Product Proposal: Amun Total Blockchain Index

Blockchains — long heralded as the next chapter of the internet — has come to life over the past two years. The emergence of decentralized finance (DeFi), non-fungible tokens (NFTs), and play-to-earn gaming has created over a $100 billion of on-chain economic activity. Crypto is no longer a bet on the future — the future is already here. For investors, the questions are: how large is this opportunity and what is the easiest way to get exposure?

Equity investors can gain easy access to the stock market through ETFs. ETFs provide easy, low cost, and diversified exposure to investment themes such as retail, tech, and healthcare. An investor with no financial expertise can buy an S&P 500 ETF and know that it will dependably track the performance of the US stock market over decades.

Crypto investors today have no such option. A few years ago, owning Bitcoin and Ethereum was sufficient. But with the explosion of new blockchains, real economic activity on these chains, and vibrant cross chain traffic, simply holding the two largest coins is no longer a sure thing. For investors seeking broad exposure to crypto, there’s a stronger need than ever for a product that provides diversified exposure across all credible blockchain protocols.

To address this need, Amun aims to bring to market two index token products that bring ETF simplicity to crypto investing:

• Total Blockchain Index — a diversified basket of all major blockchain protocols
• Layer 1 TVL Growth Index — a basket focused on emerging blockchains, especially those with strong TVL growth.

Both tokens are diversified, automatically rebalanced, and fully backed by the underlying constituent tokens.

Total Blockchain Index

The Total Blockchain Index aims to be the S&P 500 index of crypto investing. Just as the S&P 500 tracks the performance of the largest 500 public companies in the US, the Total Blockchain Index tracks the performance of the largest public blockchains.

An index of blockchain tokens has several benefits. First, it answers the age old question of “which chain should I invest in?” Blockchain technology is highly technical, rapidly evolving, and difficult to predict. A comprehensive index of blockchain protocols ensures that regardless of which blockchains succeed, investors have adequate exposure.

Second, because decentralized applications pay transaction fees to use the underlying blockchain, blockchains generally accrue value in proportion to the level of economic activity it enables. Thus this index doesn’t just track blockchain token prices, it provides indirect exposure to total on-chain economic activity without having to directly own application tokens.

Composition

We expect the Total Blockchain Index to be initially composed of around ten protocols, expanding to over twenty over time as bridging infrastructure and liquidity improves. The above composition shows what the index would look like using twenty tokens today.

Methodology

• The index selects the ten largest smart contract blockchains by market capitalization, expanding to twenty over time.
• The constituents are weighed based on market capitalization
• The protocol acts as a platform for smart contracts or blockchain development. Layer 0, Layer 1, Layer 2 protocols are eligible for inclusion.
• The index is rebalanced monthly

Considerations

• We have excluded Bitcoin from this index as its primary function today is hard money and it does not serve as an application platform. By market capitalization it would also dominate the index. Bitcoin is easy to acquire and hold — we don’t feel like this index adds value by including BTC.
• Ethereum today dominates on-chain activity and thus it presently dominates this index. We considered other weighing functions (such as square root of market cap), and while that provides a more even distribution among names, it also increases exposure to newer, less proven protocols. Being the bell-weather index, we feel market-cap weight is more neutral. Should other protocols over take Ethereum, that would be reflected in time.
• To create this index it will be necessary to use tokens bridged and custodied by third party bridges such as AllBridge, Relay, and Wormhole. Bridges increase technical and security risk.
• To be comprehensive, we include layer 0 and potential layer 2 tokens as the future of blockchains will likely span many layers of the stack.

Feedback

We would love to hear from the community on the utility, methodology, and composition of the Total Blockchain Index. Please share your thoughts in the comments section below or reach out on Discord, Twitter, or Telegram.