NEOPIN has launched the ‘RWA Project Index’ product to diversify cryptocurrencies of RWA projects that are attracting great attention in the global market 👏👏👏👏
1️⃣ Introducing 5 cryptocurrencies of RWA project index products selected by NEOPIN
- MakerDao (MKR)
- Ondo Finance (ONDO)
- Pendle (PENDLE)
- Mantra (OM)
- Propy (PRO)
2️⃣ Concept
NEOPIN’s index product is akin to traditional financial Exchange-Traded Funds (ETFs) but tailored for the decentralized finance (DeFi). This index product allows users to invest in a diversified portfolio of crypto tokens with a single purchase. By holding an index token, users can enjoy the same effect as holding multiple assets simultaneously, mitigating risk through diversification. The primary benefit of using an index product is its simplicity and efficiency; it offers a straightforward way to diversify one’s portfolio, reducing the need for constant monitoring and individual asset management. Furthermore, the index is periodically rebalanced to ensure optimal performance and risk management, providing users with a dynamic and responsive investment tool.
3️⃣ Key Benefits
- Risk Management and Simplified Investment: Index products allow users to spread their investments across a variety of assets, reducing the risk compared to holding a single asset. This helps mitigate the impact of volatility in the crypto market by balancing losses from underperforming assets with gains from better-performing ones. Periodic rebalancing ensures the portfolio remains aligned with its investment strategy, maintaining a specific risk level or following market trends. Investing in an index product simplifies the process of managing a portfolio as index token automatically provides exposure to a selected basket of assets without the user needing to manually select tokens to invest and rebalance their holdings periodically.
- No Research Needed to Follow Trends: Index products are composed of tokens from promising projects selected and analyzed by NEOPIN’s analytics team, based on market trends. Through these index products, users can easily invest in trending and promising assets without the need for independent market research.
- Transparency, Security, and Interoperability: As a decentralized product, transactions and holdings of index tokens are recorded on the blockchain, ensuring both transparency and security. Additionally, users can utilize index tokens within various decentralized finance (DeFi) services. This interoperability allows users to easily trade or leverage their index tokens both within the NEOPIN ecosystem and on external platforms, enhancing the utility and flexibility of their investments.
- Convenient User Experiences: Users can easily participate in the index product with Ethereum (ETH), Tether USD(USDT), or USD Coin (USDC). As users enter the amount, the platform will recommend the best rate option for them to select, ensuring they get the most value for their investment. The NEOPIN Index product is designed to streamline the investment process, making it user-friendly and accessible for all types of investors.
4️⃣ Perfect for You, If You
- Hope to reduce risk through a diversified portfolio: This product is ideal for investors who aim to minimize risk by diversifying their investments across multiple assets.
- Find it difficult to select and invest in individual crypto assets: If you find it challenging to choose and manage individual crypto assets, this product provides a convenient solution with a strict selection on trending tokens in the market.
- Desire to conveniently manage investment portfolios in one go: Simply choose a trending theme and let the index manage the rest for you.
🚨Note: the Index product simplifies the investment process on multiple tokens and the management of the portfolio. Thus, unlike earning products, it does not generate yield and does not guarantee your principal.
5️⃣ How it Works
Our index product streamlines the process of investing in multiple crypto assets. When a user decides to buy or sell the index token, several mechanisms come into play:
- Flash Mint: This feature allows users to mint new index tokens by providing the necessary entry assets (e.g., ETH, USDT, USDC). These assets are then swapped through a decentralized protocol like Uniswap for the tokens that comprise the index.
- Flash Redeem: Users can redeem their index tokens for the underlying assets. They have the option to receive the individual tokens or swap them back for the original entry assets.
- Swap: For smaller transactions, users can swap their entry tokens directly for index tokens or vice versa through swap pools. This feature provides flexibility and convenience for managing investments.
Our product used historical data to backtest and validate the selection of tokens and the rebalancing parameters. This ensures that the allocation has not been overly concentrated in any single asset and each component token has had an effective allocation, promoting a balanced and diversified investment approach.
6️⃣ Backtest (RPI)
This is an example of backtest of RPI and all products will be examined through same process to decide relevant parameters and validate the product details.
Objectives
With selected component tokens, the backtest using historical data has been performed to assure factors as below:
1. Optimal Rebalance Period: How frequent the rebalance needs to be executed.
2. Competitiveness: How is holding the index token would be competitive compared to holding a single component token.
3. Validate the component token performance: Assure no component tokens have behaved in a way that introduces risks to the product.
Methods
1. Used the historical dataset of components tokens during February 2023 to June 2024 from CoinMarketCap.
2. Applied a same rebalance logic with 30% Max. cap and 2% low threshold with assuming no slippage / swap fees included during the rebalancing.
- The 30% max cap is applied in the allocation calculations by averaging raw value and the max cap.
- The allocation lower than low threshold will be set to 0%.
- Any excess weight is redistributed proportionally among the other tokens in the index.
3. Compared the price changes of the certain period to calculate the price change and profit and losses.
Rebalancing Frequency: Monthly vs. Quarterly
Even though prices of component tokens are volatile affecting the market capitalization to be volatile as well, the RPI product follows a square root of market capitalizaion methodology, which makes the allocation weight less volatile. Figure 1 shows that the highest fluctuation of the largest component token, MKR, was within a 2.3% range during monthly rebalances, except for the time when the ONDO token was launched. Considering that performance of the index token does not have a significant difference between monthly or quarterly rebalancing, quarterly rebalancing was determined to be a reasonable period to reduce non-negligible operational costs that incurs during the rebalancing.
Figure 1. Changes in allocation weight of component tokens by rebalancing with different period: monthly (top) and quarterly (bottom)
Monthly rebalancing case with max cap 30% and low threshold 2% applied. The number annotated shows the allocation weights (%) per token. There is no signicant fluctuation of the trends until ONDO was launched.
Quarterly rebalancing case with max cap 30% and low threshold 2% applied. The number annotated shows the allocation weights (%) per token.
📈 Competitiveness Compared to Holding a Single Token
Figure 2 below shows the price changes of the tokens on a logarithmic scale. As demonstrated, diversifying a portfolio can hedge risks when some tokens perform weakly while others perform strongly. For instance, from March 2023 to April 2024, the value of the RPI token would have been increasing monthly by 21.89% to 334.86%, even while the market was relatively flat. This reveals that the index token can provide more stable performance and enable secure diversification of portfolio to hedge.
Figure 2. Comparison of token price changes between index token and its component tokens.
The price is in logarithmic scale for visibility on the price change, and the annotation refers to the price change of the token in % every 3 months.
Index token may incur a potential opportunity cost compared to holding a single outperforming token, such as OM, which performed exceptionally well from November 2023 to April 2024. However, it could also work the other way around in a bear market. For example, the index token was down only 5% when MKR, GFI, and PRO were down 15% to 30% during April to June 2024. This demonstrates the protective benefits of diversification in reducing losses during market downturns.
Figure 2 also suggests that the no components tokens have introduced risks or volatility to the index product in terms of their price changes.
Profit and Loss Comparison
Figure 3 compares the profit and losses by holding the RPI token (red) versus component token (blue) since February 2023. This comparison illustrates that while diversification provides risk mitigation, it might miss out on substantial gains from a single, high-performing asset.
Figure 3. Profit and Loss comparison between index token and component tokens: MKR (top) and OM (bottom)
PnL comparison between RPI and MKR, and the annotation shows the profit / loss rate (%). 100 means 2x of the principal compared to the initial investment time, February 2023.
RPI vs. OM
PnL comparison between RPI and OM, and the annotation shows the profit / loss rate (%). 100 means 2x of the principal compared to the initial investment time, February 2023.
Appendix: Bitcoin(top) and Ethereum(bottom) price from March 2023 ~ June 2024, for the reference of performance of RPI
Bitcoin price from March 2023 ~ June 2024, from CoinMarketCap. Holding ROI around 200%
Ethereum price from March 2023 ~ June 2024, from CoinMarketCap. Holding ROI around 232%
7️⃣ RWA Project Index (RPI)
1. Background
Real World Assets (RWA) refer to physical assets that are tokenized and brought onto blockchain networks, enabling them to be traded, invested in, and managed digitally. These assets can include real estate, commodities, bonds, and other tangible items. The trend of integrating RWAs into Web3 is gaining traction because it promises to enhance liquidity, transparency, and accessibility in traditionally illiquid and opaque markets. By leveraging blockchain technology, RWAs can be fractionalized, allowing smaller investors to participate in markets that were previously inaccessible. Additionally, the immutable and decentralized nature of blockchain ensures secure and efficient transactions, further driving the interest in RWAs within the Web3 ecosystem. Another advantage of RWA products is their ability to provide predictable fixed earning rates, which offer a stable investment option in the otherwise volatile crypto market. This stability is particularly appealing to risk-averse investors seeking steady returns.
The market for RWAs is experiencing significant growth, reflecting the increasing interest and investment in this space. According to Korbit research, the RWA product TVL has grown from $700 million to $5.7 billion by 2023, and The Boston Consulting Group (BCG) has projected that the RWA market will grow to $16 trillion by 2030. Furthermore, the total value of assets managed on decentralized finance (DeFi) platforms that incorporate RWAs has exceeded $1.5 billion, according to DeFi Pulse. This trend is also evident in the number of projects and protocols focused on RWAs, such as Ondo Finance, which has facilitated over $500 million in products backed by real-world assets. These figures highlight the potential and the rapid growth of RWAs in the Web3 landscape.
Thus, to follow the demand of the market, NEOPIN has selected initial component tokens of trending RWA projects as below:
Initial Set Up
Token Contract
Maker 0xe8c6c9227491C0a8156A0106A0204d881BB7E531
Ondo 0x7b1E5D984A43eE732de195628d20d05CFaBc3cC7
Pendle 0x57aF956d3E2cCa3B86f3D8C6772C03ddca3eAacB
MANTRA 0xe46935aE80E05cdEbD4a4008B6ccaA36d2845370
Propy 0xC7Cf089FB4BC91F1981dF2285ca019Ab09A5dd3B
Goldfinch 0x2A4d547Ea2c35D03A501a8BB5d12d81D0a222dC5
The parameters are updated with the data from CoinmarketCap and Uniswap on 17/06/2024. The component tokens may be updated as the market captalization changes over time.
* To consider market situation, rebalancing was performed prior to the launch, and GFI token has been eliminated. Please see the details on NEOPIN docs.
2. Methodology
Our methodology involves selecting and weighting tokens based on their market capitalization. To prevent over-concentration, we cap the allocation of any single token at 30%. Excess weight is redistributed proportionally among the other tokens in the index. The selection criteria include factors like network compatibility (Ethereum ERC20), market cap, liquidity, project history, and security reviews. These standards ensure that only high-quality, stable tokens are included in the index.
If you would like to see the full details, please see [View Details] > [Methodology] of the product details.
Notes: Allocation calculation logic with 30% Max. cap and 2% low threshold with assuming no slippage / swap fees included during the rebalancing. The 30% max cap is applied in the allocation calculations by averaging raw value and the max cap. The allocation lower than low threshold will be set to 0%. Any excess weight is redistributed proportionally among the other tokens in the index. GFI’s allocation has been set to 0% prior to official launch due to the instability of the project and DEX TVL.
3. Maintenance
The RWA Project Index is maintained quarterly, with updates occurring in two phases:
Determination Phase: During the third week of each rebalancing month, we review and determine the necessary changes for the next quarter. This involves analyzing price and market cap data to ensure the index remains balanced and reflective of the current market.
Reconstitution Phase: Adjustments, additions, and deletions of index components are implemented on the first business day of the quarter. This ensures that the index adapts to market changes and continues to provide optimal diversification and risk management.
Find the rebalancing history on NEOPIN docs.
By leveraging these methodologies, the RWA Project Index provides a robust and dynamic investment product that adapts to market conditions while maintaining a stable and diversified portfolio.
8️⃣ Guide
[App] Index Guide
1. Buy
- Go to the [Earn] tab > Select [Index] in the Discover section
- Choose a product you want to invest in.
- Carefully review the product information, and choose the token you want to use to acquire Index tokens. Entry tokens available are ETH, USDT or USDC.
* The minimum deposit is 0.001 ETH, 0.1 USDT and 0.1 USDC
- Enter the amount of your entry token and review the options between Flash Mint and Swap. Choose one option and proceed by selecting the [Mint] or [Swap] button according to your option choice.
* The option with best return in terms of estimated amount and considering gas fees is automatically recommended.
* Flash Mint is suited for large size transactions while Swap is suited for small size transactions.
* USDC does not support the swap option for now.
* As both Flash Mint and Swap options include swaps, users can also set the slippage tolerance as the deposit process includes stable swap between utilized assets. The default is set to 0.5%.
- Review the estimates and enter the PIN Code. Please make sure to review and agree to the “Terms of Use” before a transaction.
- You may check your Index tokens in the [My Token] section.
Notes: If this is your first time using a product with USDT or USDC, a one-time approval is required to proceed with each option: Flash Mint and Swap. >#6.-approve
The Flash Mint option involves swaps using Uniswap. As the transaction progresses, swap fees and slippage may occur due to the execution of logic, which is considered within the price impact value shown in the product details.
If you transact with a large amount, the high price impact may incur. If you proceed with smaller amounts in separate actions, it will reduce the price impact.
2. Sell
- Go to the [Earn] tab > Select [Index] in the Discover section and choose a product you want to redeem from.
- Select the [Sell] tab on the top of the input field and carefully review the product information.
- Enter the amount of your index token and review the options between Flash Redeem and Swap. Choose one option and proceed by selecting the [Redeem] or [Swap] button according to your option choice.
* The option with best return in terms of estimated amount and considering gas fees is automatically recommended.
* Flash Redeem is suited for large size transactions while Swap is suited for small size transactions.
* As both Flash Redeem — ETH and Swap options include swaps, users can also set the slippage tolerance as the deposit process includes stable swap between utilized assets. The default is set to 0.5%.
* Flash Redeem — Components option returns components tokens from vault directly to users and does not include swap in the process.
- Review the estimates and enter the PIN Code. Please make sure to review and agree to the “Terms of Use” before a transaction.
- You may check your redeemed tokens in the [Wallet] > [Balance] section.
🚨Notes: If this is your first time using a product with RPI, a one-time approval is required to proceed with each option: Flash Redeem and Swap. >#6.-approve
The Flash Redeem-ETH options involve swaps using Uniswap. As the transaction progresses, swap fees and slippage may occur due to the execution of logic, which is considered within the price impact value shown in the product details.
If you transact with a large amount, the high price impact may incur. If you proceed with smaller amounts in separate actions, it will reduce the price impact.
[Web] Index Guide
1. Connect your wallet
To use the Index service on the NEOPIN Web, you need to connect your wallet first. Click the [Connect Wallet] button and select the wallet you would like to connect.
For NEOPIN wallet users, please refer to the section below to connect your wallet to the web for full access to the NEOPIN Web services.
▶ Review details on #5.-web-connect-your-neopin-wallet
2. Buy
- Go to the [Index] tab and choose a product you want to invest in.
- Carefully review the product information, and choose the token you want to use to acquire Index tokens. Entry tokens available are ETH, USDT or USDC.
* The minimum deposit is 0.001 ETH, 0.1 USDT and 0.1 USDC
- Enter the amount of your entry token and review the options between Flash Mint and Swap. Choose one option and proceed by selecting the [Mint] or [Swap] button according to your option choice.
* The option with best return in terms of estimated amount and considering gas fees is automatically recommended.
* Flash Mint is suited for large size transactions while Swap is suited for small size transactions.
* USDC does not support the swap option for now.
* As both Flash Mint and Swap options include swaps, users can also set the slippage tolerance as the deposit process includes stable swap between utilized assets. The default is set to 0.5%.
- Please make sure to review the estimates and agree to the “Terms of Use” before a transaction. Then, please confirm the transaction in your connected wallet.
* If you are using the NEOPIN App, a confirmation request screen will appear in the NEOPIN App. After reviewing the transaction summary, click the [Confirm] button in the NEOPIN App and enter the PIN Code to complete the process.
- Once the PIN Code is successfully authenticated, the transaction is complete.
- You may check your Index tokens in the [My Token] section.
Notes: If this is your first time using a product with USDT or USDC, a one-time approval is required to proceed with each option: Flash Mint and Swap. >#6.-approve
The Flash Mint option involves swaps using Uniswap. As the transaction progresses, swap fees and slippage may occur due to the execution of logic, which is considered within the price impact value shown in the product details.
If you transact with a large amount, the high price impact may incur. If you proceed with smaller amounts in separate actions, it will reduce the price impact.
3. Sell
- Go to the [Index] tab > Choose a product you want to redeem from.
- Select the [Sell] tab on the top of the input field and carefully review the product information.
- Enter the amount of your index token and review the options between Flash Redeem and Swap. Choose one option and proceed by selecting the [Redeem] or [Swap] button according to your option choice.
* The option with best return in terms of estimated amount and considering gas fees is automatically recommended.
* Flash Redeem is suited for large size transactions while Swap is suited for small size transactions.
* As both Flash Redeem — ETH and Swap options include swaps, users can also set the slippage tolerance as the deposit process includes stable swap between utilized assets. The default is set to 0.5%.
* Flash Redeem — Components option returns components tokens from vault directly to users and does not include swap in the process.
- Please make sure to review the estimates and agree to the “Terms of Use” before a transaction. Then, please confirm the transaction in your connected wallet.
* If you are using the NEOPIN App, a confirmation request screen will appear in the NEOPIN App. After reviewing the transaction summary, click the [Confirm] button in the NEOPIN App and enter the PIN Code to complete the process.
- Once the PIN Code is successfully authenticated, the transaction is complete.
- You may check your redeemed tokens on your wallet [Balance] section.
🚨Notes: If this is your first time using a product with RPI, a one-time approval is required to proceed with each option: Flash Redeem and Swap. >#6.-approve
The Flash Redeem-ETH options involve swaps using Uniswap. As the transaction progresses, swap fees and slippage may occur due to the execution of logic, which is considered within the price impact value shown in the product details.
If you transact with a large amount, the high price impact may incur. If you proceed with smaller amounts in separate actions, it will reduce the price impact.
Now, let’s go invest in the NEOPIN RWA Index. Index products for ETH and AI are coming soon 👏
Go to NEOPIN RWA Index: https://app.neopin.io/index/
