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[A Report that Explains the Various Use Cases and Solutions that Blockchain Services Offer and How the DBS9 Index Can Help Investors Diversify Their Crypto Portfolio and Capture the Long-Term Trends and Performance of the Blockchain Services Industry.]
CypherBabel Linktree: http://linktr.ee/cypherbabel
Part 1: CICS and ‘1520 Diversified Blockchain Services’
Part 2: DBS9 Index Introduction
Part 3: The Key Findings and Highlights
Part 4: Analysis of Constituents Weight Changes
Part 5: Summary and Outlooks
Part 1: CICS and ‘1520 Diversified Blockchain Services’
As we know, CICS classifies over 500 crypto companies and projects, delivering insightful information about the crypto universe and forming a basis of crypto index creation.
The ‘15 Blockchain’ domain in CICS includes two sub-industries: ‘1510 Blockchain Infrastructure’ and ‘1520 Diversified Blockchain Services’. The former consists of companies and projects that provide the underlying technology and infrastructure for blockchain networks, such as consensus algorithms, node operators, validators, miners, etc. The latter consists of companies and projects that offer various blockchain-based services across different sectors and domains, such as identity management, data storage, oracle services, etc.
‘1520 Diversified Blockchain Services’ are blockchain-based services that span different sectors and domains, such as identity management, data storage, oracle services, etc. Some examples of diversified blockchain services are the Graph, which enables efficient data access for dApps; and Chainlink, which connects smart contracts with real-world data sources.
Part 2: DBS9 Index Introduction
The purpose of this report is to provide an overview and analysis of the Diversified Blockchain Services 9 (DBS9) index, which tracks the performance of nine leading blockchain service providers. The scope of this report covers the historical and current performance, volatility, correlation, risk-return profile, market share and dominance, constituent weight changes, and comparison with other relevant benchmarks or indices of the DBS9 index.
The DBS9 index was created by InCre, a platform that allows users to create and manage their own crypto indices. The nine constituent tokens of the DBS9 index are: Chainlink (LINK), UMA (UMA), API3 (API3), Polymesh (POLYX), Band Protocol (BAND), The Graph (GRT), OriginTrail (TRAC), dKargo (DKA) and Ocean Protocol (OCEAN).
The DBS9 index uses a capped market capitalization weighted method to calculate the index value. This means that each token is weighted by its free float-adjusted market capitalization, but with a maximum cap of 25% for each token. This method has several advantages over a pure market capitalization weighted method, such as:
- It reduces the concentration risk and diversifies the exposure to different tokens, sectors, and use cases within the blockchain services industry.
- It prevents any single token from exerting a disproportionate influence on the index performance and reduces the impact of price bubbles or crashes.
- It allows smaller tokens with higher growth potential to have a meaningful representation in the index.
The DBS9 index is rebalanced every 180 days to adjust the weights of the tokens according to their market performance. This rebalance method has several advantages over a more frequent or less frequent rebalance method, such as:
- It reduces the turnover and transaction costs of maintaining the index portfolio and enhances its tax efficiency.
- It captures the long-term trends and performance of the blockchain services industry and avoids excessive noise or volatility in the short term.
- It balances between tracking error and drift risk and ensures that the index reflects its intended objective and strategy.
Part 3: The Key Findings and Highlights
- The index has achieved a remarkable growth since its inception, reaching an all-time high of 230.19 on February 8, 2023. As of April 11, 2023, the index value is 198.92, representing a 98.92% increase from the base value.
- The index has outperformed the overall crypto market and other sector-specific indices, such as the Bitwise Crypto Industry Innovators ETF (BITQ) and the Global X Blockchain ETF (BKCH), which have returned 75.43% and 68.27%, respectively, over the same period.
- The index has a moderate historical volatility of 0.05, ranging from a low of 0.01 to a high of 0.10. The index has a low correlation with other major asset classes, such as stocks, bonds, gold, and oil, indicating its potential for diversification benefits.
- The index has a significant market share and dominance in the blockchain services sector, with a current total market capitalization of $6.15 billion, accounting for 18.52% of the total market capitalization of all blockchain service tokens.
Part 4: Analysis of Constituents Weight Changes
The Diversified Blockchain Services 9 (DBS9) index is composed of nine tokens that represent different aspects of the blockchain ecosystem, such as decentralized oracles, data verification, identity management, and supply chain optimization. The index uses a capped market cap weighted method to calculate the constituent weights, with a maximum cap of 25% for any token.
At the base date of November 23, 2022, the index had two tokens with the maximum weight of 25%: API3 and UMA. API3 is a decentralized oracle network that provides data feeds for smart contracts and other applications. UMA is a protocol that allows users to create synthetic assets that track the price of any underlying asset. Both tokens had strong market performance in late 2022, driven by increased demand for decentralized data and financial services.
The other seven tokens had lower weights, ranging from 5.19% to 9.5%. The third-largest token was OriginTrail (TRAC), a protocol that enables data sharing and interoperability across supply chains. The fourth-largest token was The Graph (GRT), a decentralized protocol that indexes and queries data from blockchains. The fifth-largest token was Band Protocol (BAND), another decentralized oracle network that competes with API3 and Chainlink. The sixth-largest token was DKargo (DKA), a platform that connects shippers and carriers in a decentralized way. The seventh-largest token was Chainlink (LINK), the most popular decentralized oracle network in the market. The eighth-largest token was Polymesh (POLY), a blockchain that focuses on security tokens and compliance. The ninth-largest token was Ardor (ARDR), a platform that enables users to create their own child chains with custom features.
The constituent weights changed significantly in the latest rebalance, which occurred on April 11, 2023. The most notable change was the surge of The Graph (GRT) to the top position, with a weight of 40.82%. This was due to the massive growth of GRT’s price and market cap in early 2023, as the protocol became the leading provider of data for Web3 applications and decentralized exchanges. GRT also benefited from the launch of its own blockchain, which enabled faster and cheaper queries.
The second-largest token was Chainlink (LINK), which increased its weight from 6.31% to 15.4%. Chainlink maintained its dominance as the most widely used decentralized oracle network, securing billions of dollars worth of smart contracts across multiple blockchains. Chainlink also expanded its services to include verifiable randomness, proof-of-reserve, and cross-chain communication.
The third-largest token was Band Protocol (BAND), which increased its weight from 7.66% to 10.4%. Band Protocol continued to challenge Chainlink and API3 as a viable alternative for decentralized data feeds, especially in Asia. Band Protocol also launched its own blockchain, which improved its scalability and security.
Part 5: Summary and Outlooks
The DBS9 index is a novel and innovative index that captures the performance and potential of blockchain services in the crypto industry. The index has shown impressive returns and growth since its inception in November 2022, outpacing the overall crypto market and other sector-specific indices and ETFs. The index reflects the increasing demand and adoption of decentralized data and financial services across various industries and use cases.
However, the DBS9 index also entails high volatility and risk, as it is subject to price swings and market sentiment in the crypto space. The index may also face regulatory uncertainty and competition from other platforms and protocols that offer similar or superior solutions. Therefore, investors who are interested in investing in the DBS9 index should do their own research and due diligence before making any decisions.
The outlook for the DBS9 index is positive but cautious, as blockchain services are expected to continue to grow and innovate in the coming years. The index may benefit from new developments and partnerships that enhance its constituents’ capabilities and reach. The index may also diversify its portfolio by adding or removing tokens based on their relevance and performance in the blockchain services sector. The index may also adjust its cap and rebalance frequency to optimize its returns and risk profile.
Investors who are interested in the DBS9 index should be aware of its benefits and drawbacks, and be prepared for its ups and downs. Always DYOR!
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