Which crypto index funds are worth paying attention to as the decentralized index industry heats up?

In the traditional financial sector, index funds provide a relatively low-risk method for investors seeking stable, long-term returns. Because they track multiple assets, they are inherently diverse. Although investors may not experience the huge gains of well-performing non-index investments, they can also avoid huge losses.

The index is considered an important part of any advanced market. They provide a direct way to gain exposure to the entire industry by investing in a single and highly liquid asset. Given this, one of their most powerful value propositions is efficiency.

In DeFi, index funds are not only efficient, but also inexpensive and require no license. By investing in only one fund, DeFi users can save gas fees, otherwise they will have to buy multiple tokens. On a decentralized network, users can buy and sell assets at any time, which is different from assets in the traditional financial world.

Like other index funds, its main advantage is simplicity: investors do not need to know the complexity of different protocols, the economics of each token, or the historical performance in order to make wise investments. For those looking for a low-maintenance way to gain risk, this is a great way while minimizing risk.

Crypto index funds are not new. In 2017, InvictusCapital launched one of the first tokenized crypto index funds, using seed funds to purchase underlying assets. The Bitwise10 Cryptocurrency Investment Fund (BITW) is composed of the 10 most valuable cryptocurrencies and provides a way for US investors to obtain cryptocurrency risks through traditional brokerage accounts.

However, centralized index funds have counterparty risks, and the counterparties may not fulfill their contractual obligations. Although the decentralization index cannot completely eliminate this problem, it helps to reduce this risk. The operation is automated and executed by smart contracts instead of fund managers. In addition, in the context of decentralized governance, token holders helped to set key parameters and played a role in determining the future direction of the fund.

As the decentralized index industry heats up, some leading projects have emerged:

Which crypto index funds are worth paying attention to as the decentralized index industry heats up?

Cryptex’s TCAP

Cryptex aims to build open source financial solutions for the global cryptocurrency community. Use Ethernet Square smart contract system, Cryptex is to create a center of financial solutions, including TotalCryptMarketCapToken (TCAP). TCAP is an encrypted asset that tracks the value of the entire encrypted market based on the total market value-an index of more than 9,000 assets. TCAP is managed as a decentralized autonomous organization (DAO) and is governed by the ERC20 governance token CTX. Users can mint, trade, become a liquidity provider, or mortgage assets to obtain CTX rewards. CTX holders can put forward governance suggestions, vote on current and future protocol upgrades, or delegate their voting rights to other holders.

Through this agreement, the Cryptex team aims to provide investors with a decentralized solution to obtain real-time price risk in the entire cryptocurrency market. Recently, Quantstamp audited smart contracts for Cryptex.

Which crypto index funds are worth paying attention to as the decentralized index industry heats up?

SetProtocol

Set is a non-custodial protocol used to process a basket of tokens on the Ethereum network. Through Set, anyone can create their own token index. “Set” is an ERC20 token, representing multiple tokens. Users mint their custom tokens by depositing component tokens, and then “untie” to retrieve the tokens. These custom “collections” can be listed on the exchange and are fully collateralized and smart contract ready. They can even be bundled together to create a collection. The agreement is also open, permissionless and trustless.

Which crypto index funds are worth paying attention to as the decentralized index industry heats up?

IndexCoop’s DPI

IndexCooperative is a DAO focusing on the establishment and management of various cryptocurrency index products. Since the products are built on the infrastructure of SetProtocol, they are managed and maintained by INDEX token holders. DeFiPulse Index (DPI) is such a product: a digital asset index designed to track the performance of DeFi tokens. As a capitalization-weighted index, DPI includes popular Ethereum-based DeFi tokens based on specific criteria. Token holders can directly redeem the underlying tokens of the index.

Although DPI is arguably their first and most famous product, they have launched other indices. For example, the Metaverse Index consists of tokens from the NFT, entertainment, virtual reality (VR), augmented reality (AR) and music sectors.

Which crypto index funds are worth paying attention to as the decentralized index industry heats up?

sDEFI

sDEFI is a synthetic index of popular DeFi tokens selected by the Synthetix community, including tokens such as COMP, MKR , SNX, BAL and many other tokens focused on DeFi. Investors need to purchase sUSD through any major DEX or aggregator ( Uniswap , SushiSwap, Paraswap or 1InchExchange), and then obtain sDEFI through the decentralized Kwenta exchange. Since sDEFI is managed by the community, the tokens being tracked and their weights may change in the future. In fact, earlier this year, the Synthetix community decided to rebalance the index to add new tokens, including BOND and RUNE. It is reported that sDEFI is undergoing its fifth iteration, and the community is already developing V6, which will not only adjust the weight, but also include several new DeFi tokens.

What will happen in the future

As financial advisors, hedge funds, institutions, and other professional investors continue to demand DeFi, index funds provide an excellent opportunity to meet this demand. They provide a powerful way to create a diversified portfolio by investing in a single asset. In view of this, with the growth of DeFi, it is not surprising that the demand for exponential growth.

The world’s largest crypto index fund management company Bitwise Asset Management launched the world’s first Uniswap and AAVE funds in August , enabling qualified investors to effectively access each protocol. With more than $1 billion in asset management, this heralds future demand. Galaxy Digital recently announced the launch of the Galaxy DeFi Index Fund, which aims to provide institutional investors with returns based on DeFi performance. TCAP was also recently launched through Gemini, a development project that provides institutional investors with risk exposure and custody. As the index expands its secondary market potential through futures and options, the field may also experience more growth.

There is no doubt that these index funds are helping more mainstream audiences to access the incredible growth of DeFi. At the same time, decentralized, community-managed indexes are becoming more and more common, which is not surprising considering the value of supporting the DeFi field. But one thing is certain: decentralized index funds will continue to exist. And, because they are still a key part of traditional finance, they are likely to have similar importance in DeFi, especially as the industry continues to develop.

 

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/which-crypto-index-funds-are-worth-paying-attention-to-as-the-decentralized-index-industry-heats-up/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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