In the crypto space, I’ve been fortunate to spot new trends long before they became mainstream. And I still manage to do it - though less often now - as more and more niches, industries, markets, and entire domains are being conquered by a consumer who, frankly speaking, does not care about anonymity, openness, or decentralization: the very triad on which Web 3.0 & Web3 are built. One of these (not so) obvious directions is indexes… One of these (not so) obvious directions is indexes… 2018–2020: The Early Era 2018–2020: The Early Era This is when the first indexes appeared - as simple as a brick. Essentially, they just grouped several assets under one roof using the most basic methodology. Think of something like a DeFi index, a BTC+ETH index, or even BED (BTC, ETH, DeFi). BED This approach is understandable, but it doesn’t really give the index holder anything new. 2021–2024: The Middle Ages of Index Models 2021–2024: The Middle Ages of Index Models At this time, thanks to the rise of programmable assets and NFT 2.0 in particular, more complex index models emerged that: programmable assets and NFT 2.0 Connect tokens via weighting (SoSoValue); Use different yield-generating practices (IndexCoop); And other similar mechanisms. Connect tokens via weighting (SoSoValue); SoSoValue Use different yield-generating practices (IndexCoop); IndexCoop And other similar mechanisms. Take a look, for example, at this calculation methodology. Here, we start seeing a scientific, mathematical approach. During these years, I personally studied the niche of NFT-indexes and uncovered many different solutions - but the real discovery was still ahead… methodology 2025: True Non-Custodial Indexes 2025: True Non-Custodial Indexes Let’s start from afar: what is a new entity in DeFi? It is always an old entity + some useful additional property. Let me clarify with examples: A vault is a combination of several regular and/or yield-bearing tokens “under one roof.” An LP is a combination of 2–8 tokens that work together (for swaps). Perp DEX liquidity storage is essentially a piggy bank of liquidity for a specific exchange. Looping is when you deposit one asset and borrow another (or several) in a recursive spiral — but it still becomes one connected product (as Euler demonstrated with implemented, “stitched-together” strategies). And so on. A vault is a combination of several regular and/or yield-bearing tokens “under one roof.” vault An LP is a combination of 2–8 tokens that work together (for swaps). LP Perp DEX liquidity storage is essentially a piggy bank of liquidity for a specific exchange. Perp DEX liquidity storage Looping is when you deposit one asset and borrow another (or several) in a recursive spiral — but it still becomes one connected product (as Euler demonstrated with implemented, “stitched-together” strategies). Looping And so on. All of this looks great, but it also comes with problems: All of this looks great, but it also comes with problems: For example, bridges used to mint their own wrapped tokens for each transfer, and we ended up with not one USDT but dozens of USDT versions, with liquidity scattered and nearly impossible to track. The omnichain approach + base interoperability protocols (like Circle’s) finally solved this. Vaults introduced curators, and curators started cheating (as always happens when trust is involved). Multilayered and recursive loans like xUSD and deUSD eventually led to massive liquidity collapses. Yet the solution lies on the surface: the curator should be every user who creates or interacts with synthetic entities - not some centralized authority above them. There are other issues too - but not for today. For example, bridges used to mint their own wrapped tokens for each transfer, and we ended up with not one USDT but dozens of USDT versions, with liquidity scattered and nearly impossible to track. The omnichain approach + base interoperability protocols (like Circle’s) finally solved this. For example, bridges Vaults introduced curators, and curators started cheating (as always happens when trust is involved). Multilayered and recursive loans like xUSD and deUSD eventually led to massive liquidity collapses. Yet the solution lies on the surface: the curator should be every user who creates or interacts with synthetic entities - not some centralized authority above them. xUSD and deUSD every user There are other issues too - but not for today. Why not today? Because the biggest problem is the custodial indexes themselves. SoSoValue entered the market with strong liquidity and marketing, but: custodial indexes They design the methodology for evaluating the assets in the index. They decide which specific indexes (RWA, DeFi, DePin, etc.) get created. They can block or limit index access at the interface level. They design the methodology for evaluating the assets in the index. They decide which specific indexes (RWA, DeFi, DePin, etc.) get created. They can block or limit index access at the interface level. Is this correct? In my view - no. At least not if we want to stay aligned with true decentralization. The Core Issue: Custodial Indexes Are Not Universal The Core Issue: Custodial Indexes Are Not Universal It’s like ERP/ERC fragmentation for NFTs: everyone wanted to invent their own model, and we got ERC-404, SFTs, and many other token variations - but instead of decentralization, we ended up with dozens of local solutions. In the era of account abstraction, it’s almost embarrassing to bring this up: unification does not take decentralization away from us - it accelerates it. decentralization accelerates Therefore, the world does notneed a single platform for all indexes.What we need is a single approach for creating non-custodial indexes. not But how exactly do we achieve this? But how exactly do we achieve this? Solving a Simple Problem Solving a Simple Problem Imagine you don’t have thousands of tokens in your wallet (like I do in one of mine), but just 10, and from 7 of them you want to create an index. How do you make it non-custodial? non Here are several options: You can give approvals on each token to some protocol and wait until someone buys the index. Such a solution already exists - though only for purchases - at Reserve. But it feels excessive because in reality, we aren’t creating an index; we are reassembling it according to someone else’s rules. And this only works if the tokens inside the index already have liquidity, which is far from always the case (see examples below). You can use a platform and create an index according to its rules, but as I described earlier, this approach is even more custodial and even less decentralized. Or you can take a different route and try creating a pseudo-wallet that serves as the actual storage of the index. You can give approvals on each token to some protocol and wait until someone buys the index. Such a solution already exists - though only for purchases - at Reserve. But it feels excessive because in reality, we aren’t creating an index; we are reassembling it according to someone else’s rules. And this only works if the tokens inside the index already have liquidity, which is far from always the case (see examples below). You can give approvals You can use a platform and create an index according to its rules, but as I described earlier, this approach is even more custodial and even less decentralized. You can use a platform and create an index according to its rules Or you can take a different route and try creating a pseudo-wallet that serves as the actual storage of the index. take a different route pseudo-wallet You’ve already seen an example of such a wallet in Uniswap v3 - it’s an NFT. A non-fungible token under ERC-721 or a similar standard is, by definition, a unique identifier embedded directly into a smart contract. Uniswap v3 NFT To be honest, I kept going around DAOs, startups, and various projects with this “crazy idea,” trying to explain what and how it works. And here’s the paradoxical conclusion I eventually reached… The Most Liquid Market in the World Is the Market of Illiquids The Most Liquid Market in the World Is the Market of Illiquids Yes, exactly! Consider the poorest population of Earth - billions of people. The real estate they own - from crumbling shacks in favelas and shanty towns to decent apartments, houses, garages, and other small assets - is worth enormous sums. At the lowest estimate: trillions, tens of trillions of dollars. trillions But each individual object is worth very little. But each individual object is worth very little. The same is true for tokens: in 2024 alone, millions of new tokens entered the market, but only a few thousand of them have meaningful liquidity. And NFTs? There, discrete liquidity is the norm. discrete liquidity So where do we put this “long tail”? long tail Throw it away? Probably - that’s how humanity has lived for millennia, and it led us to a point where we do not know how to handle what we create. As a result, we drown in waste while beautiful, clean places shrink in number. The solution is obvious: recycling and resource optimization, including literal waste. recycling and resource optimization This is exactly what a non-custodial(and therefore anonymous, yet open and decentralized) index represents.How to create such an index on theDAO Envelop platform - where I’m a participant and where I managed to push this proposal to implementation - I’ll explain next time. Today, I want to outline the high-level advantages of this approach. non-custodial DAO Envelop proposal First Advantage. True Meta-Indicators First Advantage. True Meta-Indicators Consider how this works. Imagine we have 3 participants, each with their own DeFi index - similar, yet different: Participant 1: UNI, LINK, JUP, AAVE Participant 2: UNI, AAVE, LINK, CAKE, YFI, SKY Participant 3: UNI, LINK, HYPE Participant 1: UNI, LINK, JUP, AAVE Participant 1: Participant 2: UNI, AAVE, LINK, CAKE, YFI, SKY Participant 2: Participant 3: UNI, LINK, HYPE Participant 3: It’s easy to see that UNIhas the highest number of intersections, which means the highest weight in the meta-index.Next come LINK and AAVE, which enter the meta-index with lower weights. UNI Now imagine there are 1,000 such participants. Or 1,000,000. 1,000 1,000,000 The accuracy and robustness of the meta-index keep increasing, while all other tokens can freely remain inside micro-indexes. Visually, you can imagine it like this: Secondly, with these indexes, you can create… meta-stablecoins! Secondly, with these indexes, you can create… meta-stablecoins! Why? For many reasons: To hold multiple yield-bearing and regular stablecoins in one place; To avoid getting censored or frozen by yet another centralized blockchain and/or stablecoin issuer like Tether; To create entirely new markets; To… To hold multiple yield-bearing and regular stablecoins in one place; To avoid getting censored or frozen by yet another centralized blockchain and/or stablecoin issuer like Tether; To create entirely new markets; To… Use your imagination. A meta-stablecoin is not just a pretty wrapper — it’s a necessity in a world where censored assets (like MiCA-compliant stablecoins) are growing in number, and where CBDCs are approaching fast and ready for deployment. meta-stablecoin Third - and this is the most interesting part - you can create a market for open options. Third - and this is the most interesting part - you can create a market for open options. How? You can combine a prediction market (like Polymarket) with a marketplace of such indexes. This gives you not just bets on growth/decline, rotation, transfer, and other index-level actions - but effectively provides a flexible mechanism for forming an option, which, as we know, consists of: consists a premium (cost), an expiration date, an underlying asset, a strike price, an exercise style (American, European, etc.). a premium (cost), an expiration date, an underlying asset, a strike price, an exercise style (American, European, etc.). In this model: The premium is the set of bets. The expiration date is defined by the index creator. The underlying asset is the index itself (the set of assets). The strike price is also set by the creator or the platform (and can even be open-ended). The exercise styledepends on the platform or the creator.That’s it. The premium is the set of bets. The premium The expiration date is defined by the index creator. The expiration date The underlying asset is the index itself (the set of assets). The underlying asset The strike price is also set by the creator or the platform (and can even be open-ended). The strike price The exercise styledepends on the platform or the creator.That’s it. The exercise style In other words, using an index option, you can create all kinds of mechanisms: index option ZKP-Barter: “like-for-like swaps.” You provide some illiquid tokens, I provide mine, and we swap only if conditions are met - for example, if both tokens have had trading activity at least once in the last six months, or if their number of holders exceeds 5,000, or based on any other verifiable onchain data. ZKP-Barter: “like-for-like swaps.” You provide some illiquid tokens, I provide mine, and we swap only if conditions are met - for example, if both tokens have had trading activity at least once in the last six months, or if their number of holders exceeds 5,000, or based on any other verifiable onchain data. ZKP-Barter: “like-for-like swaps.” Shared yield distribution. Suppose the platform hosts 1,000 indexes, and 10 of them explode from near-zero value to $1,000 during period t.Because the platform facilitated the market for these indexes, it takes 10%, another 10% goes to less successful participants, and 80% goes to the index creator.What does the creator gain?They receive tokens from others and increase their chances of a successful pick. Shared yield distribution. Suppose the platform hosts 1,000 indexes, and 10 of them explode from near-zero value to $1,000 during period t.Because the platform facilitated the market for these indexes, it takes 10%, another 10% goes to less successful participants, and 80% goes to the index creator.What does the creator gain?They receive tokens from others and increase their chances of a successful pick. Shared yield distribution. t Many other similar scenarios are possible. Many other similar scenarios are possible. Many other The key point The key point Indexes are an inevitable future of Web 3.0 & Web3 — and it’s up to us to decide what they will be: custodial or non-custodial. Indexes are an inevitable future of Web 3.0 & Web3 — and it’s up to us to decide what they will be: custodial or non-custodial. custodial or non-custodial Where can you already test different approaches to index creation? Where can you already test different approaches to index creation? Here’s a partial list: indexcoop.com → one of the earliest index-primitive solutions; reserve.org → an index-as-a-basket-sale model; coinmetrics.io/cmbi → classical indexes for new markets; glider.fi/onboarding/0 → portfolio-style index management; sosovalue.com → custodial indexes based on their own methodology; vexy.fi/#/veAERO → NFT LP-style indexes from Velodrome; app.envelop.is/indexpage → the first fully non-custodial indexes. indexcoop.com → one of the earliest index-primitive solutions; indexcoop.com reserve.org → an index-as-a-basket-sale model; reserve.org coinmetrics.io/cmbi → classical indexes for new markets; coinmetrics.io/cmbi glider.fi/onboarding/0 → portfolio-style index management; glider.fi/onboarding/0 sosovalue.com → custodial indexes based on their own methodology; sosovalue.com vexy.fi/#/veAERO → NFT LP-style indexes from Velodrome; vexy.fi/#/veAERO app.envelop.is/indexpage → the first fully non-custodial indexes. app.envelop.is/indexpage For further reading, I recommend my earlier articles: For further reading, I recommend my earlier articles: Decentralized Liquidity: The Way It Should and Could Be. Programmable Assets and NFT 2.0 as the Foundation of Non-Custodial Indexes. The Core Article on Web3 Indexes. Decentralized Liquidity: The Way It Should and Could Be. Decentralized Liquidity Programmable Assets and NFT 2.0 as the Foundation of Non-Custodial Indexes. Programmable Assets and NFT 2.0 as the Foundation of Non-Custodial The Core Article on Web3 Indexes. The Core Article on Web3 That’s all for now. Next time I’ll tell you how to tokenize your illiquid assets, and for now - See you! See you!
