What is the ETH Merge?
It’s one of the most anticipated crypto events of 2022. The Merge will see Ethereum move from the energy-intensive Proof-of-Work (PoW) consensus mechanism to a more efficient Proof-of-Stake system. It is not expected to reduce Ethereum's fees and slow transaction speeds, but it will have a significant impact on the network's energy use.
Why is there an ETH Proof-Of-Work Fork?
As the Merge nears, discussions around a potential hard fork for an “ETHPoW” (Ethereum Proof-of-work) chain are getting louder. Originally Ethereum 2.0 was planned as a non-contentious protocol upgrade and not a contentious hard fork (unlike Ethereum Classic). The “fork” terminology in the Ethereum 2.0 specs is used more for public messaging than anything else. When the upgrade is complete, there will be no fork because the network will not end up with multiple competing chains. There will only be one ETH, and the amount of ETH you hold will remain the same.
However, some miners of the current Ethereum chain have a different view. Ethereum mining is a multi-billion dollar industry, generating hundreds of millions of dollars in revenue (sometimes billions) to hardware miners every month. After the Merge, the mining hardware will be useless. There will be a fight to keep this business alive. The ETH miners will protest the Merge by forking into the new ETHPoW chain that retains PoW validation. They already have some support from developers, who removed the difficulty bomb. A migration to Ethereum Classic (ETC), which is also based on PoW was already ruled out by a majority group. ETC cannot practically absorb all of the mining power of Ethereum.
What should Investors do?
Before anybody can make an active decision, investors will have to check their trading setup. Will your infrastructure support the new hard fork? Are custodians and trading counterparties listing it or prepared? As seen with the Terra Luna Airdrop, not every investor can participate at the beginning due to critical service providers being either incapable or unwilling to provide the necessary services.
How do we treat the Fork form an Index Perspective?
At MarketVector, our hard fork policy is outlined in the index guidelines. Section 5.2 gives details on the hard fork treatment policy. On top of the hard fork treatment policy, indexes have some additional rules (like custodian support defined by the index owner or the client) which might affect the treatment of the fork in the corresponding index.
As soon as news are published, MarketVector starts tracking the development of the fork. If the corresponding index allows the addition of the forks, forks that fulfill the rules as defined in Section 5.2.1 will qualify to be added to our indexes. After this step, we apply the following checks:
- For the indexes that have the requirement in which the index components must be listed on at least one of the exchanges with AA/A rating by CryptoCompare’s Exchange Benchmark, the inclusion of the fork will be dependent on the listing status at any one of the exchanges.
- The indexes may also have the requirement in which the index components should be supported by the designated custodians of the index owner or the index client. If the fork is not supported by at least one custodian, it will not qualify for the index.
If the fork fulfills the rules to be added to an index, the following will be applied:
When do we add the new Fork?
The Ethereum Mainnet Merge has been tentatively scheduled for around September 15th/16th. The final part of the upgrade, known as “Paris,” will happen when Ethereum’s hash rate (a measure of a network's computing power) reaches a certain level. That's currently expected to happen on September 15.
But this could change in the coming days and weeks, since a network's hash rate is not constant and could increase or decrease over time.
The fork will be added by MarketVector intraday as soon as the Merge is confirmed. Clients get the data via our Real-Time API and a standard closing file with the corresponding closing price will be disseminated.
How will clients get to know what we do?
At least 3 days before the supposed fork date, MarketVector will produce an Event file where we describe the inclusion procedure. This file will be sent to our clients and can be updated when new information is available.
This FAQ represents a collection of questions our clients keep on asking. Please do not hesitate to contact us if you have additional questions.
What are digital assets?
Digital assets, such as Bitcoin, Ethereum, Litecoin are cryptographically secured, protocol-governed and mostly non-centrally issued assets that serve as store or value, medium of exchange, or merely a decentralized software solution. Digital assets have gained steady recognition over the past years. We believe that digital assets are now integrating with the broader economy and maturing into an asset class appropriate to wide array of investors. For that reason, we believe that digital assets merit proper monitoring via improved index solutions.
Why digital asset indexes?
Currently digital asset markets are fragmented, difficult to monitor and do not meet index industry standards; in other words, standard digital asset benchmarks are missing. The MarketVector Indexes CryptoCompare digital asset benchmarks fills this gap and brings industry-standard quality, transparency and investability to the digital asset market indexing.
How does MarketVector Indexes pick the top 5/10/25 digital assets?
Top digital asset are selected by size and liquidity (equally weighting both criteria) from a universe of the top 100 digital asset by size.
What are digital asset classifications?
MarketVector Indexes categorizes digital asset coins into distinct, non-overlapping categories that form the building blocks of a new crypto classification scheme. Categories capture the value and use case related to a coin. Using a qualitative process, each coin is categorized into one category. Coins may change categories over time and new categories may emerge. The “Leaders” investable category indexes capture the largest and most liquid coins within a category which are also supported by major US crypto exchanges & custodians.
||Financial services built on top of distributed networks with no central intermediaries
||Tokens owned and operated by a centralized cryptocurrency exchange
||A decentralized computer program designed to perform specific tasks
|Media & Entertainment
||Used to reward users for content, games, gambling or social media
||Axie Infinity, Basic Attention Token
||Digital, non-stable money for use in a distributed network
||Bitcoin Cash, Litecoin, wallet apps
|Smart Contract Platforms
||Blockchain protocol designed to host variety of self-developed and 3rd party applications
||Ethereum, Cardano, Solana
||Designed to minimize volatility by pegging to a more stable asset
|Store of value
||Designed to hold or increase purchasing power over time
Why does MarketVector Indexes not have indexes for all the digital asset categories?
Of the current categories identified, some are not, at present, suitable for building investable indexes:
- Exchange: many exchange tokens such as BNB (Binance) and FTT (FTX) may eventually end up classified as securities by US regulators. Indeed, some of the largest exchanges are already public or planning IPOs. As such, we see less demand from market participants at the moment for an investable index based on this category.
- Payments: this category includes meme coins such as Dogecoin and Shiba Inu, and prominent forks such as Bitcoin Cash and Bitcoin SV. While a “meme coin” category might emerge in future iterations, for now, MarketVector Indexes sees less demand among market participants for a category that includes both meme coins and prominent forks. If and as the digital assets market cap grows as we expect, investors should expect further sub-categorization of “Payments” etc.
- Stablecoins: these coins aim to peg their value to another asset. While MarketVector Indexes believes market participants will find value in an index that tracks the yields on stablecoins, there is currently no use case for a stablecoin price index.
- Store of Value: this category includes Bitcoin, wrapped Bitcoin and Bitcoin Gold. Bitcoin itself offers pure enough exposure to this category.
Why digital asset categories?
Categories allow investors to group similar digital assets into groups to analyze and proxy targeted exposures. They enable deeper analysis into peers and aggregated performance review, As the basis for investable indexes, they provide the underlying components to build an investment solution aimed at capturing the performance of the coins within the category. They allow users to measure, benchmark and capture the performance and characteristics of targeted categories. MarketVector Indexes categories will help make digital assets digestible to traditional finance investors while giving crypto native funds additional benchmarking capabilities.
How are the digital asset ‘leaders’ indexes different from their broad indexes?
Broad indexes will capture the performance of coins with $250m market cap and $10m ADTV. Leaders capture the performance of coins with $1bn market cap and $25m ADTV, and introduces additional screening requiring the coins to be traded on a major US exchange and supported by a reputable crypto custodian. In addition, the investable leaders indexes include a 20% buffer for existing constituents so as to limit turnover. Please refer to the index guide for specific detail on each index.
How often will the indexes be re-balanced?
Monthly. Digital asset markets are volatile and innovative, a monthly review enables precise monitoring of the latest trends and developments.
What’s your pricing data source?
Pricing is provided by CryptoCompare from a global list of 50+ exchanges. The index uses a special exchange liquidity based pricing mechanism for each asset and each exchange to ensure fair price discovery and representation globally.
How trustworthy is the pricing data?
The pricing source is designed to be reliable in a market that is otherwise prone to DDOS attacks, hacking, and unstable technological and legal environment
From how many different exchanges do you collect data?
This is defined in the index guide and depends on CryptoCompare's coverage, which is currently about 60 digital asset exchanges globally.
When is the index calculated?
Indexes are calculated each 15 seconds.
Could indexes be "real time"?
They are real time.
Could an index be EUR/GBP/other hard currency based instead of USD?
Yes, the index could also be provided in any other currency; please let us know if we can fill any of your index needs.
How many digital asset are not included in the index.
Currently there are over 10,000 digital assets. We cover the top 100 in our core benchmark which represents over 75% of the total digital asset market's capitalization.
What happens if a particular digital asset gets delisted between re-balances?
Only in case a digital asset gets delisted at all exchanges, it will be removed from the index and be replaced by the top ranked non-component in the latest selection list, (except for the MarketVector Indexes CryptoCompare Digital Assets 100 Index).
For what can the indexes be used?
Active and passive financial products, hedge funds, ETFs, ETNs, structured notes, derivatives, futures contracts, etc… The indexes can also be used to monitor markets.
Are these the first digital asset indexes? If not, what else is out there and produced by whom?
MarketVector Indexes CryptoCompare digital asset indexes are the first that simultaneously meet industry standards, provide high quality pricing and offer diversified exposure to the top digital assets. A few more indexes exist, but mainly used for internal or research purposes. Those indexes do not meet industry standards, are generally not available for real-time dissemination and offer limited pricing capabilities.
Can an ETF or other products be designed around the indexes?
Yes. The methodology is set up to build a wide range of financial product based on the indexes. However, product design does not only depend on indexes but also depends on other factors such as regulation.
Are the indexes investable?
Yes, they are designed to be investable. Please see our index guide for more information.
Can the index be dominated by only one or two constituents?
MarketVector Indexes applies a capping scheme which assures diversification of each index. Please see our index rule book for more information.
What makes the indexes unique?
Diversification (components, selection and weighting scheme), liquidity (additions must trade >1mln USD per day) and valuation of constituents (liquidity-driven pricing from global exchanges.)
How well do indexes reflect the digital asset markets?
We cover the top digital assets by size and liquidity, ensuring a blue chip standard which is not only based on market capitalization, but also interest in respective digital assets.
Will the index be subject to any regulations or answerable to any regulatory authority?
Yes, as a European index provider, MarketVector Indexes is registered as a benchmark administrator, regulated in Germany by Federal Financial Supervisory Authority (BaFin). In addition, it has filed as a self-indexer with the SEC in the United States.
Is there such a thing as "fair value" for digital assets?
As digital assets trade 24/7, there is practically real time pricing provided at all digital asset exchanges. Using a combined price weight from multiple exchanges, our indexes are fair valued at all times.
How can I find out the value of the index?
The index value is disseminated via the MarketVector Indexes website and standard data providers. You may refer to the indexes through tickers and various standard identifiers such as ticker, ISIN, etc…
Have you "stress tested" the index?
Yes. In addition to backtesting, several selection and capping schemes were tested to ensure quality, robustness and investability.
What expertise does MarketVector Indexes have in the digital asset industry?
MarketVector Indexes has researchers who have been involved in the digital asset space for years. As a VanEck subsidiary and a CryptoCompare partner we have access to first class tradition asset management and digital asset management research and viewpoints.
Will MarketVector Indexes launch any other digital asset indexes?
MarketVector Indexes will continue to expand the existing family of digital assets under the expectation that our MarketVector Indexes CryptoCompare Digital Asset indexes become the definitive benchmarks for the digital assets market. MarketVector Indexes categories will help make digital assets digestible to traditional finance investors while giving crypto native funds additional benchmarking capabilities. We continue to invest significant resources to track the evolving digital assets ecosystem and build indexes that reflect this dynamic asset class.