Mission & Purpose: The Data Economy Index (DATA) is a digital asset index designed to capture the growth of on-chain data economies. The Data Economy Index tracks projects with significant economic activity that connect decentralized blockchains to off-chain data.
Thesis: Where DeFi is disrupting traditional banking and financial services, we believe that the Data Economy has the potential to disrupt the data monopolies built in Big Tech over the past 20 years.
Draft Portfolio: The initial four components of DATA are Chainlink (LINK), the Graph (GRT), Numeraire (NMR), and Ocean Protocol (OCEAN).
AUM Opportunity: The initial 4 components of DATA represent approximately $14.2 billion in market value and have no overlap with our two existing index products. This suggests that DATA would be a highly differentiated product for the Coop with a significant, compelling market opportunity.
Revenue Opportunity: We believe that DATA will likely be monetizable immediately after launch, with a realistic potential to capture ~$80M AUM in the short-term, while also creating a new revenue stream for the Index Cooperative that taps an exponentially expanding market.
Product Differentiation: We are aware of efforts by DeFi Pulse to release an Ethereum Infrastructure or Middleware Index. We believe that DATA will be significantly differentiated as it is designed to capture data economies off and across blockchains.
“I believe these marketplaces will transition us out of the current era of Web 2.0 data monopolies into a Web 3.0 era of open competition for data and algorithms, where both are directly monetized.” - Fred Ehrsam, blockchain-based machine learning marketplaces (March 2018)
Decentralized finance (DeFi) is the first of many industries that will blossom on-chain. The Ethereum whitepaper outlined numerous data-intensive applications that the network would support including decentralized file storage, decentralized data feeds, cloud computing, prediction markets, and other on-chain data-based applications.
The Data Economy Index (DATA) is a digital asset index designed to capture the growth of on-chain data economies. The Data Economy Index tracks projects with significant on-chain economic activity connecting decentralized blockchains and applications to off-chain data.
The Index Cooperative now has two index products, DeFi Pulse Index (DPI) and Metaverse Index (MVI) that provide exposure to two on-chain industries, decentralized finance (DeFi) and the Metaverse.
As of today’s writing, the top 7 components in DPI, comprising ~92% of the index’s market cap, have a combined market value of ~$29 billion; the top 7 components in MVI comprise ~75% of the index’s market cap and have a combined ~$3.8 billion market value.
The initial 4 components of DATA represent approximately $14.2 billion in market value and have no overlap with our two existing index products. This suggests that DATA would be a highly differentiated product for the Coop with a significant, compelling market opportunity.
Moreover, the data economy is already deeply integrated into the workings of DeFi. For instance, Chainlink is the 800-pound gorilla in the room; it’s decentralized price oracles are used as infrastructure for most DeFi protocols, including the Set Protocol to calculate NAV issuance.
We believe it is time the Index Cooperative had an index for on-chain data economies.
We believe that DATA will likely be monetizable immediately after launch, with a realistic potential to capture ~$80M AUM in the short-term, while also creating a new revenue stream for the Index Cooperative that taps an exponentially expanding market.
Currently, DPI is $167m in AUM, approximately ~0.5% of the circulating market capitalization of its constituent tokens. DATA will have ~$80m in AUM if it captures the same share of the Data Economy that DPI has captured of DeFi.
At launch, Chainlink and the Graph would be the two assets with the largest allocations in the Data Economy Index. As of today’s writing, they have a combined circulating market capitalization of ~$13.5 billion; for comparison, the two assets with the largest allocations in DPI, Uniswap and Aave, have a combined ~$18.3 billion circulating market capitalization.
“Technology companies are the most valuable companies in the world…You don’t need a middleman to own your data…I think the big tech companies will be disrupted as much, if not even more, than the big banks. And considering those are the most valuable companies in the world, maybe that’s what’s worth paying attention to.” - Fred Ehrsam, Bloomberg (March 2021)
A little over 2 years ago, on February 28th, 2019, DeFi Pulse only had 10 assets listed on their site. Total Valued Locked (TVL) was $317m and Maker’s dominance was ~90%! Bitcoin’s Lightning Network and Augur had the 4th and 5th most TVL respectively. Much has changed in just 2 years!
We believe that the Data Economy is at the same stage of development that DeFi was at the beginning of 2019.
Where DeFi is disrupting traditional banking and financial services, we believe that the Data Economy has the potential to disrupt the data monopolies built in Big Tech over the past 20 years.
Expands Reach: DATA would represent another on-chain industry covered by Index Cooperative. This potentially expands the reach of the Index Cooperative’s brand as the premier on-chain asset manager to projects and communities currently outside of DeFi and NFTs.
The LINK Army: DATA would be the first product offered by the Index Cooperative that includes Chainlink (LINK). Chainlink’s official Twitter account has 331k followers; other prominent Twitter accounts include @ChainLinkGod (83k followers) and the @Crypto___Oracle (27k followers).
As already mentioned in the sections above, the Data Economy represents an entirely different market from DeFi and the Metaverse.
In addition, we are aware of efforts by DeFi Pulse to release an Ethereum Infrastructure or Middleware Index. We believe that DATA will be significantly differentiated from that index as DATA is designed to capture data economies across blockchains. In other words, it is meant to be blockchain agnostic over the long-term. We believe that most of the value of DATA is derived from off-chain data assets. For example, the value of Numeraire (NMR) is tied to the predictive performance of the machine learning models submitted by independent data scientists to Numerai’s hedge fund. Because the value of data economy tokens are derived from off-chain data, we believe that DATA’s value over the long-run will be uncorrelated with Bitcoin, Ether, and the DeFi Pulse Index (DPI).
Below is the initial draft portfolio for DATA
The methodology has three major components.
Token Inclusion Criteria
DATA Token List
Matrix Scoring System
Selection of the DATA tokens is based upon the following criteria:
The token must be available on the Ethereum blockchain. This will be revised when the Set Protocol infrastructure becomes multi-chain.
The primary function of the protocol provides on-chain data-based services.
Protocol must have organic network activity and usage as measured by Total Value Locked (TVL) in the protocol’s native token(s) and/or Revenue paid to data providers.
Circulating market capitalization must be over $100m.
Protocol must have at least 3 months history of operation and its token must have at least 3 months of price and liquidity history.
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 applies 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 will work with the project team to understand the issue and any effects to DATA holdings. The team is expected to provide users of the protocol with a reliable solution and adequate documentation to ensure transparency about any incidents.
DATA initializes a Token List with the following four projects and their native tokens:
The Graph (GRT)
Ocean Protocol (OCEAN)
34 separate projects were considered for inclusion in the Data Economy Index by sourcing from CoinMarketCap’s AI & Big Data, Oracles, Storage, IoT, Prediction Markets, and Distributed Computing categories.
Here are the primary reasons that projects were excluded from the Token List:
Not an ERC-20: Filecoin (FIL), Helium (HNT), Akash Network (AKT), Siacoin (SC), and many others. These projects would be re-evaluated if/when Set Protocol becomes capable of supporting non ERC-20 tokens.
Protocol Functionality: Gnosis (GNO). Primary functionality is not connecting off-chain data to decentralized blockchains.
Insufficient Network Activity: Augur (REP). REP tokens are not currently being used or staked by off-chain data providers and revenue is not being captured by token holders.
Less than $100m Market Cap: Robonomics Network (XRT), FOAM (FOAM).
Projects will be reevaluated on a regular basis and will also be able to apply for inclusion in the Data Economy Index (DATA).
Token weights for individual assets within DATA are determined via a Matrix Scoring System:
Market Cap Weight (MW) - 40%: The square root of the circulating market capitalization weighted allocation.
Liquidity Weight (LW) - 20%: The liquidity weighted allocation.
Economic Activity Weight (EW) - 40%: The weight for the size of the on-chain data economy relative to the token’s market value.
For the Draft Portfolio above, the 12 Month Forward revenue for each token was calculated by multiplying the estimated trailing 30 day revenue by twelve. Trailing 30 day revenue for each token was estimated using the following data sources: Chainlink, The Graph, Ocean Protocol, Numeraire.
Index maintenance would mirror the Determination and Reconstitution phases established with DeFi Pulse Index and Metaverse Index.
One key difference is that the methodology for DATA proposes a 50% weight cap for any given constituent token instead of the 25% weight cap in DPI.
The Data Economy Index would have the same 95 bps streaming fee as DPI and MVI.
- Won the Index Creative Challenge by publishing Why I Invested in the DeFi Pulse Index and Index Cooperative.
- Gold/Silver Owl (December 2020 - February 2021) ; Helped @jdcook form the Analytics Working Group.
- Creator of the ₿EST Portfolio.
- Numerai Data Scientist (2016) and Numeraire holder since 2017.
- Data Science Manager at PrecisionLender (2017 - 2021); successfully created and launched several data products now in use by some of the largest banks in the world.
- Financial Analyst, Amazon Prime & Kindle teams (2012 - 2015)
- Prev. Full Stack Developer @ Consensys
- Gold/Silver Owl for the first three months of coop and April
- Top degen score
- Link marine since 2017
- Originally proposed DATA Index in October 2020.
If there’s support for this index from the community, we plan to further research and submit a formal Index Improvement Proposal (IIP) to make DATA an official index listed by the Index Cooperative.