The token can be used to hedge the market or staked as collateral on lending platforms such as Aave or Compound, or on yield farming protocols. Image: MediumĭPI picks its tokens according to a DeFi project’s market cap and re-weights its index on the first day of every month. The weighting structure of the DeFi Pulse index on September 14, 2020. The token rebalances monthly to reflect the state of the market. Instead of buying all of these DeFi tokens and managing your portfolio yourself, you can just buy a single ERC-20 token that provides exposure to all 10 tokens. Launched in September 2020, the DeFi Pulse Index consists of the 10 most popular DeFi tokens available on Ethereum: LEND, YFI, COMP, SNX, MKR, REN, KNC, LRC, BAL and REPv2. The most popular is DeFi Pulse Index (DPI), which lets you gain exposure to a whole basket of top DeFi tokens through a single token. The value of the index token reflects the average prices of the tokens in the pot, so buying the index token is comparable (ish) to investing in the entire DeFi market. There are several DeFi index fund providers but they generally all work like this: a DAO or algorithm or company picks a bunch of tokens from the world of programmable finance, combines them into a pot, then sells shares in said pot through a single index token. Now, as an alternative to investing in a niche cryptocurrency yield farm your mother’s son’s father’s dog told you would fly you to the moon, decentralized finance ( DeFi) projects are trying to do the same for their own rugged industry.
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