Metaverse Index - updated proposal w/ new methodology

After seeing “Metaverse” everywhere over the last few weeks, @DarkForestCapital and myself have worked on improving the proposal from October and coming up with a methodology that we believe could work in this space.


After the successful launch of DeFi Pulse Index, the follow-through in terms of new products has been fairly sedate with CoinShares the only new partner onboarded and ready to launch. Below is a reworked version of a proposal that was put forward in the early days of Index Coop. The intent here is not to become an individual or even community index provider, but to use the methodology and composition as a catalyst to invite NFT/metaverse specialists to critique and possibly improve upon the idea as presented.

There is also the methodologist bounty to consider, 7.5% of $INDEX token distribution, to be earned over the next 17 months. Recently it’s been discussed that the bounty has not been marketed widely enough and Index Coop should get the word out. Capturing the hype around the NFT space could serve as a great way to make potential methodologists aware of the bounty and bring in new partners for the Coop.


Our society is undergoing several transformative trends at once. Covid-19 has not only accelerated these trends, it also showed us exactly which ones are here to stay.

One such trend, we believe, is the trend towards ownership economy. Modern day platforms like Facebook, Youtube and others have been the beneficiaries of our societal shift to digital. However, what makes these platforms valuable is often user-generated content. Unfortunately, the financial benefits of Youtube’s success, for example, are not accruing to the content creators who made it all possible.

This is where the idea of ownership economies comes in. The entire ethos of crypto is based on fairly rewarding all contributors, not just early investors and founders. Bitcoin and Ethereum are the primary example of community owned and led networks. In the ownership economy, users will be increasingly rewarded for creating value.

Coinciding with the trend towards ownership economies is what’s happening at the intersection of blockchain and virtual reality technologies. While gaming is the primary example, for example what Sandbox are doing with in-game items and their related marketplace, we believe this is just the beginning. Decentraland, for instance, offers so much more than gaming, with the ability to host events, build headquarters and run a business all in the virtual realm. We can see virtual and augmented reality ecosystems creating significant economic value for their patrons.

In essence, NFTs are a liquid shell for our data. This could be art and collectibles, digital resources, social money, platform tokens, reputation scores and the like. In 2020, each one of us generated 1.7 MB of data per second and the World Economic Forum estimates that we will produce more data between 2021-2024 than we did in the previous decade. Most of this data has value and can be repackaged and relicensed via peer-to-peer marketplaces.


While naming this an NFT Index certainly makes sense, we believe that it’s a bit simplistic. This index is not a bet on NFTs, but on the evolution of the economic narrative powered by technology. As such, we thought it makes much more sense to call this product the Metaverse Index.

For a more professional description of this thematic, please read the following article from Wired.


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

Questions and Answers

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? Popular 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.

Who is it for?

This is by no means a large cap index. To begin with it will be more suited to smaller investments either from smaller investors or as a portion of a larger portfolio. As discussed above, the index is designed to express the fundamental idea that the space has large growth potential. Anyone investing now is an early adopter. Of course as the space begins to realise its full potential the market cap will grow and MVI with it.


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 $5m.
  • Protocol must have at least 3 months history of operation.
  • Token must have reasonable and consistent DEX liquidity on Ethereum, as quantified by the token tier weightings in the calculation below
  • An independent security audit should have been performed on the protocol and results reviewed by Index community and product methodologist. In the case that no audit has been performed, a community vote can take place based on subjective judgement of the protocol, with a weighting reflective of the increased risk.
  • In the event of a security issue the set manager should work with the project team to understand the issue and any effects to the $MVI holdings. Upon resolution the index manager and community should review together and vote to keep the token or not.
  • 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 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 = 65%*MCW + 35%*LW


TW – token weight in the $MVI

MCW – market cap weighted allocation

LW – liquidity weighted allocation

  • Furthermore, the $MVI will use 4 tiers for projects’ market cap and liquidity. For the purposes of liquidity, the tiers will be based on the size of a trade that can be accommodated with slippage below 3%. The tiers will be as follows:
Market Cap Tier Liquidity Tier
0 to 14.99 mil 1 0 to 9.99k 1
15 to 29.99 mil 2 10 to 24.99k 2
30 to 99.99 mil 3 25k to 50k 3
>100 mil 4 > 50k 4
  • The tiers will be used to cap the portfolio weight of projects with both, low market cap and low liquidity. Projects with a Tier Multiplier (Market Cap Tier * Liquidity Tier) of 4 or below will be capped at 3% allocation.

Index Maintenance

The index is maintained monthly in two phases:

  • Additions and deletions: The tokens being added and deleted from the index calculation are determined during the third week of the month and published before monthly reconstitution.
  • Following publication of the determination phase outcome, the index composition will change to the new weights on the first working day of the following month. I.e components will be added or removed, and weights adjusted.

Draft portfolio

Portfolio construction:

Share of the market cap owned by the $MVI index at $5 million and $10 million TVL


This is an initial proposal and is open to feedback from the community. We propose the following as a starting point:

  • 0.55% fee on holdings first 6 months, charged per block. This is a subsidized rate initially to incentivize growth of AUV.
  • 0.95% after 6 months also charged per block
  • 0.3% fee on sale of the index to discourage selling but not arbitrage (should be tuneable so it can be adjusted)

This is in the same ballpark as the Van Eck e-sports ETF which currently has a net expense ratio of 0.55%, with a 0.44% reimbursement until Feb 2021, and will likely rise to 0.99% thereafter.

What’s the downside?

Liquidity in a lot of these tokens remains quite shallow. We are hoping, however, to address this issue through the liquidity weighted adjustment to market cap weights as well as the Tier Multiplier. At the same time, it’s often challenging to get a true sense of token’s liquidity. For example, a lot of MANA liquidity is being provided through the Kyber Fed Price Reserve (FPR), which is an on-chain market making platform for professionals. Unfortunately, we have no visibility into how deep that liquidity is, how it evolves over time and if it’s sticky. For example, over the January 2-3 weekend Kyber liquidity was not available. This meant that a $10,000 trade for MANA would have a 3% slippage. This is compared to $65,000 trade with 3% slippage when Kyber liquidity is available. We are conscious of this issue and will work on ways to address it. For example, MANA’s Treasury is a DAO and we could partner with the project to facilitate deeper MANA liquidity on Uniswap. )

As a nascent space built on a nascent technology the index would likely be quite volatile over short timeframes and holding for 6+ months would be recommended. The volatility also reflects the large upside potential for these projects and as such it is a high risk high reward index. Having said that, as mentioned earlier the volatility of the proposed MVI tokens are in most cases a lot lower than that of the DPI index which has been a runaway success.

As with everything built on Ethereum there is underlying smart contract risk.

Ok, so what’s the benefit?

  • Reduced gas fees when compared to buying/selling tokens individually
  • Volatility of individual tokens is offset by holding an index
  • Simple way to capture a broad market trend based on the idea of the metaverse, without having to constantly research and rebalance a portfolio
  • It’s a unique product. To carry out the same trade today you’d have to buy tokens individually or create a Balancer pool and risk impermanent loss.
  • Potential to be first community index to market
  • Generate excitement around the Index Coop and bring in new users

Next steps:

We believe that the time is right for the Metaverse Index. If there’s broad support for this index in the community we would like to:

  • Solicit feedback from industry experts i.e Messari analyst covering NFTs.
  • Reach out to projects like Sandbox, Axie and Rarible to explore a potential partnership for the index. Bankless also launched a Metaversal newsletter a few days ago and could be a great partner.
Metaverse Index Proposal
  • For: We should actively seek partners to launch this index
  • Against: We should let partners approach us with their own ideas

0 voters


I just voted “for” – mainly, I’m interested in the learnings that will be generated by testing this outbound approach.


Would love to buy this index, which I think fits well into the Index Coop overall too.

:clap: :clap:


I voted for. I like the motivation and as @gregdocter says, the learning will be valuable. Could end up huge too! But may be slow to get going, as mentioned.

1 Like

I like it.

There is a small market at the moment, but it’s obvious that the sector will grow over time (and it’s hard to identify who will become dominant in time) - ideally suited to an index fund.

@verto0912 and @DarkForestCapital
Any thoughts of the fee split between coop and Methodologist?

The more I’ve thought about this potential product, the more it’s got under my skin - and in a really good way. I’d love to buy a bit of it (as a pretty humbly educated crypto participant) and I think professional allocators would too in time. Please let me know if I can help bring it to life.

While the product if built today might be early (but that’s hard to call), it’s ideally suited to an index fund (as @overanalyser says) and feels like a brilliant product-audience fit, if our audience is as @puniaviision inspiringly describes it here.

“We consider deeply the eventual end users: a middle aged factory worker saving for retirement, a father investing in a college fund, and the young woman daring to make a bet against the status quo. If we do our jobs right, we will greatly accelerate the pace at which DeFi is adopted and make a dent in the financial future of our world.”

I find serving this audience a motivating ideal - I think it’s the primary motivator of the original sound money crypto movement - and personally think it should be at least a partial focus of the Coop, if not the majority focus.

1 Like

Thank you @verto0912 for the detailed proposal. I actually signed up to be able to reply, so hope this adds value!

For context, I’ve spent the past 2 years building Blockchain Games and actively invest in NFTs and NFT related ERC20 tokens. My Twitter: marnold_mch.

Overall Feedback

Very excited to see an NFT fund proposal here and agree that it's much needed to make NFT investing easier for the average crypto investor. It's difficult to understand NFT land as somebody who never played any of the games or traded with any of the NFTs. If DeFi is already complicated to the average crypto investor, NFTs are much more difficult to understand in terms of investments.

An NFT fund is inevitable and I'm sure we'll see multiple different NFT index funds in the future. However, I think it's not as easy as just throwing a few gaming/metaverse related erc20 tokens into one basket. We should consider more "NFT-native" blue chip NFT index funds like PUNK from [NFTX](

Examples of suitable ERC20 tokens

Considering our target audience, I think an NFT index fund should be easy to digest, without the need to fully understand NFT valuation. However, we should not just include projects' ERC20 tokens: Unlike DeFi, value is also captured by the NFTs itself, not just the governance token of the platform/game.

I tried to group the available assets by category, ordered by how easy it is to grasp:

  1. ERC20 gov tokens: AXS (Axie Infinity), SAND (The Sandbox), REVV (Revv Motorsport, Animoca), GHST (Aavegotchi), COIN (coin_artist, Blockade Games), etc.
  2. Pure NFT-backed ERC20 tokens (NFTX territory): NFTX index tokens,
    B20 (, Wrapped Kitties (no liquidity though)
  3. Semi NFT-backed ERC20 tokens with active community: WHALE (Whaleshark’s Community), soon Yield Guild
  4. NFT funds with active managers: soon Yield Guild (YieldGuild on Twitter), soon Blackpool (BlackpoolHQ on Twitter)
  5. NFT funds with passive holdings: Flamingo DAO

My Questions

  • Do we want to capture the entire NFT space?
  • How much risk (read: speculation) is desired?
  • Do we want multiple index funds, grouped by category (Gaming, Collectibles, Art, Music, etc.)

My Thoughts

I assume we want to start with an overall NFT index fund which can be rebalanced in the future through proposals. A good start is to bet on a few of the most established NFT projects like Axie Infinity and a few NFT backed index tokens like PUNK-BASIC. Pre-launch projects like SAND or GHST are still too risky for the average investor in my opinion.

In the long run, I think this fund should be composed of:

  • 50%: ERC20 gov tokens of NFT projects (see list above)
  • 30%: pure NFT-backed ERC20 tokens (liquidity might be an issue)
  • 10%: established community tokens like WHALE
  • 10%: actively managed NFT funds like Yield Guild or Blackpool. (once launched)

IMO it's still a little early to tell which NFT projects are here to stay. We see a few promising new-comers (NFTX, SAND) but I would avoid to include "hyped" projects (looking at you MEME) that might not be active anymore in 3 years.

Curious to hear more thoughts on this and how to move this forward.

PS: I could only include 2 links as a new user, hence the lack of links to the projects I mentioned. Sorry!


Hey @MAkzent, thanks for creating an account just to give us feedback!

Two things that we have to keep in mind when discussing any fund:

  1. Metholdogy should be clear and objective vs. ambiguous and subjective. Token selection should follow an objective methodology with some room for subjective interpretation. Someone actively picking which tokens to put in or take out is more akin to an actively managed fund and not an index product. It also makes it hard for investors to buy into something like that. Because they need to trust whoever is making token picks and they also have limited visibility into the future direction.

  2. We need considerable liquidity on decentralised exchanges to deliver a product.

To answer your questions directly:

Arguably, that’s not really possible. We are constrained by points 1 and 2 above. Best we can do at this stage is to launch some sort of a blue-chip NFT index that we can then build upon.

I would think that the NFT space as a whole is speculative in nature due to how early we are. So making certain restrictions by market cap and liquidity, for example, allows us to stay away from the danger zone. Small cap projects with no liquidity would be very challenging to include in an index product.

Bluechip product first, but the methodology should allow for the inclusion of other assets as the space matures. I’m sure there will be a range of NFT or Metaverse funds introduced over the next 12 to 18 months. Right now, the liquidity is simply not there.

Thank you @verto0912 for taking the time to answer my thoughts!

I read up on other proposals to get a feel for INDEX’s methodologies and agree that subjective selections of tokens are not the right approach.

I assume the first step is to come up with a methodology for which NFT-themed tokens to include? Would be good to hear your thoughts on which project KPIs are relevant here.

Agreed and IMO this is the biggest issue for NFT-backed tokens right now. However, I expect things to get better within the next 6-12 months. This medium post is a good read.

Agree with you. I think it’s too early right now to find “mature” NFT projects to include into the index fund. If we launch such an index fund within the next 6 months, it’ll very likely be too volatile and not what INDEX endusers are looking to invest in.

How about we continue to collect suitable token projects and Metaverse funds and observe them over the next 6-12 months? This way, we can watch NFT land to further mature and will get a proper overview of potential assets to include into the fund.

TL;DR: Considering that we need sound methodologies to craft a proper index fund, I agree that it’s too early right now. I’d feel more confident to develop a model in 6-12 months.

What do you think is the best approach to collect data until then?

1 Like

Really excited about this kind of Index. Metaverse Index is a sound name as well.

FWIW: I would strongly recommend to team up with a big brand like Nifty Gateway, OpenSea, etc. because I believe this made $DPI successful in the first place.


Nifty Gateway is owned by Gemini. Could be another opening to an exchange listing.


yep would be nice to see an index like this. NFT are supposed to be the future ^^

1 Like

I am voting in favor, as I would be interested personally in being an MVI investor.
Speaking of partners, Alex Salnikov (co-founder of Rarible) showed me his interest in participating on the community calling.
He would be available in options C and D (both on February 10), I hope he’s an interesting contact, I would like to continue the communication with him.


thanks @emmeworld, we were introduced to Alex yesterday and are talking to him about MVI.