Feb 16 | 8 min read
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:
Ethereum Token: The token must be available on the Ethereum blockchain. This will be revised if the Set Protocol infrastructure becomes multi-chain.
Market Capitalization: Circulating market capitalization must be over $50m.
History: Protocol must have at least 3 months history of operation and its token must have at least 3 months of price and liquidity history.
Protocol Categorization: Protocol must be in one of the following token categories on Coingecko: Non Fungible Tokens, Entertainment, Virtual Reality, Augmented Reality and Music. More categories will be added as the market matures.
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 assessment of the criteria above and communications with the team.
Staking: Tokens will not be staked at the launch of the index. This is subject to change as liquidity increases and it becomes possible to safely generate yield through staking.
Liquidity: Token must have reasonable and consistent DEX liquidity on Ethereum.
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:
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.
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.
Illuvium (ILV): Illuvium is a decentralized Role Playing Game (“RPG”) powered by blockchain technology and NFTs. ILV is a governance token for Illuvium DAO. The token also sees revenue streams from in-game purchases on IlluviDEX and is used as a reward token for locking liquidity within partnering DeFi platforms to incentivize token liquidity.
Axie Infinity (AXS): Axie Infinity is a blockchain-based universe where players battle, collect, raise, and build a land-based kingdom for their pets. It follows a “play-to-earn” model, meaning players can earn tokens through skilled gameplay and contributions to the ecosystem. AXS is the governance token for the Axie Infinity game.
The Sandbox (SAND): The Sandbox is a community-driven platform where creators can monetize voxel ASSETS and gaming experiences on the blockchain. SAND is the utility token used throughout The Sandbox ecosystem as the basis for transactions and interactions.
Decentraland (MANA): Decentraland is a decentralized 3D virtual reality platform where users can create virtual structures and charge other players to visit them. MANA is the token used to buy and sell in-game items as well as the governance token for Decentraland DAO.
Enjin (EFI): Enjin offers a suite of integrated products that make NFTs easy to create, distribute, and integrate. EFI is the governance token of Engin and the core utility token on Enfinity, Engin’s infrastructure for bringing NFTs to Polkadot. Everyone who participates in the Efinity network—from collators who help maintain it, to users that trade or bid on NFTs—is rewarded with EFI.
Rally (RLY): Rally enables creators and online communities to launch their own cryptocurrencies. Benefits of creating these “social tokens” are two-fold: fans can gain access to exclusive content while creators can unlock new forms of revenue. RLY is the token that powers the Rally network.
WAX (WAXE): WAX is a purpose-built NFT blockchain—it provides launch tools to brands including games, dApps, exchanges, and digital marketplaces. WAX token holders can participate in WAX tokenomics by converting WAXP tokens into WAXE (Wax Economics Tokens) on Ethereum Mainnet.
Audius (AUDIO): Audio is a fully decentralized music streaming platform that aims to democratize the music industry by giving more money and control back to artists and fans by eliminating middlemen like record companies. AUDIO is the governance token of Audius.
Yield Guild Games (YGG): Yield Guild Games is a play-to-earn gaming guild, bringing players together to earn via blockchain-based economies. It manages a treasure mine of game-related NFTs, digital assets, and virtual land parcels that players can employ to increase their earnings and the guild's earnings. YGG is the governance token and the primary currency for payment of services within the YGC DAO.
Decentral Games (DG): Decentral Games is a play-to earn platform where users can play ICE Poker and earn tokens by completing daily challenges and competing against each other on a daily leaderboard. Scoring on the top monthly leaderboard earns DG, the governance token that grants community votes to modify economic incentives and allocate fees that accrue in the Decentral Games treasury.
Whale (WHALE): $WHALE is a social currency that is indirectly underpinned by NFT assets in “the vault” of WhaleShark, one of the largest individual buyers of NFTs in the market.
Terra Virtua Kolect (TVK): Terra Virtua Kolect is a blockchain-powered collectible platform across mobile, AR, and VR that offers social, gaming, and creative experiences. TVK is the governance token for the platform.
Ethernity Chain (ERN): Ethernity Chain is a community-oriented NFT platform that produces limited edition authenticated NFTs from prominent digital artists, athletes and notable figures. ERN is its governance token.
Rarible (RARI): Rarible is a community-owned marketplace for creating, selling, and collecting NFTs. RARI is the governance token for Rarible DAO.
NFTX (NFTX): NFTX is a platform for creating liquid markets for illiquid NFTs. Users deposit NFTs into NFTX vaults and mint fungible tokens that represent a claim on a random asset from within the vault. NFTX is the governance token for the platform.
REVV (REVV): REVV is a play-to-earn motorsport ecosystem. During gameplay, REVV is earned by players who participate in time-trial races and grand-prix tournaments, as well as through staking of the race cars and collecting dividends from track ownership.
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.
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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