Introducing The DeFi Pulse Index

Chaz Schmidt
Feb 02, 2022
|4 minutes read
DPI token

DeFi Pulse Index is a capitalization weighted index built on Set Protocol’s new V2 infrastructure consisting of 10 of the most popular DeFi tokens available on Ethereum.

DeFi Pulse has always been proud to be many user’s first steps into DeFi. It often starts with a google search or tweet which leads you down a long, exciting and sometimes treacherous path of learning the ins and outs of the world of decentralized finance. For some, this path is simply too much; there are so many concepts, terms, and protocols to learn that it can be far too easy to hit a wall or stumble along the path. New users want a safe and reliable shortcut into DeFi that they feel safe placing their trust in. The DeFi Pulse Index is a blockchain financial product that lowers the barrier to entry for new users who lack the expertise to gain exposure to DeFi, and provides experienced users with exposure to DeFi through one single asset.

A new DeFi standard the community can stand behind

DeFi Pulse Index is the first of its kind, an index of decentralized finance that isn’t synthetic or a derivative but rather you own the tokens that comprise the capitalization weighted index. Built on Set Protocol’s new v2 infrastructure, DeFi Pulse Index tokens are directly redeemable for its DeFi tokens. Much like our Total Value Locked (TVL) metrics, DeFi Pulse Index is a standard the community can stand behind. Total Value Locked was created to help the community interpret the value locked within the DeFi ecosystem. We see DeFi Pulse Index as a natural progression of what we have to offer to the wider community.

What was the inclusion criteria for DeFi Pulse Index?

The index’s criteria to determine which DeFi tokens are included takes into account many factors. The index utilizes a capitalization weighted index where the value weight is based on a DeFi project’s market cap.

As previously mentioned, DeFi Pulse Index’s goal is to establish a standard that empowers the reputable DeFi projects that make up our community. And so, tokens and their dApps are required to embrace common security and decentralization standards.

As such, any included token and its associated dApp and founding team must be widely considered legitimate. It goes without saying that qualifying tokens and their dApps must follow best practices concerning the security and safety of the protocol and post-incident management.

In order to qualify, tokens must be related to DeFi and be bearer assets listed on Ethereum. Tokens held by the index may not be wrapped or synthetic tokens nor can they represent options, futures, physical world assets, or claims to other tokens on blockchains other than Ethereum. Additionally, projects associated with included tokens must be listed on DeFi Pulse and must be launched and functional for a minimum period of time before it may be included in the index. Additionally, the token must have a minimum circulating supply as well as a reasonably predictable total supply.

See here for more information regarding the DeFi Pulse Index Construction.

What is the initial weighting criteria?

The index utilizes a capitalization weighted index where the value weight is based off of a DeFi projects market cap. The price per token and circulating supply were taken on September 8th, 2020 from CoinGecko. Then, the price per token was multiplied by the circulating supply to determine the circulating market cap. Each position is weighted by its relative circulating market cap to other positions in the index.  The following tokens are included in the index at launch:

  • YFI
  • LEND
  • SNX
  • COMP
  • MKR
  • LRC
  • REN
  • KNC
  • BAL
  • REPv2

Money Legos work better together

It’s no coincidence that nearly all the projects and protocols behind the tokens included in the DeFi Pulse Index interact in some way or another. This entire industry was built through collaborative innovation with each new protocol and smart contract system, or money lego, building on the next. We have plans to onboard further integration partners (wallets, DeFi dashboards, CEXs etc) over time to broaden access to the DeFi Pulse Index and its underlying tokens. The smooth experience of one-click exposure to 10 of DeFi’s top tokens is a vast improvement over having to perform 10 transactions or more and truly makes you feel like you’re living in the future.