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DPI

Defi Pulse Index

The DeFi Pulse Index (DPI) is a capitalization-weighted index that tracks the performance of some of the largest protocols in the decentralized finance (DeFi) space.

About

Overview

The DeFi Pulse Index (DPI) is a capitalization-weighted index that tracks the performance of some of the largest protocols in the decentralized finance (DeFi) space. The index is weighted based on the value of each token’s circulating supply. The DeFi Pulse Index aims to track projects in DeFi that have significant usage and show a commitment to ongoing maintenance and development.

Methodology

The DeFi Pulse Index methodology weights tokens in the index according to their market cap based on circulating supply. Index constituents are capped at a 25% max allocation to avoid over-concentration. Any excess weight above 25% that would have been allocated to the token is redistributed to the remaining components of the DeFi Pulse Index on a proportional basis.

Token Inclusion Criteria:

The DeFi Pulse Index considers a wide range of characteristics that can be placed in four dimensions. Two dimensions are used to evaluate the token’s characteristics, one dimension is used to assess the project’s characteristics, and one is used to evaluate the protocol’s characteristics. The inclusion criteria are the basis to select what tokens will be included in the index.

Token’s Descriptive Characteristics

  • The token must be available on the Ethereum blockchain.
  • The token must not be considered a security by the corresponding authorities across different jurisdictions.
  • The token must be a bearer instrument. None of the following will be included in the index: Wrapped tokens, Tokenized derivatives, Synthetic assets, Tokens that are tied to physical assets, Tokens that represent claims on other tokens. 

Token’s Supply Characteristics

It must be possible to reasonably predict the token’s supply over the next five years. At least 7.5% of the five year supply must be currently circulating. The token’s economics must not have locking, minting or other patterns that would significantly disadvantage passive holders.

Project’s Traction Characteristics

  • The project must be widely considered to be building a useful protocol or product. Projects focused on competitive trading/holding, having Ponzi characteristics, or projects that exist primarily for entertainment, will not be included.
  • The project’s protocol must have significant usage.
  • The protocol or product must have been launched at least 180 days before being able to qualify to be included in the index.
  • The protocol or project must not be insolvent.

Protocol’s User Safety Characteristics

  • Security professionals must have reviewed the protocol to determine that security best practices have been followed to maintain user assets safe under different circumstances. Alternatively, the protocol must have been operating long enough to create a consensus about its safety in the decentralized finance community.
  • In the event of a safety incident, the team must have responded promptly and addressed the incident responsibly in the aftermath, providing users of the protocol with a reliable solution and the decentralized finance community with adequate documentation to provide transparency about the incident.
  • The selected tokens must have sufficient liquidity across a variety of trading platforms.

The DeFi Pulse Index is implemented using TokenSets on Ethereum mainnet

Maintenance

The index is maintained quarterly (in January, April, July, and October) in two phases:

Determination Phase. The determination phase takes place during the third week of the rebalancing month. It is the phase when the changes needed for the next reconstitution are determined.

Circulating Supply Determination: The DeFi Pulse Index currently references CoinGecko’s circulating supply number. The Circulating Supply is also determined during the final week of the quarter and published before the reconstitution. Additions and deletions: The tokens being added and deleted from the index calculation are determined during the last week of the quarter and published before the reconstitution.

Reconstitution Phase. The index components are adjusted, added and deleted as per the instructions published after the end of the determination phase. New index weights, additions and deletions are incorporated into the index during the monthly reconstitution, which will take place on the first business day of the month. As assets tracked by the index grow, the reconstitution window will expand to more than one day to lower the reconstitution’s market impact.

Fees

Streaming fee: 0.95%

Mint fee: 0%

Redeem fee: 0%

Risks

The following risks may apply to this digital asset: full or partial loss of digital assets due to technical hacks, exploits, or failures that may occur at the protocol or smart contract level of a product’s infrastructure; restrictions placed on the digital assets by regulatory authorities in the end users region; loss of digital assets or loss of access to the digital assets due to decisions made by centralized providers of the underlying assets; full or partial loss of digital assets through standard product operations which can be hampered by unexpected market conditions; full or partial loss of digital assets due to changes to underlying product assets made by the originating protocols; full or partial loss of digital assets due to volatility, correlation, value at risk, and contagion risks; underperformance of digital assets due to deviation from intended methodology; full or partial loss of digital assets due to the volatility of underlying tokens.

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Want to learn more? Enter your details below to unlock the product performance report.