The DeFi Pulse Index has a collection of criteria composed of four dimensions. Two dimensions are used to evaluate the token’s characteristics, one dimension is used to assess the project’s characteristics, and one is used to evaluate the protocol’s characteristics. The inclusion criteria are the basis to select what tokens will be included in the index.
Token’s Descriptive Characteristics
The token must be available on the Ethereum blockchain.
The token must be associated with a decentralized finance protocol or dapp listed on DeFi Pulse.
The token must not be considered a security by the corresponding authorities across different jurisdictions.
The token must be a bearer instrument. None of the following will be included in the index:Wrapped tokens. Tokenized derivatives. Synthetic assets. Tokens that are tied to physical assets. Tokens that represent claims on other tokens.
Token’s Supply Characteristics
It must be possible to reasonably predict the token’s supply over the next five years. At least 5% of the five year supply must be currently circulating. The token’s economics must not have locking, minting or other patterns that would significantly disadvantage passive holders.
Project’s Traction Characteristics
The project must be widely considered to be building a useful protocol or product. Projects focused on competitive trading/holding, having Ponzi characteristics, or projects that exist primarily for entertainment, will not be included.
The project’s protocol must have significant usage.
The protocol or product must have been launched at least 180 days before being able to qualify to be included in the index.
The protocol or project must not be insolvent.
Protocol’s User Safety Characteristics
Security professionals must have reviewed the protocol to determine that security best practices have been followed to maintain user assets safe under different circumstances. Alternatively, the protocol must have been operating long enough to create a consensus about its safety in the decentralized finance community.
In the event of a safety incident, the team must have responded promptly and addressed the incident responsibly in the aftermath, providing users of the protocol with a reliable solution and the decentralized finance community with adequate documentation to provide transparency about the incident.
The selected tokens must have sufficient liquidity across a variety of trading platforms.