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What is The DeFi Pulse Index Set's Methodology?
What is The DeFi Pulse Index Set's Methodology?

Understanding what assets are included in the index and why?

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Written by Felix Feng
Updated over a week ago

This Index Set is managed by DeFi Pulse and they have created a strict methodology defining what types of assets may be included in the Set and when the Set is rebalanced to reflect the most up to date market conditions.

Inclusion Criteria for DP DeFi Index:

  • The token must be listed on Ethereum.

  • All tokens must be bearer assets.

  • Tokens held by the index may not be wrapped or synthetic tokens.

  • Tokens held by the index may not represent options or futures.

  • Tokens held by the index may not represent physical world assets.

  • Tokens held by the index may not represent claims to other tokens on blockchains other than Ethereum.

  • The dApp associated with the token must be listed on DeFi Pulse

  • The dApp associated with the token must be launched and functional for at least 180 days before its associated token may be included in the index.

  • The token must be freely circulating for at least 30 days before it is included in the index.

  • The token supply must be reasonably predictable over the next 5 years.

  • The current circulating token supply must be at least 5% of the projected token supply in 5 years.

  • The dApp, token, and founding team must be widely considered legitimate.

  • The dApp and token follows best practices concerning the security and safety of the protocol and post-incident management. Alternatively, a token may qualify if 1) the associated dApp and token has been unchanged & operational for a significant time without a security incident, 2) the identity of the developer(s) of the dApp and token are publicly known and is considered to be a security expert, or 3) the dApp and token undergo sufficient community-led audits before changes in the dApp or token are pushed to production.

  • The dApp associated with the token must be sufficiently decentralized through multi-signature contracts of several community members or be entirely controlled through the voting of token holders.

  • The dApp associated with the token must be directly related to Decentralized Finance (“DeFi”) as a lending platform, exchange, synthetic asset platform, prediction market, cross-chain service provider, asset management platform, options platform, futures platform, or other relevant service.

Weighting Methodology

  • The price per token and circulating supply were taken on September 8, 2020 from CoinGecko. The price per token multiplied by the circulating supply determines the circulating market cap. Each position is weighted by its relative circulating market cap to other positions in the index.

  • The index is re-weighted on the first day of every month.

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