About Index Products

Index products are some of the most popular financial products in traditional markets. Many investors seek broad exposure to specific verticals within an asset class without dealing with the complexity of managing these positions. In crypto, this need is amplified due to the fragmented ecosystem requiring users to operate across multiple wallets, chains, and platforms to store, stake, and rebalance their assets.

OpenDelta Index Products offer a simple, one-click solution to provide exposure to to broad-market, sector, and ecosystem categories. By tokenizing these indexes on-chain, users can access them through existing wallet infrastructure or other integrated front ends.

Purchasing a single token grants users exposure to a curated basket of assets that are held, managed, and rebalanced by OpenDelta. Importantly, exposure via OpenDelta Index Products includes staking rewards and lending from productive assets when applicable.

The Problem(s)

Despite the immense popularity of index products in traditional finance, they have yet to gain significant traction in crypto-native markets. We attribute this to three key challenges:

1. Timing

2. Inefficiency due to excess decentralization

3. Poor design

Timing

In 2024, DeFi has experienced an explosion of new token issuances. From highly volatile assets to fixed-income opportunities in RWAs and money markets, the sheer number of new tokens and yield-generating mechanisms flooding the market has made it nearly impossible for even the most seasoned crypto investors to keep up.

Crypto-native index products are no longer just about diversification—they are now essential for curation and simplifying the management of underlying assets. Additionally, the growing influx of retail investors through traditional financial service providers reinforces the idea that crypto-native index baskets will ultimately become the primary vehicles through which the majority of retail investors engage with the market.

Inefficiency Due to Over-Decentralization

One of the most critical requirements for index product providers is the ability to efficiently assemble and manage baskets of diverse assets. While blockchain technology has democratized accessibility and transparency, it has also introduced significant challenges.

Today, tokens exist across multiple blockchain networks and layers, making it extremely difficult to build products that can seamlessly and securely operate across these fragmented ecosystems. Yet, cross-chain interoperability is essential for developing high-performing index products. Historically, projects have focused on building fully decentralized index token issuance protocols that function well within their own ecosystems but fail to incorporate external assets, severely limiting their scalability.

Additionally, index products rely on efficient rebalancing and trading mechanisms to accurately track benchmarks, as well as smooth minting and redemption processes. While decentralized exchanges (DEXs) have seen steady growth in both adoption and liquidity, they remain too rigid and underdeveloped to fully support the operational needs of index product issuers and their authorized participants.

Poor Design

A proven formula for creating successful index products consists of three key components:

1. Authorized Parties (Liquidity Providers)

2. Index Issuers

3. Methodology Providers

Traditionally, these responsibilities are handled by three independent entities. However, past and current crypto-native index providers have attempted to take on two or even all three roles themselves. As a result, they stretch their resources too thin, failing to execute any of these functions effectively—ultimately leading to poorly designed and underperforming products.

For an index product to succeed, each of these roles must be executed with the highest level of expertise. A failure in any one of these areas will inevitably result in a subpar product.