Apr 12 | 7 min read
The Data Economy Index (DATA) is a basket of tokens designed to provide accessible, passive exposure to a major Web3 sector, the data economy. It is also the first multichain index to include non-ERC-20 tokens through the integration of Ren Protocol.
DATA includes tokens that provide data-based products and services across blockchains including oracles, decentralized storage, marketplaces, and more. These tokens are inherently multi-chain and grow along with the success of the entire crypto industry.
The data economy is an ecosystem of data-based products and services disrupting the Big Tech data monopolies built over the past 20 years. This data economy methodology guide examines criteria and other key factors including:
In this post, we’ll unbox the Data Economy Index (DATA) and examine the rules and criteria that determine the index’s composition and maintenance, also known as the methodology. But first, let’s get to know the creators of DATA, the methodologists.
Founded by Thomas Hepner and Kiba Gateaux, Titans of Data is the brains behind the DATA index. The organization self-describes as:
A coalition of innovators, operators, and investors in the data economy. We are cultivating a more open, secure, and equitable internet where everyone, including robots, are equals when facing opportunities in Web3. Through our research, we curate innovation to bring the data economy into the mainstream.
As methodologists, they are continuously on the lookout for new opportunities and emerging trends within the Web3 data economy. They are in close communication and collaborate directly with data-centric Web3 protocols. If their mission resonates with you and you are interested in joining the Titans of Data community, join their Discord to get involved.
The first step of the methodology is to determine which tokens should be included in the index. To be eligible for inclusion into the DATA index, each token must meet the following criteria:
Data-based Protocol: The protocol provides data-based services or products.
Ethereum Token: The token must be available on the Ethereum blockchain. This will be revised if the Set Protocol infrastructure becomes multi-chain.
Organic Network Activity or Usage: Protocol must have organic network activity or usage. On-chain transaction volume, Total Value Locked (TVL), and/or revenue paid to service providers are all examples of metrics that can be used to demonstrate organic network activity.
Market Capitalization: Circulating market capitalization must be over $100m.
Decentralized Exchange (DEX) Liquidity: Token must have sufficient DEX liquidity to support inclusion. If a token has insufficient liquidity, it will be removed from the index during the determination phase.
History: Protocol must have at least three months history of operation and its token must have at least three months of price and liquidity history.
Security: An independent security audit should have been performed on the protocol and results reviewed by the product methodologist. In the case that no audit has been performed, the methodologist applies subjective judgment of the protocol based on an assessment of the criteria above and communications with the team.
Safety: In the event of a security issue the methodologist will work with the project team to understand the issue and any effects on DATA holdings. The team is expected to provide users of the protocol with a reliable solution and adequate documentation to ensure transparency about any incidents.
Once the eligible tokens have been identified, the next step of the methodology is to calculate the appropriate weighting of each token. The DATA index uses a circulating market capitalization to determine the weight of each token included in the index. The weight of each token is calculated with this formula:
While the formula might seem complex, it’s simple once you break it down. To calculate an individual token weight, you take the token’s circulating market capitalization (circulating supply multiplied by price), divided by the total circulating market cap for all tokens eligible for inclusion. For example, if Token Z has a circulating market cap of $2B and the total circulating market cap of all eligible tokens is $10B, Token Z would have a token weight of 20% within the index.
Another rule in the weight calculation is an imposed cap on each token’s respective weight at a maximum of 25%. Excess weight for a given token will be redistributed to the remaining components of the index on a weighted basis. This same process will be repeated for every token exceeding the 25% allocation cap. This cap is in place to decrease single token risk and ensure the index is providing a diversified allocation.
Methodologists maintain the quality of the index by quarterly maintenance comprised of two phases:
Determination Phase: The tokens being added and deleted from the index calculation are determined by re-evaluating the inclusion criteria during the final week of the quarter.
Rebalancing Phase: Following the determination phase outcome, the index composition will change to the new weights during the first week of the following quarter.
The index maintenance for Q1 2022 was recently performed and a new token was added, Ethereum Name Service ($ENS). The token was launched on November 8th, 2021, and garnered excitement with a retroactive community airdrop. Since the token and project met all the inclusion criteria, it was added to the DATA index at an initial weighting of 5.74%. To stay up to date on future rebalances, subscribe to the Titans of Data blog.
There are 8 holdings in total, with Filecoin, The Graph, and Chainlink being the top 3 respectively. Current weightings are available here. Here’s a brief summary of each token and its role in the data economy:
Filecoin (FIL): a decentralized data storage network that allows users to sell their excess storage on an open platform. It acts as the incentive and security layer for IPFS (InterPlanetary File System), a peer-to-peer network for storing and sharing data files. Filecoin turns IPFS' storage system into a market where users pay storage providers in Filcoin's native token, FIL, to store and distribute data on the network.
The Graph (GRT): a protocol for indexing and querying data from blockchains. Developers build applications with open APIs called subgraphs to easily access on-chain data that is indexed by a network of node operators. Subgraphs are open source so anyone can use the APIs to build decentralized applications.
Chainlink (LINK): a decentralized oracle network. It serves as a middleware between smart contracts and external data sources, allowing smart contracts to securely access off-chain data feeds.
Basic Attention Token (BAT): a blockchain-based digital advertising and rewards platform powered by BAT, an ERC-20 token, and Brave, a new internet browser. BAT is used as a payment token allowing advertisers, publishers, and users to spend, receive, and earn.
Livepeer (LPT): an open video infrastructure, enabling developers to build video streaming applications. The network is run by a decentralized network of token holding node operators, and powers both traditional and web3 video streaming at reduced prices relative to the existing cloud providers.
Ethereum Name Service (ENS): a naming service for wallet addresses, hashes, and other identifiers. It turns difficult to read strings of data into easily readable addresses. It works similarly to the Domain Name System (DNS) used for websites.
Ocean Protocol (OCEAN): an ecosystem for sharing data and services. It provides a tokenized service layer that exposes data, storage, compute, and algorithms for consumption with a set of deterministic proofs on availability and integrity that serve as verifiable service agreements.
Numeraire (NMR): a crowdsourced hedge fund protocol that makes investments based on artificial intelligence and predictions made by a global network of data scientists.
The DATA index is data-centric, chain agnostic, and is the first decentralized index to capture the growth of the data economy. Beyond those core value propositions, there are 4 major benefits of buying DATA:
Simplicity: a convenient way to gain exposure in a single ERC-20 token without having to constantly research and rebalance a portfolio.
Efficiency: provides reduced gas costs and tax-efficient rebalancing.
Diversity: the volatility of individual tokens is offset by holding an index and quarterly rebalances prevent overconcentration.
Transparency: the index follows a transparent methodology to assess tokens for inclusion and removal.
The DATA index can be purchased at app.indexcoop.com/data and is available on both Ethereum and Polygon. Simply connect your wallet and swap ETH for DATA.
You can also buy DATA directly your favorite decentralized exchange aggregator.
Disclaimer: This content is for informational purposes only and should not be construed as legal, tax, investment, financial, or other advice.
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