This Metaverse Index (MVI) methodology guide examines criteria and other key factors including:
The Metaverse Index (MVI) is designed to capture the trend of entertainment, social activity and business moving to take place in virtual economies, powered by NFTs and blockchain technology.
MVI methodologists use Piers Kicks’s definition of the “metaverse” from his article “Into the Void,” namely that the metaverse is “a persistent, live digital universe that affords individuals a sense of agency, social presence, and shared spatial awareness, along with the ability to participate in an extensive virtual economy with profound societal impact.” Metaverses built on blockchains base their existence on digital ownership and free markets, two components that differentiate them from the social contract that governs the games and digital platforms of web2.
MVI provides an opportunity to gain exposure to the Metaverse by providing access to a wide range of protocols rather than betting on a single token. In this post, we’ll unbox the MVI and examine the rules and criteria that determine the index’s composition and maintenance, also known as the methodology.
Created by DarkForestCapital and Verto0912, $MVI is the first index product launched from within the Index Coop and not with an external partner as the methodologist. DarkForestCapital has been a member of the Index Coop since its founding in 2020. He initially proposed the Metaverse Index within the first week of the Index Coop’s launch. He has served on the Index Coop’s Treasury Committee and produced an early weekly Index Coop newsletter.
Before launching MVI, Verto0912, another early contributor to the Index Coop, worked in business development before creating MVI. To overcome the low liquidity faced by some of the underlying tokens, Verto amended the weighting calculation in $MVI’s initial proposal. Index Coop enabled the creation of a substack, MetaPortal, which allowed MVI to become a brand in its own right and for its methodologists to become experts in one field, the Metaverse.
The first step of the methodology is to determine which tokens should be included in the index. To be eligible for inclusion into MVI, each token must meet the following criteria:
Once the eligible tokens have been identified, the next step of the methodology is to calculate the appropriate weighting of each token. To arrive at the final weights each month, the methodologists calculate both square root of market cap (price of token x circulating supply) and the aggregate value of DEX liquidity for each token. The square root of market cap accounts for 75% of a token's final weight, with liquidity accounting for the other 25%. This gives liquidity some importance in the calculation, helping ensure the index doesn’t overallocate to something that can't easily be rebalanced through a DEX. Having ample liquidity for the underlying tokens is important for maintaining NAV and preventing large slippage during monthly rebalances.
The weight of each token is calculated with this formula:
TW – token weight in the $MVI
RMCW – square root of market cap weighted allocation
LW – liquidity weighted allocation
Methodologists maintain the quality of the index by monthly maintenance comprised of two phases:
Now that we have examined the methodology behind $MVI, let’s take a look at its 16 holdings. Current weightings are available here. Here’s a brief summary of each token and its role in the Metaverse.
MVI is a great choice if you’ve heard the term “Metaverse,” but you don’t know where to start. It is designed to always hold the largest market cap tokens in the Metaverse sector, from gaming to NFTfinance, marketplaces to platforms, and everything in between. In this way, MVI encompasses the best of the Metaverse without betting on one specific narrative, using risk-adjusted returns through diversification across different areas of the Metaverse, each of which may react differently to the same event.
$MVI can be purchased at app.indexcoop.com/mvi and is available on both Ethereum and Polygon. Simply connect your wallet and swap ETH for MVI.
You can also buy MVI directly via your favorite decentralized exchange aggregator.
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