BNC Maker Vault Index Methodology
This index announcement details the methodology for the BNC Maker Vault Index, tracks the market performance of the 8 largest crypto assets in the Maker Vaults, at a sub-second frequency.
Distributed Ledger Technology (Blockchain) is at the center of the revolution in financial technology and has the potential to cause a large number of sectors, including financial services, peer-to-peer (P2P) and peer-to-pool lending, to change dramatically.
The vital favorable position of utilising blockchain innovation in P2P lending is that it can eliminate intermediaries from the lending process instead of using a conventional bank as an intermediary. The crypto P2P lending markets are already disrupting traditional providers of debt by providing investors an attractive and stable stream of passive income.
One of the largest decentralized applications (dApps) on the Ethereum blockchain providing crypto lending services and gaining significant market share is the Maker Protocol. The Maker Protocol is governed by MakerDAO, an open-source project and a Decentralized Autonomous Organization that was created in 2014.
The Maker Protocol smart contracts that facilitate borrowing and lending are managed by individuals around the world who hold its governance token, MKR. MKR holders govern the Protocol and the financial risks of Dai to ensure its stability, transparency, and efficiency.
The DAI stablecoin is a decentralized, unbiased, collateral-backed cryptocurrency that is algorithmically soft-pegged to the US Dollar and is not issued or administered by any centralized actor, trusted intermediary or counterparty. Users generate DAI by depositing collateral assets into Maker Vaults and destroy DAI when repaying their generated DAI balance.
The Maker Vault Index is a rules-based sector index designed to measure the growth of crypto assets used as collateral and locked in the Maker Vaults.
In the context of the BNC BMVI, the term “Maker Vault” refers to assets available and vetted by the MakerDAO governance body. For a new token to be added to the protocol, it needs to be accepted by the decentralized governance body of MakerDAO. This is done via Executive Voting, Governance Polling, and ensures that ‘unstable’ crypto-assets cannot be used in the DAI ecosystem.
This institutional-grade index product tracks the market performance of the 8 largest crypto assets in the Maker Vaults at a sub-second frequency. The constituent asset weightings are rebalanced every three months based on free float market capitalization with capped at a maximum constituent weight of 25%.
The index is owned and administered by Brave New Coin under the principles:
| Representative | The index should closely follow the target market and represent an adequate sample. |
| Transparent | The index should be transparent in its design and reproducible in its calculation. |
| Timely | The index should be computed as frequently as necessary to reflect price changes in the constituent assets. |
| Robust | The index should be robust to disruptions such as erroneous data or pricing source outages, and be resistant to manipulation. |
Please see the below public release for full details on this announcement.
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