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Exploring Product Revenue Tokens (PRTs), a New Incentive from Index Coop

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The Index Coop is launching its new tokens, such as the High Yield ETH Index (hyETH), with PRTs as a novel incentive.

By: Squiffs Loading...

Exploring Product Revenue Tokens (PRTs), a New Incentive from Index Coop

Alongside the launch of its newest DeFi product, the High Yield ETH Index (hyETH), The Index Coop is introducing a new incentive mechanism called Product Revenue Tokens, also referred to as PRTs.

These PRTs were distributed amongst High Yield ETH Index presale participants, and act as a versatile form of incentive that can incentivize value adding behaviors post token launch also.

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How do PRTs work?

PRTs are erc20 tokens which, when staked, enable the holder to receive a share of a product's revenue, and give presale participants the opportunity to earn additional returns. The amount of PRTs that are distributed to presale supporters is directly correlated to the duration and amount contributed. The Index Coop is continuing to experiment with the mechanism design to optimize outcomes and it is expected to develop and change over time.

After the product launch, PRT holders who have staked their tokens will earn a share of the product's revenue that is directly correlated to the percentage of PRTs they own, meaning if one wallet has 10% of all PRTs staked, that wallet will earn 10% of the revenue generated by that product.

In future, the team aims to use PRTs as incentives for distribution partners, liquidity providers, oracle partners and as incentives to lend against Index Coop products.

Why is Index Coop using PRTs?

PRTs are intended to be a solution to the cold start problem with onchain structured products where future revenue is shared with early supporters of a product with the goal of enabling faster growth, more TVL and higher net revenue.

For Index Coop, PRTs offer an incentive structure without having to give away treasury stablecoins or INDEX tokens. For DeFi users and advocates, they present a multi-faceted approach to investing in protocols.

Combined with presales, PRTs enable Index Coop to identify product demand. Index Coop hopes PRTs will also appeal to distribution partners such as CEXs, wallets and fintechs.

The Index Coop recently secured its first deal with a Top40 CEX for one of its upcoming products, a new twist on a large cap index. CEX’s can act as mutually incentivized PRT holders, as their listings can often increase token inflow volumes, which may drive value back to their PRT holdings.

Launching hyETH with PRTs

The High Yield ETH (hyETH) Index is a tokenized index that provides its holders with exposure to some of the best available yields on Ethereum Mainnet.

hyETH uses its diverse yield accrual strategy to outperform ETH through higher yields. The method of yield farming will rebalance on a monthly basis, to try and maintain a sustainable and strong performance. A more detailed breakdown of the methodology and source of yield can be found here.

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hyETH Implied APY. Source: Dune Analytics

hyETH’s was the team’s first presale, and their RWA index presale started on June 19. Once a presale’s threshold is met, presale supporters will become eligible for the corresponding PRTs. The Index Coop team will retain 70% of the PRTs for hyETH, and 30% will be distributed to the community, meaning 30% of all future revenue sharing is split amongst community PRT holders. For future products, this PRT allocation may change.

The Future of PRTs

Index Coop plans to incorporate PRTs into future launches and potentially retro-actively on legacy products. PRT incentivization can promote other key user behaviors such as liquidity provision, lending and borrowing, and future distributions.

These activations can help the product become more valuable, and lead to increased TVL, and potentially act as a flywheel that leads to more revenue generation for holders.

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