This is the first of two votes required for a new product to be onboarded to the Index Coop.

A passing vote here signals the Index Coop’s intent to further research the Token Terminal Smart Beta Index feasibility resulting in a product prioritization score.

Passing Thresholds:

• 5% or more of circulating supply must participate (2,181,385*0.05 = 109 069)
• 50% or more of participating tokens must vote FOR

FOR - Pass Token Terminal Smart Beta Index through Decision Gate 1. Begin work to research & assign Token Terminal Smart Beta Index a product prioritization score.

AGAINST - Do not pass Token Terminal Smart Beta Index through Decision Gate 1.

DG1 is a signaling step to gauge community sentiment. The full-text Token Terminal Smart Beta Index exceeds Snapshot’s character count limit. Below is an abbreviated proposal. Check out this forum post to read the full proposal.

================================================ Title: Token Terminal Smart Beta Index (TTI) Status: Proposed Author: Token Terminal (@tokenterminal) Created: 2021-10 -27

index.tokenterminal.com

1. Summary

A price to sales ratio (P/S) weighted smart beta index by Token Terminal (TTI).

Token Terminal is a leading data analytics provider focused on the fundamentals of crypto protocols. We track metrics such as revenue and earnings to gauge the actual usage and performance of different crypto protocols. Over the past year, we’ve witnessed increasing interest towards our chosen methodology and believe that a broadly available index product based on that same methodology could generate significant interest among the community.

We have launched a dedicated site for the TTI: https://index.tokenterminal.com

If this proposal is moved forward to DG2, we will open-source the algorithm used for calculating asset allocations in our backtest for maximal transparency.

2. Motivation

‌Smart beta. In contrast to traditional market cap-based indexes, smart beta indexes employ alternative index construction rules with the aim of improving a portfolio’s risk-adjusted returns. These indexes seek to combine the benefits of passive investing and the advantages of active investing strategies.

Token Terminal smart beta index (TTI). The TTI uses a fundamentals-based ruleset for its index construction. Assets included in the TTI are chosen primarily based on their price to sales ratio. The price to sales ratio compares a protocol’s market cap to its revenues. A low ratio could imply that the protocol is undervalued and vice versa.

The price to sales ratio is an ideal valuation method especially for early-stage protocols, which often have little or no net income. Given the nascency of the crypto market, we believe that the price to sales ratio offers a highly accurate tool for relative analysis between different crypto protocols.

3. Specification

‌3.1 Overview

The TTI will contain a cross-sector collection of ERC20 tokens to capture broad exposure to assets with a low P/S-ratio. The assets can be wrapped representations of tokens from other blockchains than Ethereum, subject to available liquidity.

3.2 Differentiation

Market cap-based indexes offer a low-cost and easily accessible alternative for investors looking to diversify their cryptoasset exposure. We believe that the TTI could serve as a great fundamentals-based complement to market cap-based indexes and over time, especially as the crypto market and the asset universe expand, evolve to offer its investors differentiated exposure to revenue-generating and fairly valued crypto protocols.

3.3 Example composition

See https://index.tokenterminal.com for composition.

3.4 Backtest data

See https://index.tokenterminal.com for backtested data.