Hold the top 45 cryptocurrencies with one easy-to-buy token.
"The portfolio is greater than the coin."
CryptX is both an index and a token. The index is the industry-leading benchmark for all cryptocurrencies and is updated daily. The token can be purchased using a Lykke wallet on the Lykke exchange.
1/3: For crypto investors
CryptX gives you diversification.
Convert some of your BTC to CryptX
and benefit from the rest of the
market while decreasing the impact of
volatility on your portfolio. Learn more ...
2/3 For new investors
Bitcoin is a high-performance
investment with high volatility.
CryptX is gives you exposure to
the asset class with reduced
volatility and risk. Learn more ...
3/3 For journalists and analysts
The CryptX index is the new, smart
benchmark for the cryptocurrency
industry. Learn what makes it a
better tool ...
Token Factory is a division of 2030. Eventually, we hope to offer a wide range of token-based products. We are starting with an index token that we believe is a smart approach to investing in cryptocurrencies. The following short white paper tells you about our upcoming index token ...
Smart Beta Background
Smart beta means using analytics and simulations to algorithmically define a broad-based, highly diversified investment product. A smart-beta portfolio is an unmanaged and broadly diversified portfolio.
The term “beta” means correlation to the broader market indexes. An example of a true-beta product would be the Vanguard Index Fund, which tracks the performance of the S&P 500. We say this fund has a "beta" of 1.0, since it uses the S&P 500 as a benchmark. A smart-beta approach would be to recognize that the cap-weighting of the S&P may not provide the best returns long-term, so you could imagine an index comprised of the last 490 stocks on that list, which probably has a chance of better returns in the long run. By running simulations and backtesting, you can determine what you think is the best version of an index that consistently beats the S&P. Then the next step is to create an investable product that produces those returns.
Several ETFs are founded on the principles of smart beta. It’s entirely legitimate to construct an investment portfolio consisting of only smart-beta products. Unmanaged portfolios are looking better and better, the more we come to grips with our shortcomings as "alpha" investors.
What is a Cryptographic Token?
In the blockchain world, a token is a tiny fraction of a cryptocurrency (bitcoin, ether, etc) that has a value usually less than 1/1000th of a cent, so the value is essentially nothing, but it can still go onto the blockchain. (For more on blockchain, please visit www.decentralstation.com). This sliver of currency can carry code that represents value in the real world - the ownership of a diamond, a plot of land, a dollar, a share of stock, another cryptocurrency, etc. Tokens represent ownership of the underlying asset and can be traded freely. One way to understand it is that you can trade physical gold, which is expensive and difficult to move around, or you can just trade tokens that represent gold. In most cases, it makes more sense to trade the token than the asset. Tokens can always be redeemed for their underlying asset, though that can often be a difficult and expensive process. Though technically they could be redeemed, many tokens are designed never to be redeemed but traded forever. On the other hand, a ticket is a token that is designed to be redeemed and may or may not be tradable.
At this point, there are a handful of cryptographic indexes we know of:
- Lawnmower.io - a two-year-old index of just the few dominant currencies. Not investable.
- Iconomi.net - a well thought-out index of about a dozen cryptocurrencies. We believe this is investable (need more info)
- CRIX - 30 cryptocurrencies, meant to be a "benchmark," (not investable?)
- Coinfund.io - a fund, run by smart guys
I will use the term “coins” or “cryptocurrencies” to refer to the underlying cryptocurrencies in the portfolio. I’ll use the term token only to refer to the SB1 tokens we plan to issue. So on the one hand we have a portfolio of coins, and on the other hand we have a market-cap of tokens.
Token Factory Smart-Beta Structure
We plan to release many products. They are like ETFs. All of them will have the following characteristics:
- The portfolio will be unambiguously algorithmically defined, based on research.
- We will reserve the right to make adjustments "by hand," but we expect them to be very rare (for example, when we suspect a scam or price manipulation of a coin that otherwise fits our requirements).
- We will purchase the tokens manually and use best practices for key management and security.
- We will create a token that represents the value of the portfolio.
- We will create a legal agreement that binds the token to the portfolio.
- We will then issue and sell the token on various exchanges and on our own site.
- We will publish the NAV of each portfolio daily: the NAV is the value of the portfolio divided by the number of tokens issued.
- When we sell out each issue, we repurchase at the time of our weekly rebalancing. We then offer a new batch of tokens for sale.
- Token batches make no difference. Tokens for a given product have no identity. You buy a token from us at the issue price, and you can sell it to anyone else, any time, for any price you can get. They are completely fungible.
- We don’t redeem tokens. The reason for this should be obvious: you would need a wallet capable of accepting close to sixty cryptocurrencies.
- We may offer to buy tokens back with two-day settlement.
- Eventually, we hope to have a liquidity fund that buys back tokens.
- We will have guidelines on who can legally buy our various tokens.
- We will charge a weekly management fee automatically. This will be built into the tokens themselves - they will automatically decrease in value every week. The fee will be in the range of 1-2% per year. By definition, then, the NAV will always be less than adding up the value of the currencies in the portfolio. This reflects the effort required to build and balance the portfolio.
- The algorithm will automatically rebalance the portfolio. We will do this by hand at the beginning.
Our First Product: Smart Beta 1: Cryptocurrency Diversification
SB1 will be an easy-to-buy token aimed at people who want exposure to cryptocurrencies but don't want the volatility of a concentrated portfolio. So one SB1 token will represent some 20-40 cryptocurrencies, and we’ll sell as many of those tokens as people want to buy. Our target market is people with Bitcoin and Ethereum, and people using the Lykke wallet, which we recommend. We want to get people to reduce their BTC and Ether holdings by 10-20% and buy our tokens, diversifying their holdings without going to the hassle of buying all the coins separately.
Description: This token represents the top-50 cryptocurrencies, including bitcoin and ether.
Weighting: We use a cube-root weighting scheme, which takes a cap-weighted ranking and smooths it out to closer to a flat distribution. This gives good exposure to the hard-to-get alt coins, while still maintaining a bit of the heavyweights. Anyone who wants to add bitcoin or ether can do so easily on the Lykke exchange. We cap the largest coins at 7 percent of our portfolio.
Fee: We will charge a 1.5 percent per year fee, taken out weekly. This comes to a reduction of 0.0288 percent per week and will be reflected in the published NAV.
SB1 Rules for Inclusion
Each week, we will rebalance the portfolio.
We will always purchase the top fifty coins that meet our criteria. We use CoinMarketCap as our ranking reference. This means the coins can be different from week to week. Some coins are currencies, some are tokens that power a certain system, others represent tradable assets.
Coins we don't include:
- Pegged coins
- Premined coins
- Coins that are under four months old
- Other index tokens
- Coins that don't trade at least $100,000 in the past ten days.
We reserve in very rare cases the ability to "blacklist" a coin, because we think it could be a scam or could be in trouble.
We never sell coins from our portfolio. Once we purchase, they are in.
SB1 Initial Portfolio
We’ll probably offer other smart-beta tokens, but our goal here is to take a good first step in offering a token that provides exposure to the up-and-coming coins, without too many long shots.
[LIST OF COINS IN FIRST PORTFOLIO - WE NEED A WAY TO PRESENT THE PORTFOLIO EACH WEEK. SHOULD BE DATA DRIVEN.]