Introducing the Index Coop Large Cap Index (ic21) powered by 21.co Wrapped Assets

Until now allocating capital across chains has been challenging. Users wishing to move digital assets from one chain to another or diversify and rebalancing across multiple chains faced a multi-step process with high transaction costs. That’s all changing with the Index Coop Large Cap Index (ic21) powered by 21.co Wrapped Assets. ic21 is an onchain index token that contains the top ten crypto assets.  The weighting of the underlying tokens is determined by square root market capitalization to avoid overweighting towards BTC and ETH. In order to achieve seamless cross-chain diversification, non-EVM assets, such as ADA and SOL, are included via the creation of new 21.co Wrapped Tokens. These tokens use a fully collateralized custodial model similar to wBTC or USDC.

In this post, you will learn:

• The Underlying Tokens of the Index Coop Large Cap Index 
• The Methodology for the Index Coop Large Cap Index

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The underlying tokens 

At launch, the Index Coop Large Cap Index will be composed of ten underlying assets: 

• Bitcoin (BTC)*
• Wrapped ETH (WETH)
• Binance Coin (BNB)*
• Ripple (XRP)*
• Cardano (ADA)*
• Solana (SOL)*
• Litecoin (LTC)*
• Polkadot (DOT)*
• Polygon (MATIC)
• Bitcoin Cash (BCH)*

* 21.co Wrapped Assets

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These ten tokens represent the most substantial and successful crypto projects operating today, jointly amassing a market capitalization of over $860B USD. 21.co has created wrapped versions of these assets that are not native to Ethereum main net, which are backed 1:1 and custodied with Copper.

The protocol 

The Index Coop Large Cap Index token is built on Index Protocol and benefits from the same battle-tested infrastructure as other Index Coop products like DPI, icETH, and dsETH. ic21 will also be one of the first products to rebalance via auctions, a new capability exclusive to Index Protocol 

The wrapped assets 

21.co Wrapped Tokens rely on 21.co’s proprietary operating system, Onyx, to power the mint-and-burn redemption process, which has been adapted for onchain tokens. All underlying tokens are held in cold storage by institutional custodians, offering separation between the issuer and the native blockchain token. Operations are executed by approved and verified institutions that can mint and burn tokens to maintain their peg with the underlying assets.

All operations are reviewed with both automated and manual checks conducted over multiple steps, each required to approve the transaction. The keys necessary for sending crypto assets to and from the custodian are shared through Multi-Party Computation (MPC) cryptography with multiple segregated participants.

The first use case of the Wrapped Tokens will be ic21.

Benefits of the Index Coop Large Cap Index

• A More Diversified Allocation
• Auction Rebalancing
• 0x RFQ Support

A More Diversified Allocation

ic21 employs a square root market cap weighting, resulting in less concentration of BTC and ETH and more diversification in the other eight assets. Simple market cap weighting would result in an index weighted heavily towards BTC and ETH. 

While Layer 1 blockchain tokens make up the majority of the index, the methodology permits protocol tokens, Layer 2 tokens, and other categories to be included as long as they measure among the top ten assets. This allows the index to be “evergreen”, evolving over time as the crypto ecosystem grows and changes.

Auction Rebalancing

ic21 will be the first Index Coop product to rebalance via dutch auctions, an innovative upgrade for Index Protocol. Historically, Index Coop products on Set Protocol v2 and Index Protocol function as “takers” when rebalancing and constrained by onchain liquidity sources. With auction rebalancing, $ic21 will function as a “maker” by setting acceptable prices and defining discrete decay functions per component. Once an auction begins, bidders compete against each other to provide the best possible price, buying and selling the underlying components until the index is effectively rebalanced by these third parties. As always, $ic21 token holders do not pay for any gas associated with rebalancing.

For $ic21 token holders, this means more efficient rebalances, less potential NAV decay, and less dependency on the index operator. Auction rebalancing also opens up future automation and efficiency improvements that we will cover in a future blog post.

0x RFQ Support

$ic21 will be the first Index Coop product to launch with 0x RFQ liquidity. For token holders, this means that market makers can offer more competitive quotes and more efficient trade execution for the $ic21 token compared to providing liquidity via DEX. Access to RFQ liquidity will be enabled through the Index Coop app, Matcha, and anywhere else that supports RFQ as a liquidity source when calling the 0x Swap API.

Due to the custodial nature of the underlying wrapped assets, issuance and redemption will not be initially supported for $ic21 token holders in the Index Coop app; therefore, RFQ-enabled swaps will be the primary entry and exit paths at launch. Market-making partners providing RFQ liquidity can issue and redeem $ic21 tokens to ensure the market price does not deviate from NAV. When liquidity for the underlying wrapped assets is available onchain, direct issuance and redemption will be enabled for $ic21 token holders.

Ease of Use

The Index Coop Large Cap Index token provides a simple way to access the largest digital assets in crypto.

Easy access - the Index Coop 21.co Large Cap Index can initially be purchased through the Index Coop app or anywhere else that 0x liquidity can be accessed. This eliminates the need for users to individually procure all of the components to mint ic21 themselves, resulting in significant gas savings.

Passive holding - the Index Coop Large Cap Index allows users to simply buy the token and maintain exposure without requiring any additional effort or involvement. This can be a convenient, hands-off way to track the market.

Understanding the Methodology

The objective of the Index Coop Large Cap Index is to help token holders gain seamless exposure to the largest and most impactful crypto assets in the market. ic21 offers substantive access to L1 & L2 blockchains and blue-chip crypto projects without significantly overweighting BTC and ETH. The methodology also provides diversification across chains without the need to bridge assets.

ic21 uses a square root market cap methodology that applies a 30d Simple Moving Average to market cap data before determining the ultimate weights for the ten included assets. The moving average helps reduce the impact of short-term price movements that may result in unnecessary churn before rebalances.

Token Inclusion Criteria

In order for a token to be included in the index, it must meet the following inclusion criteria:

• the digital asset should not be a staked or derivative version of an included asset
• the digital asset must not be a stablecoin
• the digital asset must not be a meme coin
• the digital asset must not be under individual investigation by a securities regulator
• the protocol or project associated with the digital asset must be open source
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Fees

The Index Coop Large Cap Index will have an annual fee of 0.95% (95 bps) and no mint or redeem fees.

How to Buy / Sell

Non-restricted persons can buy and sell $ic21 tokens in the Index Coop App or anywhere else that supports RFQ liquidity via the 0x Swap API.

A substantial amount of seed liquidity will be deployed by a market-making partner to provide an easy access point for swaps via 0x RFQ; liquidity for larger trades can be coordinated upon request.

More Resources 

Read the forum post
‍Index Protocol explainer
Review the analytics dashboard on Dune
For more information on Index Coop, please visit: Discord | Twitter | Website