[Proposal] Low Cost Index

Sigma
#1

Author: Bedon292 (Template stolen from redphonecrypto’s DEGEN proposal)

Summary: Proposing the launch of a new Low Cost Index as part of the Sigma pilot program.

The Low Cost Index (LOW10)

Category description

As its name implies, the Low Cost Index aims to find assets that have a low cost (<$1) and lower market cap than other Indices (<$1B). There is some definite overlap with other Indices like DEGEN, however the criteria specifically revolves around the share price. If a token is already involved in to many other indices the community could decide to now allow it in this one as well. Market caps range from $100 million to $1 billion. If a token’s market cap or share price 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. In the event that a token in the index is compromised or impacted by a bug, trading of the LOW token should 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, Snapshot, and Discord. The Sigma committee can add or remove tokens from the index or alternate list regularly based on community feedback. Examples 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 outgrowing the parameters of this index. Community members can propose adding or removing a token from the active index or the alternate list at any time.

Token’s criteria

The index has the following criteria for inclusion:

  1. The token has a market cap ranging from $100M to $1B
  2. The token has a value ranging from $0.10 to $1.00
  • Once a token is sustaining value above $1.00 governance should start to phase it out in favor of an alternative.
  • Should not allow the value to hit $2.00 before being phased out entirely.
  • (I picked $0.10 somewhat arbitrarily as a way to get away from more ‘penny stocks’ which could wildly fluctuate and throw off the balance of the entire pool)
  1. The token does at least $50M in Volume on average.
  2. The token is not a “Stable Coin”
  3. This token is at least a week old.
  4. No major vulnerabilities have been discovered in the token contract.
  5. The token’s supply cannot be arbitrarily inflated or deflated maliciously.
  6. 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.
  1. The token meets the requirements of the ERC20 standard.
  • Boolean return values are not required.
  1. Sufficient liquidity is locked in a DEX (Uniswap, Sushi, 1Inch) market pair between the token and WETH.
  • This does not apply to WETH.
  1. The token is one of:
  • Protocol token for an Ethereum-based project.
  • Governance token for a DeFi project.

The LOW Index Composition

Market caps and volumes pulled from CoinMarketCap Feb 15, 2021

1. Ren (REN)

$887M market cap ($7M REN-ETH Uniswap liquidity) $320M volume

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

2. Loopring (LRC)

$859M market cap ($20M LRC-ETH Uniswap liquidity) $121M volume

Loopring’s goal is to combine centralized order matching with decentralized on-blockchain order settlement into a hybridized product that will take the best aspects of both centralized and decentralized exchanges.

3. Basic Attention Token (BAT)

$789M on market cap ($4.6M in BAT-ETH Uniswap liquidity) $543M volume

BAT, is the token that powers a new blockchain-based digital advertising platform designed to fairly reward users for their attention, while providing advertisers with a better return on their ad spend.

4. Polygon (MATIC)

$515M market cap ($1.7M in MATIC-ETH Uniswap liquidity) $252M volume

Polygon (formerly Matic Network) is a Layer 2 scaling solution backed by Binance and Coinbase. The project seeks to stimulate mass adoption of cryptocurrencies by resolving the problems of scalability on many blockchains.

5. Decentraland (MANA)

$484M ($2.1M MANA-ETH Uniswap liquidity) $173M volume

Decentraland uses two tokens: MANA and LAND. MANA is an ERC-20 token that must be burned to acquire non-fungible ERC-721 LAND tokens. MANA tokens can also be used to pay for a range of avatars, wearables, names, and more on the Decentraland marketplace.

6. Enjin Coin (ENJ)

$439 million market cap ($1.6M in ENJ-ETH Uniswap liquidity) $81M volume

Enjin allows game developers to tokenize in-game items on the Ethereum blockchain. It uses Enjin Coin, an ERC-20 token, to back the digital assets issued using its platform, meaning that items can be bought, sold and traded with real-world value.

7. Ocean Protocol (OCEAN)

$401M ($3.9M OCEAN-ETH Uniswap liquidity) $137M volume

Through Ocean Protocol, publishers can monetize their data while preserving privacy and control, whereas consumers can now access datasets that were previously unavailable or difficult to find. These datasets can be discovered on the Ocean Market, where they can be purchased and later consumed or sold.

8. NuCypher (NU)

$269M ($2.1M NU-ETH Uniswap liquidity) $74M volume

NuCypher is a decentralized encryption, access control and key management system (KMS), encryption service for public blockchains. NuCypher offers end-to-end encrypted data sharing on public blockchains and decentralized storage solutions.

9. Orchid (OXT)

$223M market cap ($1.2M in OXT-ETH Uniswap liquidity) $106M volume

Orchid (OXT) is the native token of Orchid, a cryptocurrency-powered virtual private network (VPN).

10. The Sandbox (SAND)

$160M ($7.4M in SAND-ETH Uniswap liquidity) $185M volume

The Sandbox claims to be a virtual world where players can build, own, and monetize their gaming experiences in the Ethereum blockchain using SAND, the platform’s utility token. It is claimed that players can create digital assets (Non-Fungible Tokens, aka NFTs), upload them to the marketplace, and drag-and-drop them to create game experiences with The Sandbox Game Maker.

The LOW Index Alternates

Storj (STORJ)

$199M ($211k in STORJ -ETH Uniswap liquidity) $145M volume

Storj, pronounced as “storage,” is an open-source cloud storage platform. Basically, it uses a decentralized network of nodes to host user data. The platform also secures hosted data using advanced encryption.

District0x (DNT)

$186M market cap ($255k in DNT-ETH Uniswap liquidity, $890k on SushiSwap) $55M volume

Billed as a “network of decentralized markets and communities,” district0x is a platform that allows users to easily launch their own decentralized platforms which are governed by a decentralized autonomous organization (DAO) structure.

Civic (CVC)*

$318M ($65k in CVC-ETH Uniswap liquidity) $183M volume

Civic is a blockchain-based identity management solution that gives individuals and businesses the tools they need to control and protect personal identity information.

Loom Network (LOOM)*

$105M ($64k LOOM-ETH Uniswap liquidity) $50M volume

Loom Network is a platform as a service that allows Ethereum Solidity applications to be run through side chains.

*Extremely low liquidity, may not be viable candidates.

I am not completely set on the $1 price point, could certainly move that point up a little higher, but I thought it was an interesting starting point. Someone else had mentioned a $1 index as well, so figured I would put it out there as is for now. It would likely increase the list of available tokens, and add some flexibility. Also not thrilled with the name, I just couldn’t come up with anything.

This does have an awful lot of overlap with another idea I had, which was purely a virtual world / gaming index, which is also overlapping the NFT index, but slightly different. I may put something together for that if people are interested.

3 Likes
#2

There is real value in “cheap” coins, this index will most likely do well :slight_smile:
Everyone is like, hey ADA/Stellar/etc is soo cheap I can by so many - no regard to market cap - good stuff.

Imagine if exchanges started quoting Bitcoin in one of it’s smaller denominations…

1 Like
#3

Is there anything specific about it being under 1 dollar? I like the idea of low cost to capture the rapid/initial growth period, but with .10 to 1.00 being the range, I feel like the balance could end up being an issue. Would it change drastically if it was an under $3 or under $5 instead?

1 Like
#4

I think that the price could be more flexible and might even ask if there were enough small USD denominated tokens to do multiple ones if we bumped it up to 5 like say 5Under5 value, 5Under5 Growth or any other reasonable mixing of categories with the general idea being the tokens are currently cheap. You’d probably exclude all the usual stable coins and anything that could be made elastic in supply to change the token’s price.

#5

I like this idea a lot, though I think the price requirement could be more flexible or even done away with entirely. Shouldn’t the focus for an index like this really be on market cap? Also I wonder if it would make sense to focus on just small/mid cap defi projects or small/mid cap NFT projects.

1 Like
#6

As I built the proposal, I kinda started liking the <$1 idea a little less, but it was where I started, so figured put it out there as is and see what everyone else though. The problem with 10 under 1 is that there really aren’t many alternatives. Basically only two of them are viable. So opening up the thread a little more could be good.

@EAsports The $1 was picked mostly arbitrarily, from a psychological standpoint it feels like anything under $1 is treated way different. As I was building it I actually was thinking about moving the cap on entry up to maybe $2-3 area, and then grow out at $5 maybe. I will see about putting a list of tokens together that would fit that bill too. I think that would still keep it mostly separate from DEGEN.

@DefiDiogenes I love the sound of a 5Under5, but think 10 probably gets a better balance, rather than risking more on just 5. Thoughts on 5 vs 10?

@BentoKing I did want to separate it out from DEGEN though, which is focusing on the <$2B area. My though was to keep this specifically the “cheap” ones. But with how much overlap there is on this vs the NFT / VR / Gaming type space, it may be better to just flesh that proposal out. Just took a break, probably end up putting that together in the next couple days though.

#7

Probably but I thought Ten was pushing it but 10 Under 10 could work.

#8

it makes absolutely no sense to base this on the price - as we all know marketcap matters. why not just base it on the marketcap? otherwise, you only support the false perception of newbies that cheap price is cheap price while it might not be the case

#9

My answer to this is actually simple, the goal is to uplift the better projects that fall into this category until they don’t, somewhat similar to the Degen Ten, if you know X amount of people buy/invest/trade tokens based on Y metric then you have the opportunity to make an ETF with rules that make those trades/investments more efficient. It’s not a false perception, I’d actually argue that it’s a part of design mechanisms and tokenomics that goes in deliberately ( the pricing of each token against a base pair) I’m simply suggesting we make buying things you can buy in whole coin form faster and easier and less expensive to have exposure to multiple tokens. But there are multiple ways to evaluate tokens/projects and unless someone suggests a literal “pump and dump coin dex” or “elastic coins that deliberately siphon value away from users index,” I’m not sure we should automatically assume our metrics are more valuable than those who want a whole coin for less fiat. Part of the value of specializing in categories and sectors is that if you don’t like that sector/category you don’t invest in it. Obviously you know rational limits I don’t want there to be a dozen nearly identical indexes being pushed while nobody does anything new but in general I see value in diversity and optionality.