Index Cooperative, a DAO focused on designing simplified tokens to help buyers create their own crypto portfolio, has recently launched a money market index, icSMMT, to diversify its users’ stablecoin holdings.
icSMMT is a fork of Set Protocol v2, an Ethereum virtual machine protocol designed to translate asset management strategies into ERC-20 tokens. Its purpose is to help users with large stablecoin holders to diversify their assets, the pseudonymous kindeagle, a product marketing manager at Index Coop, told Blockworks.
“As we saw with the USDC depeg, there is inherent risk in DAO[s], protocols and those in crypto holding a single stablecoin asset,” kindeagle said.
The Money Market Index is an ERC-20 token incorporating six different yield strategies from protocols Notional, Aave, Morpho and Compound for the three most popular stablecoins: USDC, USDT and DAI.
Each position will be representative of specific lending markets through ERC-4646 vaults — a tokenized vault standard that leverages protocol composability instead of secondary market liquidity.
“Along with diversification, we’re seeking to include stablecoin yield strategies in the Money Market Index that are decentralized, transparent and long-term sustainable,” kindeagle said.
icSMMT is designed so that each stablecoin will be distributed across two protocols with the highest historical lending rates. They note that token holders are expected to earn an annual percentage rate (APR) of 2%-4% in real yield.
Although there is no set purchase amount for icSMMT, the recommended minimum is around $500,000 due to the high gas prices associated with minting the token.
Diversification of DeFi strategies
Index Coop is not the only team that has been looking at ways to diversify DeFi yields.
Origin Protocol has recently revealed OETH, an ERC-20 token that can help its holders earn rewards almost immediately through its positive rebasing mechanism.
OETH is designed in a way so that staked ether can be spread across various strategies, operators and jurisdictions, similar to icSMMT.
Underlying collateral used to mint OETH will be paired with ETH and used as liquidity for multiple Curve pools, the company said.
“With OETH, you can earn additional yield on top of the native staking yield that is available from trusted liquid staking derivatives without wasting hundreds of dollars maintaining your position,” Josh Fraser, co-founder of Origin Protocol, noted in a press release reviewed by Blockworks.