[RFC] Request For Comments: The OPEN Rules Upgrade v1.2

OPEN Stablecoin DTF
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RFC Summary

  • OPEN v1.1 indexes top-10 Universe projects, but exposes diversification, weighting, and clipping risks.
  • Proposed fixes include tighter caps, better efficiency metrics than TVL, and alternatives to zero-clipping.
  • RFC v1.2 invites community input on caps, metrics, growth measurement, and clipping tradeoffs.

How v1.1 Works

  1. OPEN Universe: Anyone can propose additions to the OPEN Universe whitelist. Candidate projects move to OPEN Universe after vlSQUILL Snapshot approval (see process here).
  2. OPEN Rules: Top 10 Universe whitelist projects are indexed following OPEN Rules (v1.1 methodology detailed in Table 1 below)

Projects are tracked on v3 Metrics: $OPEN Universe: by glyph

Table 1: OPEN Index v1.1 Rules

Rule v1.1 Method Data Source
OPEN Universe whitelist inclusion Universe whitelist application → RFC → vlSQUILL Snapshot approval Manual calculation
Number of constituents Up to 10 from OPEN Universe whitelist, ranked by index weights n/a
Rebalancing cadence Quarterly, calendar year n/a
Index Weight 1 20% — Liquidity efficiency = constituent liquidity / OPEN market cap DeFiLlama DEX liquidity; CoinGecko market cap
Index Weight 2 60% — Value efficiency = constituent TVL / FDV DeFiLlama TVL; CoinGecko FDV
Index Weight 3 20% — Growth velocity = YoY TVL growth DeFiLlama TVL
Zero/negative value clipping Negative values clipped to zero; positives only weighted Manual calculation
Component weight bands ≤40% max, ≥1% min at quarterly rebalance; interim resets via governance Manual calculation
Onchain rebalance approval vlSQUILL approved Onchain / Reserve app

v1.1 Problem

  • Diversification risk: permits a single constituent to reach 40% of index weight. Consider the rationale and tradeoffs of cap at 35%, 30% or 25%.
  • Weighting risk: TVL varies too much by protocol mechanics; revenue and P/S proposed as more impactful inputs.
  • Clipping risk: Zero/negative value clipping loses signal; consider deviation from median or worst-performer to preserve full spread or z-score mapping to preserve underperformance without discarding data.

Problems and suggestions are further unpacked in OPEN Rules v1.2, request for comments Jan 2026. If you’d like to add your input via a column to the document, just request access in the google sheet.

Call to action

This RFC invites your input in the comments on four questions:

  1. Diversification risk: What maximum and minimum constituent weights do you recommend, and what are the tradeoffs? Please cite supporting evidence where available.

  2. Weighting risk: For the Value Efficiency weight, how should the numerator and denominator be changed using a standardized, publicly available metric from DeFiLlama without customization? Please provide supporting arguments.

  3. Weighting risk: For the Growth Velocity weight, how should the numerator and denominator be changed using a standardized, publicly available metric from DeFiLlama without customization? Please provide supporting arguments.

  4. Clipping risk: should this approach change, and if so, what alternative is recommended and why? Please include tradeoffs and supporting rationale.

Helpful links

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Response to $OPEN Index Methodology RFC

GM,

I’m honored to respond to this call to action.

Market Volatility & Rebalancing Capacity

In times of volatility and capital expansion, the asset values within the OPEN index will be unpredictable and difficult to rebalance reasonably. To address this, I propose adding stability anchors to the index composition.

Proposed Stability Anchors (10-30% combined allocation):

  • sCRVUSD (Curve’s savings stablecoin)

  • cbBTC (Coinbase wrapped Bitcoin)

  • frxETH (Frax staked ETH)

  • xAUT ( Tether Gold)

Purpose: These assets would absorb unreasonable rebalancing volatility, providing liquidity buffers during extreme market conditions while maintaining yield generation for the index.

Combined weight: 10-30% of total index position

Governance Token Constituents (70-90% allocation):

Individual weight range: 3-19% per constituent

This structure maintains the ability to:

  • Push dominant positions toward quality protocols (up to 19%)

  • Capture assets with speculative growth opportunity (minimum 3% threshold)

  • Preserve diversification across 8-12 governance tokens

Value Efficiency & Growth Weighting Methodology

I support using Fees / Market Cap as the primary value efficiency metric:

Formula:

Value Efficiency Score = (Fees 30d × 12) / Governance Token Market Cap

Why Fees over Revenue: For stablecoin protocols specifically, fees represent total economic activity while revenue reflects only what’s retained post-distribution. Since we’re indexing governance tokens that represent the protocol’s economic engine, fees are the superior measure.

What this captures:

  • Protocol usage intensity — high fees indicate high activity

  • Token valuation efficiency — low market cap relative to fees suggests undervaluation

  • Long-term sustainability — fee generation is essential for protocol longevity

Example:

  • Protocol A: $50M annual fees, $500M market cap → 10% efficiency score

  • Protocol B: $10M annual fees, $200M market cap → 5% efficiency score

  • Result: Protocol A receives 2× the weight from this factor

Clipping Position

DeFi moves fast. The protocol deserves the right to clip without boundaries.

Traditional index methodologies impose gradual rebalancing caps to minimize market impact. However, in a market characterized by:

  • Rapid governance token volatility

  • Protocol exploits and de-pegging events

  • Shifting regulatory landscapes

  • Fast-moving capital flows

…restrictive clipping policies create more risk than they mitigate.

I support uncapped clipping authority for quarterly rebalances, with transparent methodology execution and governance oversight.

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