The SharesPost Token Index (the “Index”) is designed to be a proxy of the growth of, or losses within, the token market. The tokens in the index represent a broad array of Blockchain solutions for various industries. All of the components of the Index are ERC20 tokens. ERC20 is one of the more prominent standards for transferable tokens used by technologists and market participants. The technology underlying ERC20 tokens - the Ethereum protocol - is different from bitcoin and other protocols that pertain to blockchain and distributed ledger technologies, and neither bitcoin nor other tokens based on non-ERC20 standards are eligible for the Index. Ether (sometimes called ETH) is a virtual currency that is an element of transactions that use the Ethereum protocol, but ETH itself is not part of the Index. It is conceivable, however, that the value of certain ERC20 tokens may be affected by fluctuations in the market value of ETH or by the overall popularity of the Ethereum protocol.
ERC20 tokens are easily transferable tokens that are created to offer a special functionality, often to help establish smart contracts. A smart contract is, essentially, self-executing software code that unlocks a payment once a product is delivered or otherwise automatically completes a transaction once all required conditions are met. Bitcoin, on the other hand, is a one-way transfer of value. Each different kind of ERC20 token offers a different form of functionality, and some are more complex than others. Some ERC20 tokens may see their technology become more widely adopted and used than others, which will affect the price and market capitalization of the tokens themselves.
Other standards are constantly being developed, even standards that use and build upon the Ethereum protocol. It is possible that, in the future, ERC20 could fall out of popularity, and the Publisher reserves the right to adjust the Index to account for such developments, although no such changes are currently anticipated.
The Index uses a market capitalization formula to calculate a total value based on real-time pricing data from a white list of exchanges. Any white list of exchanges reflects certain diligence but does not reflect a formal approval or endorsement of those exchanges for any other purpose than for index calculations.
Index Eligibility Requirements
The Index will include the top 15 ERC20 tokens (the “Index Constituents”) by market capitalization and must meet the following criteria:
- Average market capitalization (*) of at least $75 million in the 12 weeks prior to each quarterly rebalance;
- Average daily trading volume of at least $1 million in the 12 weeks prior to each quarterly rebalance;
- At least 45 days of trading history.
Average market capitalization and average daily trading volume for each index consituent is evaluated on a weekly basis.
- Tokens “pegged” or linked to the value of bank-issued currencies like the US dollar or physical assets like gold
- Tokens that have announced the launch of a new chain (“mainnet”) with the migration expected to occur in the 45 days
- Such other exclusions as the Publisher may determine in its discretion, such as if a token ceases legal trading or has its liquidity drop in advance of the quarterly rebalancing despite otherwise meeting the eligibility thresholds
The index may have fewer than 15 tokens if fewer than 15 tokens meet eligiblity standards. Finally, the Publisher reserves the right to exclude any company from the Index that it believes would undermine the integrity of the Index and its effectiveness in representing a broad array of Blockchain solutions.
(*) Market capitalization is defined by the average daily token price multiplied by the number of tokens in its circulating supply as of each quarterly rebalance, and is as reasonably determined by the Publisher.
The Index uses a market capitalization formula to calculate a total value based on real-time pricing data. Specificially, the Index draws upon the volume-weighted average price of each token from a white list of up to ten (10) exchanges (not every token will necessarily be priced on every exchange that is consulted, so the number may be fewer than 10 in some cases). As a price return index, the Index only considers price movements (token price gains or losses) of the tokens that make up the Index, and does not include dividends, interest, rights offerings and other distributions realized over a given period of time.
As a capitalization-weighted Index, the Index weighs each token’s value relative to its market cap as a share of the Index’s total market cap. This approach insulates the Index from fluctuations in value from smaller-cap tokens versus an equal-weighted calculation.
The formula used to calculate the Index is:
The numerator is the sum of the price of each token in the Index multiplied by an estimated number of tokens circulating on the global market, as reasonably determined by the Publisher.
The denominator is the Divisor. The initial Divisor is time zero price divided by the base level of the Index. Prior to each Index publication, we will adjust the Divisor to ensure that the introduction or removal of a token does not disproportionately impact the existing weightings.
In setting Index eligibility requirements and in calculating the Index, the Publisher will exercise judgment. We may adjust the market capitalization and volume requirements from time to time should market dynamics change. We strive for consistency and will work to ensure that personnel responsible for the Index possesses the required expertise. Furthermore, the Publisher regularly evaluates the appropriateness and accuracy of prior judgments when new data becomes available.