Application for the DEGEN Index

Authors: Redphonecrypto, 0xBay

Summary: We’re formally proposing the launch of a DEGEN Index as part of the Sigma pilot program.

The Degen Index (DEGEN)

The Degen Index/category is an alpha-seeking index of small- and medium-cap Ethereum-based protocol tokens. An initial list of 30 tokens was curated from the community including many of the most active investors in DeFi. We removed some of the larger-cap tokens from the original list to focus on smaller-cap names and avoid overlap with existing Indexed indicies and products from other leading index platforms. All future index components will be selected with input from DEGEN index holders and the NDX community. We will also encourage everyone who voted on the original DEGEN list to become active in the NDX community.

Category description

As its name implies, the Degen category aims to find higher-risk, higher-reward assets by seeking out emerging projects with exceptionally high growth potential predominantly in the DeFi sector. It’s compents all have strong communities and large total addressable markets. Market caps range from $50 million to $2 billion. If a token’s market cap outgrows the index, it will be automatically replaced with the largest market cap token on the pre-existing list of alternates (described below). In this way, the index will constantly evolve to capture upside from tokens during their most rapid growth phases. To maximize upside potential, interest-earning version of tokens will be held over non-interest-bearing versions when ample liquidity is available. In the event that a token in the index is compromised or impacted by a bug, trading of the DEGEN token will be halted until it can be replaced in order to protect the index’s value. To protect against market manipulation, a token must have sufficient liquidity on its ETH trading pair.

Governance

Governance will handled by Indexed Finance’s existing framework including the forums and Snapshot Discord. The existing Degen Discord group will be encouraged to migrate over to the Indexed Finance Discord where the community can discuss ideas for index components moving forward. Snapshot votes will be held semiannuallyThe Sigma committee will add or remove tokens from the index or alternate list regularly based on community feedback. Votes may be held more frequentlyExamples of changes may be adding new tokens if the alternate list is in danger of being emptied or adding or removing tokens from the index due to material changes in tokenomics or project direction. Community members can also create a proposal to add or remove propose adding or removing a token from the active index or the alternate list at any time.

Initial value of DEGEN

We will target an initial price of $5 for the DEGEN token. During the bootstrapping phase, 100 tokens will be crowdfunded to reach a total value of $500 (or $5 per token). Once DEGEN reaches its target value, the pool will be deployed giving anyone the ability to mint new DEGEN tokens. The pool will maintain capitalization-root-weighting.

Token’s criteria

The index has the following criteria for inclusion:

  1. The token has a market cap ranging from $50 million to $2 billion (as calcuated by a rolling 14-day TWAP on Uniswap).
  2. This token is at least a week old.
  3. No major vulnerabilities have been discovered in the token contract.
  4. The token’s supply can not be arbitrarily inflated or deflated maliciously.
  5. The control model should be considered if the supply can be modified through governance decisions.
    • The token does not have transfer fees or other non-standard balance updates.
  6. The token meets the requirements of the ERC20 standard.
    • Boolean return values are not required.
  7. At least $300,000 worth of Sufficient liquidity is locked in the Uniswap market pair between the token and WETH.
    • This does not apply to WETH.
  8. The token is one of:
    • Protocol token for an Ethereum-based project.
    • Governance token for a DeFi project.
    • Wrapper token for a blockchain’s native currency.

The Degen Index Composition

Market caps pulled Jan. 29, 2021

1. Sushi (SUSHI or XSUSHI)

$1 billion market cap ($1.9 million in SUSHI-ETH Uniswap liquidity)

Sushi is the governance and fee-earning token on the Sushiswap decentralized exchange (DEX) and it’s growing number of crypto-related services. Daily trading volumes on Sushiswap regularly exceed $300 million.

2. THORChain (RUNE)

$763 million market cap ($317,000 in REN-ETH Uniswap liquidity)

THORChain is a decentralized exchange (DEX) that enables trading of native assets across various blockchains (i.e. bitcoin to Ethereum or Polkadot to Monero).

3. REN (REN)

$492 million market cap ($12 million in REN-ETH Uniswap liquidity)

RenVM makes it simple for projects to issue tokens on other blockchains creating inter-blockchain liquidity for decentralized applications (dapps).

4. Curve DAO Token (CRV)

$381 million market cap ($4.8 million in CRV-ETH Uniswap liquidity)

Curve operates a decentralized exchange (DEX) that’s optimized for swapping assets with similiar values (i.e. stablecoin-to-stablecoin swaps or pegged coin-to-pegged coin swaps). Daily trading volumes regularly exceed $100 million.

5. Alpha Finance (ALPHA)

$292 million ($992,000 in ALPHA-ETH Uniswap liquidity)

Alpha Finance Lab is building an ecosystem of DeFi products that will interoperate and accrue value to ALPHA tokens. It’s products include a leveraged yield farming platform and a decentralized exchange (DEX) for perpetual swaps.

6. Ocean Protocol (OCEAN)

$226 million market cap ($2.9 million in OCEAN-ETH Uniswap liquidity)

Ocean Protocol operates a data marketplace where users and decentralized applications (dapps) can swap high-quality data.

7. Mirror Protocol (MIR)

$131 million ($921,000 in MIR-ETH Uniswap liquidity)

Mirror Protocol allows the creation of fungible assets, “synthetics”, that track the price of real world assets. Mirror synthetics are intended to be used as key building blocks in smart contracts, and to bring the world’s assets to the blockchain.

8. KeeperDAO (ROOK)

$111 million ($6.2 million in ROOK-ETH Uniswap liquidity)

KeeperDAO system automates aspects of providing liquidity to decentralized exchanges (DEXes) as well as capturing profitable trades across trading platforms (arbitrage) and liquidating undercollateralized loan positions.

9. API3 (API3)

$101 million ($3.8 million in API3-ETH Uniswap liquidity)

API3 connects smart contracts to real-world data that’s quantifiably secure. This data can be integrated into decentralized apps (dapps) on any blockchain.

10. Hegic (HEGIC or ZHEGIC)

$101 million market cap ($1.4 million in HEGIC-ETH Uniswap liquidity)

Hegic operates a protocol for decentralized, fixed priced options which can be used by end users or integrated into existing decentralized applications (dapps).

The Degen Index Alternates

Reserve Rights Token (RSR)

$333 million ($5.4 million in RSR-ETH Uniswap liquidity)

Reserve is a flexible pool of stablecoins designed to reduce risk through diversification and decentralized governance.

1inch (1INCH)

$285 million market cap ($870,000 in 1INCH-ETH Uniswap liquidity)

1inch operates a decentralized exchange (DEX) aggregator, which allows users to access the best deals simultaneously across a number of popular DEXes in a single trade.

Perpetual Protocol (PERP)

$133 million ($9.4 million in PERP-ETH Uniswap liquidity)

Perpetual Protocol offers decentralized perpetuals with up to 20x leverage for any asset.

Alliance Block (ALBT)

$92 million ($2.4 million in ALBT-ETH Uniswap liquidity)

AllianceBlock is building a regulatory-compliant decentralized capital market.

Badger DAO (BADGER)

$71 million ($603,000 in BADGER-ETH Uniswap liquidity)

Badger DAO aims build the products and infrastructure necessary to accelerate Bitcoin as collateral across other blockchains.

Keep3rV1 (KP3R)

$65 million ($4.4 million in KP3R-ETH Uniswap liquidity)

Keep3r Network is a decentralized network that projects can utilize to streamline their development and outsource any routine, automated tasks.

Polkastarter (POLS)

$61 million ($9.8 million in POLS-ETH Uniswap liquidity)

The Polkastarter protocol enables cross-chain token pools and auctions, allowing projects to raise capital on a decentralized and interoperable environment based on Polkadot.

Axie Infinity (AXS)

$43 million ($793,000 in AXS-ETH Uniswap liquidity)

Axie Infinity is a blockchain-based game with more than 19,000 monthly users. The game is built around its Axie characters. Users can accrue and spend AXS tokens within the game.

88mph (MPH)

$34 million ($4.2 million in MPH-ETH Uniswap liquidity)

88mph operates a decentralized tranched-debt platform that enables use to lend out funds at fixed APYs.

dHEDGE DAO (DHT)

$32 million ($0 in DHT-ETH Uniswap liquidity)

Built on top of Synthetix (SNX), dHEDGE is a decentralized asset management protocol connecting the world’s investment managers with investors on the Ethereum blockchain in a permissionless, non-custodial, trustless fashion.

Whiteheart (WHITE)

$29 million ($4.7 million in WHITE-ETH Uniswap liquidity)

Whiteheart enables hedging contracts that help DeFi users to protect value of their holdings in ETH and WBTC.

Cover Protocol (COVER)

$25 million ($460,000 in COVER-ETH Uniswap liquidity)

Cover operates a decentralized insurance platform that can protect user funds in the event of a hack on a given smart contract platform.

OctoFi (OCTO)

$23 million ($507,000 in OCTO-ETH Uniswap liquidity)

OctoFi empowers users to invest in in thousands of DeFi investment opportunities from a single paltform/dashboard.

Synlev (SYN)

$3.8 million ($171,000 in SYN-ETH Uniswap liquidity)

Synlev enable decentralized trading of leveraged tokens on Ethereum.

33 Likes

Great proposal. Love the picks. Would like to hear others’ thoughts on these and potential risks with some of the smaller cap projects.

2 Likes

Great proposal, appreciate the attention to detail as well. I personally like the majority of the tokens proposed so would be ok with shipping it as listed, although given preference I would probably make the following changes:

-Swap OCEAN for MPH
-Swap HEGIC for BADGER (Hegic index should be coming soon anyways via Molly)
-Swap REN for 1INCH

Aside from that I don’t really see much to critique. Thanks for submitting.

8 Likes

Yeah swapping OCEAN for MPH and HEGIC for BADGER would be really enticing.

Or swap CRV for OCEAN since the other two indices have CRV in them.

OCEAN, MPH, and BADGER exposure would be awesome.

3 Likes

I actually agree w a lot of these suggested token switches. We tried to stay true to the original crowd-sourced list, though (minus the defi blue chips, which would be redundant since they’re in other indicies).

Main idea, though, would be to get a small-cap token to market quickly, then maybe swap out some tokens after we give it some time to perform.

I personally like DHT and 1INCH a lot. But I like the 10 in DEGEN, too, and plan to go long on it pretty aggresively.

7 Likes

DHT and 1INCH would be great adds as well. Really strong list all around.

1 Like

Great work @redphonecrypto love the idea and I’m glad you’ve submitted this to the forum.

I’ve been speaking with redphonecrypto and bay for about two weeks about applying once Sigma is up and I think it’s a great option for our first index with the new experimental program. It will bring in an existing community that has formed around this idea and will help establish that Indexed works with lower cap tokens, especially with the circuit breaker added.

I don’t think we should specify that the updates will be semi-annual considering how quickly this ecosystem evolves. I think it would be best to leave the updates of the sector’s token list to the Sigma committee so that they can act quickly to add/remove tokens from the list (not the pool itself) without needing to wait 5 days for an on-chain proposal, but have it be common practice for the committee to poll the community before implementing changes.

For the market cap, we will need to use the fully diluted market cap if we want to ensure that governance is not needed for basic maintenance, as there is no way to check the float supply on chain.

I do like having the size in the name, but if the plan is to only have a single size I think just DEGEN is fine as well.

1 Like

Great idea. Lets get this going.

Think a 2d timelock with 2w reindex cycles could be optimal, also would like to suggest a lower max mcap, possibly 500m to 1b.

seconded on the idea of the degen index.

Love the idea! Let’s get it!

Great proposal. I like it. BTW, one edge case, if the biggest cap becomes more than 2B, and the top11 is less than 50M, so how will we do in this case, keep the biggest one, or remove it and send in the top11?

Here’s a question that hasn’t come up - what should the icon for this be?

Maybe a pair of dice? :joy:

1 Like

The IBCO used by Molly on HEGIC could be used for fair initial funding … my 2 sats

Great idea. However , i’d prefer to find promissory projects (at small market caps) in the index. Giants already in place don’t interest me (Ocean, Rune …)

I hope we got albt and pols in, instead !

1 Like

There’s already a process in place for fair initialization - basically a crowd-funding contract where you get credited for the value you contribute, and once it hits the balance targets the pool is initialized for trading.

1 Like

Something clown related was what I went with for the Discord logo

I could send you that

3 Likes

Great feedback, ser. I have edited the original proposal with strikethroughs to remove the on-chain voting requirement.

RE: floating supply vs fully-diluted… would it possible for the Sigma committee to swap those out manually for now based on Coingecko floating market caps? (obviously the community could track this). If we went manual, then we wouldn’t necessarily have to take the highest-market cap from the alternate list, either. We could pick the one that seems best-positioned for rapid growth.

Agreed on just using DEGEN since the index size won’t change. I’ve also noticed Twitter cashtags don’t support text plus numbers. It breaks their tagging mechanism so no cashtag appears at all. That’s a small consideration, but one that could have big implications on product virality.

1 Like

Good question. I think the community should keep an eye on the alternate list and make sure it’s never in danger of ending up in that situation. If we had to implement an automated fallback, I’d lean toward keeping the bigger one in until a solid alternate was identified (mainly because the big one would probably have some momentum/price growth happening).

I’m biased, lol, but I do like the clown logo 0x made in our discord.

Dice might turn some people off as it conjures up pure gambling…

If not the clown, maybe a sword or raised fist or we talked about a stylized insular d symbol (ꝺ) or some other ancient-looking d?