How to Gain Exposure to the Best DeFi Projects With One Token

How to Gain Exposure to the Best DeFi Projects With One Token

By D3F1 | DeFi Box | 28 Oct 2020


Tired of keeping up to date with the latest DeFi trends or you are not sure where to put your money in? 

You are not alone. 

Today I would like to introduce you to the DeFi Pulse Index that does the job of managing the top DeFi portfolio for you. 

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The DeFi Pulse Index (DPI) is a capitalization-weighted index on the TokenSets platform that tracks the performance of a basket of top-rated DeFi assets. It allows you to simply buy into the index that will automatically invest and move your money around based on the weightings inside the TokenSet.

How Does It All Work?

First, a few words on Token Sets. 

In a nutshell, TokenSets is pretty much a decentralized version of eToro that allows you to buy into a trader’s specific ‘strategy’ and earn profit from the trading decisions of that trader/algorithm.

I won’t go into too much detail about TokenSets, but if you would like to learn more - take a look at my previous post about what it is.

The DeFi Pulse Index (DPI) is a strategy built on top of TokenSets by Defi Pulse.

It was created on September 9th, 2020, and has already managed to attract 1710 investors. Its current market cap hovers at around $15M. 

The DPI is weighted on the value of each token’s circulating supply. It focuses on DeFi projects that have significant usage and commit to ongoing maintenance and development of their projects.

The index currently has the following tokens with their corresponding weighted allocation;

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As you can see, the top DeFi projects such as AAVE, MKR, SNX, UNI, YFI, and COMP are all included and have the highest weighting in the index. On top of this, other smaller DeFi tokens are including such as REN, LRC, KNC, BAL, and REP.

DeFi pulse has an outlined list of criteria that determine which tokens should be added. These revolve around characteristics of the Token’s description and supply, the token transactions, and the safety measurements each project has undertaken.

Some important characteristics include;

Descriptive characteristics:

  • The token must not be considered as a security by authorities. 
  • The token must be a DeFi protocol/dApp listed on DeFi Pulse.
  • The token must not be wrapped, synthetic, derivative, or tied to physical assets.

Supply Characteristics:

  • It must be possible to ‘reasonably’ predict the token supply over the next five years.
  • At least 5% of the 5-year supply must be circulating.

Transaction Characteristics:

  • The protocol must have significant usage.
  • The protocol must be at least 180 days old.

Safety Characteristics:

  • The smart contracts must have been audited by a security professional/firm.
  • In the event of a security breach, the team must have responded promptly and addressed the incident responsibly.

You can see a full detailed list of other characteristics they look for on their DPI Homepage.

Why Would I Ever Want To Buy The DPI TokenSet?

Let’s face it; trading and proper asset management aren't for everyone!

You have to make many trading decisions from picking which cryptocurrency to buy, figuring out how much of the token to buy, and estimating the best price to enter/exit the trade.

Buying into a token set such as DPI takes all of these decisions out of your hands and leaves it up to an experienced professional. It is important to note that not anybody can just create a TokenSet. All Set creators have to be vetted to make sure they are competent traders/investors. This brings about a significant degree of confidence when investing in any TokenSet.

When you buy into the DPI set, you are pretty much betting on the DeFi movement as a whole rather than just picking a single token to invest in. 

Your exposure to other assets allows your returns to be more stable with a reduced impact if one of your assets completely tank. If a rug gets pulled, there are other assets in the index to offset or reduce your losses.

The “downside” of buying into a index such as DPI would simply be a reduced ROI than buying into one of these tokens individually. More risk more reward - no brainer. However, if you believe that DeFI tech is the future, but you struggle to figure out the best entry/exit prices and do not have the time to track the DeFi news and prices for 14 hours per day - then the DeFi Pulse Index TokenSet is a good choice. 

How To Invest Into The DeFi Pulse Index?

Head over to the TokenSets homepage and sign up for an account. The process is fairly straight forward so I will refrain from guiding you through this.

After you have signed up and logged in, the next step is to top up your account. Hit the “Account” button to bring up your account and then click “Receive” to see your account Ethereum address;

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This will bring up a QR code and an address for you to fund your account with.

Once your account has been funded, it is time to invest in the DPI TokenSet. Head over to the DeFI Pulse Index TokenSet page.

From here, we need to click the blue box that says “BUY” to invest in the Set;

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This will bring up the window where you select how much of the Set you would wish to purchase. In this case, I have purchased 0.25 ETH worth, which will give me 1.221 of the SET. Once you are ready to purchase, hit “Preview Buy:’

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This will bring up a separate window asking you to confirm the purchase. As you can see, there is a small premium to pay, and the network fee also (everything is logged on the Ethereum blockchain). Hit “Submit Buy”;

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The transaction will process, and once complete; you will see the following window;

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This confirms that you have invested in the DeFi Pulse Index set. You can verify that you have entered by heading back to your account page;

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As you can see, I now have $89.12 invested in the TokenSet.

That’s all there is to it!

If you are struggling to trade DeFi and don’t have enough time to track the markets but still want a piece of the action - this is something I can highly recommend.


D3F1
D3F1

Yet another defi fan


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