed after January 22, 2021 in a manner determined by governance.
  • 30% will be made available to the NDX treasury over the course of 9 months, beginning March 1, 2021.

After June 1, 2021 the ability to mint new NDX tokens will be available to the governance organization. Minting is restricted to a maximum of 10% of the supply (at the time tokens are minted) and may only occur once every 90 days. NDX governance may also disable minting permanently by changing the minter address from the timelock contract to the null address.

Early Governance

In order to ensure the security of the project while distribution is underway, the team will retain the ability to create and vote on governance proposals while our tokens are vesting. This will ensure that we are able to respond if security incidents occur prior to the completion of the initial distribution, but all successful proposals will still be subject to the two day time lock.

Additionally, the voting period on the governor contract is temporarily set to a value which corresponds to about 12 hours in blocks; after January 7, 2021, anyone can call a function on the governor to set the voting period to its permanent value, which is closer to 3 days.


The 5% allocation for keepers is currently held by the timelock contract and will be transferred once we complete development and testing of the keeper bot and contract. Until then we will trigger the updates ourselves, and anyone else can do so on Etherscan.

Liquidity Mining

Users will be able to mine NDX by staking CC10, DEFI5 or the Uniswap LP tokens for their respective WETH pairs. Each pool will receive 625,000 NDX in total.

Smart Contracts


Because of limited availability from auditing firms, the NDX contracts have not been audited by an established security firm; however, the core contracts have been audited by two independent security experts: Daniel Luca, a former auditor for Consensys diligence, and Mudit Gupta, the lead blockchain engineer at Polymath.

Temporary Restrictions

In order to ensure the security of users, we have taken two steps which some may find inconvenient, but which we see as necessary until these contracts have been through a bit of a trial by fire.

First, the index pools have a configurable maximum total supply which restricts the number of tokens that can be minted. We have set this to 25,000 for each pool (at the time of writing, roughly $500,000 per pool) and we will be removing it before staking begins. We’ve added this feature to the contracts to limit the risk to users in the first couple of days after launch, as we’ve seen projects go through quick hype cycles where millions of dollars are deposited and quickly stolen.

Second, we have configured the dapp to only prompts users to approve the exact amount of tokens that will be used in each transaction. You are free to approve larger amounts to save on gas when interacting with the dapp, but you do so at your own risk.


It is important for users to understand that the NDX governance contract, which the team will hold majority control of until the initial distribution is complete, has the ability to change the proxy implementation for most core contracts in the Indexed protocol. All functions executed by the governance contract are subject to a two day time lock, so careful users should monitor proposals submitted to the governor.


This project is still in beta and we advise caution — please do not put more into our contracts than you are prepared to lose if a vulnerability is found and exploited.

We are confident in the security of our contracts and have sought third-party opinions, but since the project is new and has not received extensive scrutiny from hackers or auditing firms, we can not be absolutely certain that no mistakes were overlooked.

Ongoing Development

Our current priorities for development are:

  • Improving the data displays on the website.
  • Finishing development of the keeper bot and smart contract.


We’re excited to release this project after several months of hard work. We’ll continue working tirelessly to improve the app in the coming weeks, and we look forward to building a community with you. We hope Indexed makes DeFi a bit easier for users and that we can develop more interesting and unique systems together in the future.