IIP: XX
Title: Polygon 10 Index (P10)
Status: Proposed
Author: @Hamzah Khan (Head of DeFi, Polygon Foundation), @AsifKhan (DeF Teami, Polygon Foundation @Mringz Created: 2021-06-27
Simple Summary
Following the launch of Set protocol on Polygon’s POS chain , the Polygon Foundation would like to partner with Index Cooperative to launch the Polygon 10 Index (P10). This index will showcase the top-performing projects built on Polygon based on weighted market cap. The index will serve to give holders exposure to the leading protocols that natively exist on Polygon.
Motivation
The launch of this index will mark the first scaling solution native product from Index Coop, both showcasing the innovative culture at Index Coop and marking the beginning of Index Coop’s expansion to other chains. If launched this will be the first native Index token on the Polygon network.
Size of Opportunity
Polygon has seen large amounts of liquidity and trade volume and has established itself as the undisputed leader in scaling infrastructure. According to Nansen AI, Polygon boasts 400,000 daily active addresses, processes around 5,400,000 daily transactions (~62.5 tps).
Product Differentiation
Polygon is able to provide blockchain developers an ultra low-fee environment which has led to the development of entirely new classes of dapps. We believe that the Polygon 10 Index has the potential to capture the best of these new projects and offer a holistic, sector agnostic snapshot of the innovations occurring in the Polygon ecosystem. Ethereum needs to continue to scale in order to reach the average consumer and scaling solutions such as Polygon will play a critical role in helping usher in that vision.
Initial Composition & Token Inclusion Criteria
Selection of the components of the P10 Index is based upon the following criteria:
- The token must be available on the Polygon blockchain.
- The protocol has a first-class Polygon deployment.
- The protocol must have organic network activity or usage. On-chain transaction volume, Total Value Locked (TVL), and/or revenue paid to service providers are all examples of metrics that can be used to demonstrate organic network activity.
- Circulating market capitalization must be over 10M MATIC.
- Protocol token must have sufficient Polygon DEX liquidity to support inclusion. If a token has insufficient liquidity, it will be removed from the index during the determination phase.
- Protocol must have at least 2 months history of operation and its token must have at least 2 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 P10 holdings. The team is expected to provide users of the protocol with a reliable solution and adequate documentation to ensure transparency about any incidents.
The P10 Index will use circulating market capitalization to determine the weight of each token included in the index.
The weight of each token within the index will be calculated as follows:
The methodology for P10 will include a 20% weight cap for any one project to ensure that it provides diversified exposure.
The initial tokens that we propose to include according to the methodology are as follows:
| Product | Circulating Supply | Allocation | Description |
|---|---|---|---|
| Quickswap | 159,753 | 13.40% | DEX |
| Dfyn | 18,418,617 | 5.84% | DEX |
| Aavegotchi | 47,976,705 | 19.01% | NFT |
| Cometh | 90,793 | 2.35% | DeFi & NFTs |
| Adamant Finance | 1,352,852 | 6.25% | DeFi |
| Decentral Games | 286,465 | 9.71% | Metaverse |
| SportX | 79,733,333 | 10.45% | Sports |
| Telcoin | 56,969,406,904 | 20.00% | Payments |
| Qi DAO | 16,156,540 | 3.93% | DeFi |
| UniLend | 52,885,000 | 9.05% | DeFi |
Maintenance
The P10 Index is maintained quarterly 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 quarter and published before quarterly 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 quarter.
We acknowledge current limitations in the TokenSets Polygon deployment currently limit the ability to rebalance and for that reason we are selecting a quarterly rebalance, however once sufficient development and testing has been conducted, we intend to rebalance monthly.
Fees
A more detailed fee structure will be determined before the DG2 vote and subsequent product launch. However, Polygon’s methodologist portion of the fees generated by the P10 Index will be streamed directly to the Polygon Ecosystem Development Fund, to support the continued growth of the Polygon Ecosystem. We also hope to direct a portion of the methodologist INDEX rewards earned from the P10 Index to a bounty program to encourage the further development of IndexCoop and TokenSets technology on Polygon.
Author Background and Commitment
Polygon (formerly known as Matic) is a protocol and a framework for building and connecting Ethereum-compatible blockchain networks. Polygon’s open-source technology provides developers with the tools to readily deploy a stand-alone network or to a secure sidechain, such as MATIC, that leverages the security of the Ethereum network via smart contracts. Polygon maintains its security from Ethereum, however it uses a Proof-of-Stake consensus layer to allow for up to 7,000 transactions per second, helping bring much needed scaling to the Ethereum ecosystem.
Polygon is committed to making DeFi, NFTs, Dapps, and all kinds of blockchain based technology accessible to everyone. This mission is deeply aligned with the Index Coop’s strong desire to make crypto investing safe, easy and accessible for all.
Michael Mtenga will be the internal methodologist for Index Cooperative. He has been constantly contributing for the Index Coop since February 2021. His contributions include initiatives with PoolTogether, Perpetual Protocol & Rabbithole. Furthermore, he has been a key member within the business development working group (BDWG) creating and leading the DeFi Partnerships vertical. He also serves as the protocol ambassador for Maker DAO.
The P10 Index methodology was jointly developed by core members of the Polygon Team and BDWG, and is hopefully the first of many collaborations between the Coop and external protocols.
Special thanks to @oneski22 from the Simple Indices Pod and BDWG for advice and feedback.
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