Indexing Cryptocurrency
Index funds democratized finance by allowing the average investor access to a broad range of assets at a low cost. When John Bogle and The Vanguard Group introduced index funds to the public in 1974, many financial professionals considered it a blunder, even calling index funds “un-American”. However, index funds have repeatedly outperformed actively managed funds over both short and long term horizons. Now one of the richest men in the world, Warren Buffett, advocates an investment in broad based index funds for everyone.
Cryptocurrency is a wild west of investment opportunity. Bitcoin and its proof of work protocol formed a basis for a disruptive economy that has grown drastically in value since its inception eight years ago. Bitcoin recently went below 60% dominance of the combined $37B cryptocurrency marketcap for the first time, not because it decreased in value but because other coins are gaining support. The spotlight is on the vibrant market of blockchain assets that represent pioneering efforts into unique networking solutions. Indexing this booming economy is nearly guaranteed to produce a high-performance fund if risks are properly treated. Such is the path taken by index efforts like Iconomi and Indicium.
Iconomi is one service that allows for the creation of cryptocurrency baskets. Their ‘index’ fund uses eligibility criteria to exclude outright scams then aims to track the blockchain economy and market capitalizations, offering diversification to cryptocurrency investments. There are several other blockchain platforms whereby individuals can create a token and use it to track asset value external to the blockchain the token is recorded on. Bitshares, for example, has user-issued assets as well as intrinsic methods of price tracking and use of oracles. There are a series of other projects aimed at token creation, such as the Waves blockchain and the Bitcoin-based OpenAssets, Omni, and Counterparty protocols. However, reliable cryptocurrency indices with advanced financial forethought and thorough investment research are rare in the technologically complex market of crypto tokens.
Indicium will build sophisticated index funds using an advanced trading oracle. The composition of the initial Indicium index will be aimed at achieving Smart Beta by assembling strategically positioned coins in the risk-return space into a basket that grows with the crypto-economy but minimizes volatility. In so doing, it will offer a targeted product that has yet to be explored in contemporary cryptocurrency markets. Such an endeavor warrants building a decentralized voting base and a well-maintained board to govern the project and manage the big-picture aspects of the fund, supported coins and exchanges for example. This effort springs forth from the Peercoin proof of stake community, which has been at the forefront of decentralized governance and the peer to peer economy for almost five years, giving Indicium the know-how to excel in the cryptocurrency marketplace. While not the first and certainly not the last attempt at indexing a booming economy, Indicium is a bold step forward in decentralized finance.
Indicium is still in the initial phase of fund raising, but you can speak with the founders and advisors directly on Peercoin chat.
