IIP-15 Metaverse Index

iip: 15
title: Metaverse Index
status: Proposed
author: DarkForestCapital (@DarkForestCapital), Verto0912 (@verto0912)
created: 2021-02-02

Simple Summary

This IIP relates to launching the Metaverse Index with an updated methodology as described below. This will be the first index product to be launched from within the Coop community and not with an external partner as the methodologist. It is designed to capture the potential upside of the new but growing group of projects on Ethereum that relate to virtual ownership through NFTs, gaming, virtual reality and entertainment.


It’s clear there is strong demand for an index in this sector, PieDAO recently voted to launch PLAY index, PowerPool are considering an NFT index and Indexed are discussing the NFTI index. The Index Coop has to ensure we have a well thought out product ready to capture market share as the space continues to grow.

Taken directly from Piers Kicks’ article Into the Void, we envision the metaverse to be:

“A persistent, live digital universe that affords individuals a sense of agency, social presence, and shared spatial awareness, along with the ability to participate in an extensive virtual economy with profound societal impact.”

The opportunity here is to create an index that rewards long term investment in a decentralized and virtual future. The Metaverse Index is designed to take a view that the future of entertainment, sports and business will shift to a virtual environment and that economic activity will take place on the Ethereum blockchain within this metaverse.


Size of the opportunity?

Unlike the current craze for yield and the narrative of blockchain replacing traditional financial systems, the gaming/VR sector is flying somewhat under the radar. If we look at the mainstream gaming market, it’s currently valued around $155b (2020) predicted to rise to $200b by 2023. A quick back of the envelope calculation for the top 5 crypto gaming projects (using MANA, ENJ, SAND, UOS and CUBE) gives a market cap of roughly $360m, that’s 430x smaller…

In terms of holding virtual meetings and other remote working opportunities, ZOOM’s market cap rose above $100b in 2020. What happens when we are all meeting in the local Decentraland office? Crypto educator Alex Saunders of Nuggets News recently constructed a HQ in Decentraland and established businesses like Rarible and Matic have been there for a while (take a walk over to crypto valley). In the last year there have been a number of forums and conventions held in Decentraland and prominent figures in the crypto space continue to use it as a way to engage with followers.

Aside from gaming and the virtual meetings that can take place inside these projects, there is also the ‘virtual object’ aspect, underpinned by Non Fungible Tokens (NFTs). According to research from Messari, sales volume for NFTs is around $150 million and metaverses make up roughly a third of that.

So what is the actual value of these virtual worlds? Annual subscription revenues for World of Warcraft are in the $200 - $300 million range. At the same time, the North American MMO (massively multiplayer online) industry generated total revenue of $2.5 billion in 2016.

In Somnium space, Decentraland and Sandbox it is possible to use each project’s tokens to purchase objects or land as NFTs. Enjin went as far as creating a technology that allows user created content to move between games, something not seen in the worlds of Sony or Microsoft. This adds some depth to $MVI as the underlying tokens represent more than just face value, they are a substrate for virtual creativity.

How is it different from other products?

$MVI is a straightforward bet on the world moving to a more virtual environment to conduct both business and pleasure.

In terms of differentiating from other products that exist this isn’t a yield farming play, it functions more like a traditional equity ETF in that it simplifies the expression of a particular trade. In this case the belief that virtual environments hold huge growth potential over the coming years. A similar product in the tradFi world is the Van Eck e-sports ETF.

Liquidity Analysis

The market liquidity for potential inclusions is considered during the screening process and is incorporated into the final portfolio weights via liquidity weighting. We have a live Dune dashboard that measures Uniswap liquidity of the underlying tokens over time (soon to include Sushiswap and Balancer), ready to be used during the determination phase prior to each monthly rebalance. We are also using root cap weighting methodology, which should dampen the magnitude of monthly rebalances.


Selection of the $MVI tokens would be based on the following basic criteria:

  • The token must be available on the Ethereum blockchain.
  • Protocol must be in one of the following token categories on Coingecko: Non Fungible Tokens, Entertainment, Virtual Reality, Augmented Reality and Music. More categories can be added in the future as the market matures.
  • Total market cap must be over $30m.
  • Protocol must have at least 3 months history of operation and its token must have at least 3 months of price and liquidity history.
  • Token must have reasonable and consistent DEX liquidity on Ethereum.
  • An independent security audit should have been performed on the protocol and results reviewed by the product methodologist. In the case that no audit has been performed, the methodologist will apply subjective judgement of the protocol based on assessment of the criteria above and communications with the team.
  • In the event of a security issue the methodologist should work with the project team to understand the issue and any effects to the $MVI holdings. The team would be expected to provide users of the protocol with a reliable solution and adequate documentation to ensure transparency about the incident.
  • Tokens will not be staked at the launch of the index. This is subject to change as liquidity increases and it becomes possible to safely generate yield through staking.

Index Weight Calculation

The $MVI will use a combination of root market cap and liquidity weighting to arrive at the final index weights. We believe that liquidity is an important consideration in this space and should be considered when determining portfolio allocation.

TW = 75%*RMCW + 25%*LW


TW – token weight in the $MVI

RMCW – square root of market cap weighted allocation

LW – liquidity weighted allocation

Index Maintenance

The index is maintained monthly in two phases:

  • Determination phase: During the determination phase, the tokens being added and deleted from the index calculation are determined during the final week of the month and published before monthly rebalancing.
  • Rebalancing phase: Following publication of the determination phase outcome, the index composition will change to the new weights during the first week of the following month.

The index is maintained monthly in two phases:

Draft Portfolio (as of March 16)



The Metaverse Index will have a streaming fee of 0.95% (95 basis points). The revenue generated from the streaming fee will go entirely to Index Coop and the methodologist will forfeit the methodologist bounty, which will accrue to the Index Coop Treasury instead.

Author background and commitment

DarkForestCapital has been a member of the Index Coop community since the beginning, initially proposing the Metaverse Index within the first week of the Coop launching. Since then DFC has joined the treasury committee, produced the newsletter and more recently looked to improve Index tokenomics.

Verto arrived on the scene more recently but got straight to work making improvements, firstly launching the Investment Committee to improve our content and analysis while also reaching out to wallets and exchanges for partnership. Verto took the original Metaverse proposal and reworked the weighting calculation to overcome the low liquidity that some of the tokens experience, making the idea into a reality.

Mason Nystrom is a research analyst at Messari specialising in NFTs, social tokens and the metaverse. Mason will provide fundamental analysis as an overlay to the methodology and criteria specified above.


Copyright and related rights waived via CC0.


Decision Gate 1: Feb 24 - Feb 27 - PASSED

Decision Gate 2: March 22 - March 25 - VOTE LIVE


If Rep was pulled from DPI for liquidity reasons, I imagine all of these products would cause observable slippage?

Rebalanced monthly?

Yeah, liquidity is the toughest challenge here. We are working with the underlying projects and exploring options. Might need to cap the size of the fund initially, rebalance more frequently, rebalance over a period of time, incentivize underlying liquidity, etc. Lots of options, hopefully, one of them or a couple in combination will work. If you have thoughts, please let us know.

I would add (wrapped) $FLOW and $NFTX. In my opinion those are NFT infrastructure blue chips.


This is a great idea :slightly_smiling_face:

As virtual ownership on Ethereum continues to grow, I see a ton of opportunities spinning off of $MIV.

For example: Skin markets in games such as CS:GO, Rust, Dota 2, and Team Fortress 2 are massive — with skins going for 10’s of thousands of dollars through OTC trades. If games continue to issue their items on Ethereum, we can absolutely see similar markets develop.

In the future, the ability to gain exposure to rare in-game items is something the Index Coop is perfectly equipped to provide. $MIV is a great opportunity to lay that foundation now.


Agree with $NFTX, they haven’t had 3 months history of operation yet but could certainly been an inclusion after launch, provided the project meets all the other criteria.

As far as I know for the Flow token there is no DEX liquidity for the wrapped token yet so will have to wait and see what their plans are for liquidity pools before it can be considered.


Strongly in favor. Love this crypto investment theme and will look to implement it less elegantly myself if this doesn’t come online for a while.

On the call to discuss the Metaverse Index I was very focused on top-of-funnel marketing partners - such as DeFi Pulse for DPI - but I see now that this is important after solving the liquidity issues - which can hopefully come from a mix of working with the projects (more inventory) and structural evolution. No point in driving tonnes of buys if we cannot fulfill them.

Feels like a large scale, strategic outreach effort to the underlying projects should be done, drawing on all relationships and value we have in the community.

Also +1 re $NFTX.


Re the search for a brand name partner to help open doors. While I can see advantages, I think the coop is already building a brand awareness of what we are doing and I’m not sure that there is a suitably independent authority for the metaverse (yet).

So, maybe we launch the index, and then charge someone to sponsor the fund name!


Agreed with this 100% ^. Let’s get it launched!


A really good idea. Maybe this guy is interesting for marketing purposes :
I’m a DPI and INDEX investor and I love these products, I think the Metaverse Index will be a huge success.

That’s what @DarkForestCapital and myself believe as well. I’m happy to share our detailed rationale but it centres around the fact that 1) there isn’t enough liquidity to benefit from a branding/marketing partner, meaning it’s best to grow organically in the beginning; 2) community launched index, especially for the Metaverse, will elevate Coop’s standalone profile as more people will learn what we do, and 3) economic considerations (all fee income & methodologies bounty $INDEX stay with the Coop).

@richard hopefully we can do DG1 soon.


Perhaps an exclusive branding partner would not work at this point, but if we’re branding this as an Index Coop methodology, I think it would make sense to take more steps to harden it.

I’ve posited this to DFC, but why not try and actively solicit a group of leaders/thought leaders in this space; Mason et al; to comment on the methodology in order to harden it. We could use this as a template for all community-driven indices going forward, something like Index Coop Open Methodology Standards.

It gives them skin in the game (can reward with a portion of methodologists cut) and gives us cross-promotion. It also gives us more and strong input on the methodology.


In case folks have missed it, NFTX is currently exploding: NFTX price, chart, market cap and info | CoinGecko.

Good market signal of a core part of this index thesis.


One week later and liquidity might not be an issue anymore.

As for brand partners, the first that came to mind was Gemini since the have niftygateway and are active in promoting DeFi.

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I was under the impression that @verto0912 and @DarkForestCapital had been talking to a few people and that is how they decided to work with Mason.

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I would also propose that the streaming fee split be set at 100% Coop and that the Coop member methodologists and outside methodologist voices (should we go that route, and fwiw I’m confident we can attach some big names) split a portion (say 15-20%) of the methodologist rewards.

IMO the ‘methodologist’ role is not very significant and shouldn’t receive streaming fees in perpetuity. I’d prefer that the coop offer a healthy INDEX bounty to accepted methods, but then just have the coop manage the index and receive 100% of the streaming fees.


This is really a separate discussion (which I think we need to have) we community led index funds.

So, I’ve started one:

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just a +1 for using any learnings to product a “template” to iterate on, however this moves forward


How are the rewards between the Metaverse and existing DPI index going to be allocated? If there’s not enough demand for the Metaverse index might be a drag on INDEX holders.