In order to ensure and maintain a quality user experience, we are proposing an asset framework for choosing tokens to include in index products. This framework will serve to ensure that only tokens from projects with ongoing development, a valid use case, trusted team members and enough liquidity are to be included into any index. It will act as a guideline that initial asset composition and rebalances of the index should abide by. While most criteria will apply to any index product, we are going to outline the proposed asset framework specifically for the Kujira Index (KJI), the first index that will be launched on the protocol.
The requirements fit into four categories: Qualitative requirements, liquidity requirements, safety requirements & requirements specific to the Kujira Index.
Qualitative
In order to be considered for the index the team behind the token has to be trusted & actively working on the project. Further, it should have a clear value proposition & no signs of ill intent.
Qualitative criteria:
- Team has proven track record building & maintaining products
- Project has a valid use case
- Token has a valid use case / value capture mechanism
- No red flags or signs of potential rug
- Ongoing development (updates in past 3 months)
Liquidity
These requirements aim to ensure quality user experience by selecting assets only if they have enough liquidity to get in and out with as little price impact as possible. This is highly important to avoid slippage during mints, redemptions & rebalancing of the index asset. The token release schedule has to be transparent to avoid unpredictable large changes in liquidity & token supply.
Liquidity criteria:
- 3 month avg daily volume > $50k / Day
- 3 month avg liquidity > $50k
- Current liquidity (BOW) > $100k
- The token release schedule has to be predictable
- No more than 50% of tokens are still vesting
Safety
While code audits are often mostly a vanity metric, undergoing code reviews from professionals does make code less prone to certain attacks. Therefore, for newly launched projects that secure value in any form it shall be a requirement to undergo reviews by an auditor or the Kujira Sentinel.
Safety criteria:
- Code base must have undergone auditing or reviewed by Kujira Sentinel
- Proven track record for safety incident response
KJI specific
For the Kujira Index (KJI) there are further criteria that may not apply to future indices with assets originating from outside the Kujira Ecosystem.
Index specific Criteria:
- Project deployed on Kujira / Kujira is the home chain
- Team known to the public or the Kujira Core Team
Next steps:
The logical next steps are to:
- select assets for KJI that fit the framework
- calculate the index weights with a formula based on several metrics, including market cap, liquidity/volume & a smart contract risk factor
However, as some of these metrics are constantly changing (e.g. market cap & liquidity), the final asset and weight calculation shall happen shortly before the launch of the index.
As of today, the following assets fit (most of) the criteria above: KUJI, MNTA, NSTK, WINK, FUZN, ampKUJI, ampMNTA, qcKUJI, qcMNTA, xUSK & xUSDC. Most of the LSDs mentioned as well as FUZN & WINK do not meet all liquidity requirements (yet), but could be initially included with a small weight.
About the Kujira Index
The Kujira Index is going to be a basket of assets tracking the broader Kujira ecosystem. It simplifies exposure to Kujira as a whole without having to individually pick and choose which assets to invest in. Read more in our previous introduction blog here.
Also, make sure to follow us on Twitter / X. As we are almost done with the UI, we may drop some teasers soon.