SPICE DAO Official
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SPICE DAO Official

Launching the $SCIFI Index

Today, the first index product launched by the SPICE DAO goes live. $SCIFI is a basket of expert-curated low- to mid-cap gems that will be continuously rebalanced.

What is the $SCIFI Index?

The $SCIFI index is an expert-curated, DAO-governed crypto index, represented by a single ERC20 token.

Similar to the development in the traditional financial markets with regards to ETFs, we can observe a similar dynamic in the digital asset space. With the speed of development in the space, selecting the right assets to invest is a daunting task, not only for the average investor, even for those working in the space. This is why we believe that leveraging the experience of those that have broad oversight and deep knowledge of the market to curate an index for the community adds a lot of value.

By offering a single token that represents a multitude of vetted assets, investors can get diversified exposure to a range of selected assets by buying just one token. $SCIFI does not take any fees and is 100% collateralised. That means that all the assets that $SCIFI represents are actually bought and locked into the $SCIFI smart contract. Because $SCIFI is 1–1 collateralised, it can also always be redeemed for its underlying assets.

$SCIFI is governed by a governance token called $SPICE. The SPICE DAO will have far reaching governance powers over a range of index parameters, launching new index tokens and more.

The First Constituents

The constituents of the $SCIFI index are chosen based on project fundamentals, growth potential and expert recommendations. The first basket of SCIFI will include the below assets:

Initial Constituent Weightings

Get more background on the $SCIFI constituents here.

Update, 28 December 2020 — Due to an unexpected minting glitch at Cover, we implemented a non-scheduled liquidation of COVER into USDC, and will replace the constituent in the next scheduled rebalancing. More info to come.

How to Access the $SCIFI Index

SCIFI can be obtained in one of two ways:

  1. Market purchase: $SCIFI is available via Uniswap or any other DEX it might get listed on. Mission Control will also pursue CEX listings, however this will not be completed immediately.
  2. Minting $SCIFI: To do so, you will need to perform a smart contract interaction with a wallet that contains all of the above assets. The details on how this is done can be read in our documentation.

Governance

$SCIFI is governed by a governance token called $SPICE. The SPICE DAO will have governance powers over the $SCIFI index as well as the power to launch and govern new indices. The path to DAO has only just begun and the journey towards full implementation of the DAO will take place gradually. The first DAO vote will take place in Q1 2021.

Methodology

Selection

In order to determine the initial portfolio constituents, Mission Control ranks the assets it picked by market capitalisation from largest to lowest. Market capitalisation is defined as price multiplied by the existing supply of coins at this point in time. From this list the highest ranked crypto assets are chosen as constituents.

Weighting

Each constituent of SCIFI is weighted by its market capitalisation relative to the combined market capitalisation of all constituents. In order to avoid high exposure to any single constituent, a cap of 30% is applied. If a constituent exceeds this threshold, its excess weight will be redistributed to all other constituents proportionately to their existing weights. This procedure is repeated until no constituent exceeds the cap.

Index Level

The index level for SCIFI is calculated by dividing the sum of the current market capitalisations of all constituent assets by the Divisor and multiplying the result by 100.

Reconstitution

SCIFI will be reconstituted each time that a new asset is listed on SCIFI, in order to allocate the correct weight to each constituent asset and to prevent an artificial increase in the index level. Each reconstitution will occur at 5pm [UTC Time] on the fifth day that the new asset is traded on SCIFI. This is designed to reduce the effect of any temporary price volatility in the new asset in the first few trading days after its listing. The index level can be calculated upon reconstitution by including the new asset when calculating the index level (see above), and updating the Divisor.

Asset Price

For the purpose of portfolio construction, the price for each asset is defined as the moving average price of the last 2 minutes. Prices will be sourced from a variety of crypto asset exchanges. If trading is suspended for any reason, $SCIFI will continue to be calculated based on the last traded price before trading was suspended. $SCIFI will be calculated based on new traded prices once trading commences again.

Asset Supply

The supply of each constituent asset is defined as the total number of units that have been created since the first block on the asset’s blockchain, adjusted by stated and/or validated burned, frozen or non-spendable coins/tokens and free-float adjustments. Supply is mostly measured directly by querying a full node running on the blockchain of each constituent asset.

Unlike traditional assets, for digital assets it is difficult to objectively determine the number of units actually available for purchase by investors, because there is no record of identity of the owners or holders of each asset. Therefore, it is difficult to determine whether or not any particular unit of an asset is available for trading. For example, the private keys corresponding to the public address of those units could be lost or destroyed, meaning that these units are not available for trading. Therefore, SCIFI reflects total circulating supply with verifiable, published adjustments.

The full index methodology can be studied here.

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Updates and insights about the developments on SPICE DAO — a decentralised community that launches and governs tokenised investment funds.

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