Colony Avalanche Index Methodology Explained

Published on: 17.09.2022
Colony Avalanche Index Methodology Explained

Colony Avalanche Index Methodology Explained, is the benchmark index for AVAX and major Avalanche apps.

The index is rebalanced periodically, and its tokens and weights are determined using a strict approach. Colony Avalanche Index Methodology Explained

CAI’s methodology comprises of three key sections:

  • Token inclusion criteria
    a. Project and token characteristics
    b. Token supply requirements
    c. Liquidity requirements
    d. Security requirements
  • Defining asset weights
  • Index maintenance

Every project’s token should have a data feed that they can access through CoinGecko and should have at least 6 months worth of pricing data. They stipulate a minimum of 6 months to ensure that the project has had sufficient time in the market.

  • The project should have a token that is native to Avalanche. This excludes wrapped variants, where the underlying tokens are locked on an alt-L1.

CAI tokens should use the Avalanche network. This removes any vulnerabilities associated with ass et bridges between layer 1 blockchains.

CAI will only invest into projects that are building positive sum applications for the Avalanche ecosystem whether that is in DeFi, GameFi or another category.

  • The project’s token must not have the ability to pause token transfers.

The CAI tokens shouldn’t be able to delay token transfers, since this would prevent minting, redeeming, and rebalancing. Investors must always have access to index money.

CAI’s innovative design generates return on underlying tokens via Yield Yak, mitigating passive token dilution. Yield Yak is now generating 5% of CAI’s AVAX reserve.

They prioritize liquidity above everything else, hence we never engage in lockup-based staking programs. CAI never invests in yield-bearing vaults with temporary losses, entry/exit fees, or hazardous leverage to preserve investor returns.

Liquidity requirements

  • The token must be listed on a supported exchange.
  • The token should have in aggregate at least $2mm of on-chain liquidity across Trader Joe and Pangolin.
  • The token must have shown consistent DeFi liquidity on Avalanche

CAI can access liquidity across every major exchange on Avalanche ensuring the best possible execution and support for even the largest investment sizes.

Security requirements

  • The project must have had smart contract security audits with published reports.. Alternatively, the protocol must have been operating long enough to create a consensus about its safety in the decentralised finance community.

Conclusion:

CAI’s objective is to give investors regularly managed, diversified exposure to the growth of the Avalanche ecosystem. The methodology has been put in place to protect the capital held by the index, reduce the costs of entering and exiting the index and ensuring the index is always allocating capital to the best projects the Avalanche ecosystem has to offer. If you are looking to get exposure to the Avalanche ecosystem in a responsible, well balanced manner then head over to either Phuture or Colony’s app now.

About Colony

Colony deploys capital within Avalanche on early stages projects, provides liquidity to DeFi protocols, validates networks through stacking capabilities and will maintain an Index on top Avalanche projects

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SOURCE

https://medium.com/cai-colony-avalanche-ecosystem-index/cai-methodology-explained-9d0e90ce2710

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