Crypto Indices, what are they?
Recently I've come across a very exciting project in the crypto space and its name is "Phuture". The gist of it is simple: pick your favorite coins, build an index and put money in them equally (or weighted) over time. This will open up a whole number of possibilities to build wealth with crypto. I can very well see indices becoming an essential and integral part of crypto.
Here's a quick example of what could be possible with indices:
Practically speaking, you could create an index of say ETH, BTC, DOT, ACA, and maybe some additional low-cap coins that you want to invest into. A side effect is that it makes dollar-cost averaging incredibly easy. Each and every month you get your paycheck, you could move that money into your own custom index of your favorite projects and build wealth over time.
DCA will become easier than ever before and here's why it's a big deal: It de-risks investing for people new to crypto and makes it stupidly easy to invest in multiple projects at once.
As I like to think a lot about startups as well, here's where I think this value proposition gets really interesting: more people than ever before will be able to join investing in crypto which in turn makes crypto a more mature space and drives prices upwards. Indices also lower the entry barrier of having to manually go to an exchange and buy each and every asset you like manually and repeatedly - this creates friction and statistically wherever you have friction, people will churn.
I can see one example get a lot of traction:
Dollar-cost-averaging into indices in connection with traditional banking a la you get your paycheck -> 200$ are automatically distributed into a crypto index (e.g 33% BTC, 33% ETH, 33% DOT) and you go on with your life.
In my opinion, you could sum up crypto indices' value proposition like this: Indices de-risk crypto investments and reduce friction for newcomers.
As big parts of the crypto ecosystem are permissionless in nature, anyone could create and fine-tune indices at the click of a button. This would never be possible with stocks. Crypto indices are simply way more powerful than their stock counterpart (ETFs). It leads the path for a fully automated investing system that just would not be possible with closed gate ecosystems in traditional banking.
There are incredible opportunites for teams wanting to build in the crypto space right now. Especially in regards to developer tools & HyFi (connecting traditional banking with crypto).
Developer tools and integrations could supercharge indices by allowing devs to rebalance an index when certain actions happen, I'm thinking of something like webhooks or custom smart contracts that third parties can use to build their own integrations.
HyFi is the second area that I would heavily focus on. Working with traditional banks or HyFi projects would open lesser risk crypto investing for a vast majority of the world. Just like Acala partnered with Current (https://www.prnewswire.com/news-releases/current-acala-announce-partnership-establish-new-category-of-hybrid-finance-301293713.html), a crypto index project could do the same. The reason for this is as obvious as is simple: it again reduces friction for investing.
Imagine getting paid by your employer in the form of fiat currency, let's say your banking provider is Current in this example (which already works with Acala to build integrations) → you set up a standing order to move 200$ each month from fiat to crypto with Acala → a smart contract moves this money into an index which then automatically distributes it to the coins you've chosen. Dollar-cost averaging made simple: now you have a fully automated investment system in a high-growth space and don't have to manually do anything anymore 🤯. The easiest way of building wealth this century in my opinion.
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