Kuiper Finance

Kuiper, a permissionless protocol for creating indexes, launched on February 1st on the Ethereum mainnet. The team behind it calls it a soft launch.

The index tracks a range of financial assets and often has an associated financial product such as a fund or token that allows investors to access that basket of assets. ETFs are such financial assets in traditional finance and they have grown into a $9 trillion industry. Many tokenized index projects have been launched in DeFi, but Concourse Open co-founder Scott Lewis argues that there is still a lot to be done.

“Currently, there is no credible neutral protocol for tracking an index, and being able to track an index is an essential feature for any financial system,” Lewis, a member of the team that launched Kuiper, told The Defiant in a Twitter private message. "We believe this feature should exist as a public protocol."

Although the project has been triple tested by the Code4rena project (a project started by Scott Lewis, one of the people involved in the launch of Kuiper), it has not yet been tested in a live environment. In a draft blog post provided by The Defiant ahead of time, the team wrote that “it is not possible to understand the level of security of a protocol until it has started working with real money and has been tested by users, as well as white hat and black hat hackers, who may want to hack it."

Indices usually have rules for balancing the relative value of the constituent assets. So, for example, if one asset rises significantly in price, it is either exchanged for other assets in the index, or new investments in the index are directed to exactly the assets that need to be replenished in order for the overall portfolio to return to balance (but become more expensive as a whole ).

The situation is even more complicated with indices in decentralized finance, because many assets in this area perform unusual functions, such as collecting fees, collecting other tokens, rebase (rebase) or grow on their own. All of these features can create risks for smart contracts.

“Kuiper allows any standard 'defi safe' ERC-20 index to be included,” Lewis said, citing some more complex tokens such as NFTX's xPUNK, Compound's cUSDC, and Convex's cvxCRV as likely tokens to be supported. It will also support tokens that have been connected to other chains. “Deflationary tokens, rebasing tokens and other exotic tokens will not be supported,” he added.