RESEARCH

For general questions, please read our F.A.Q.
Disclaimer: Cryptomover is not a licensed financial advisor. The information presented in this piece is an opinion, and is not purported to be fact. Cryptocurrency is a volatile virtual commodity and can move quickly in any direction. Cryptomover is not responsible for any loss incurred by following this advice.

 

94. CMS: World's First Cryptocurrency Staking Index (Published: 22nd Mar, 2018)

In our previous article we mentioned how an index offers a targeted exposure to a particular asset class. As the market matures, we see the need of a sector focused index. While sectorisation can be done on multiple factors and we think staking is the new mining.

We, at Cryptomover, is introducing the world’s first staking index CMS (Cryptomover Staking Index) to the Cryptomover family of indexes. Our CMS is focussed on market exposure to staking reward tokens in the cryptocurrency market.

Today in crypto, typical transactions are confirmed either by POW (proof of work) or POS (proof of stake). When one offers computation work for confirmation of transactions and get coins in rewards, it is termed as Proof of Work. Satoshi believed in 1 CPU, 1 vote. Ethereum is built the same way. Interesting, that is changing. With Casper, Ethereum is moving to POS and so will the industry.

What is Staking?
When one uses already owned coins for confirming transactions, it is referred as Proof of Stake. In staking, typically, the more coins you own, the more rewards you get. While there is a long list of coins that are based on POS, it is highly cumbersome for a user to buy all these coins and stake it themselves. Managing of these wallets and running masternodes are a nightmare.

However, staking is a beautiful concept. With mining industrial centralization, cheap electricity, and ASIC hardware, 1 CPU 1 vote has failed for altcoins. To add insult to injury, exchanges do not credit staking rewards to users who custody coins with them.

Our CMS index provides an easy way to track POS coins. CMS primarily focuses on the below rules for screening out the index constituents:

  • POS should be functional; we screen out names that have POS as future developmental work
  • Coin is not a security coin
  • Market Cap greater than 200m USD
  • 24 hour trading volume higher than 1m USD

The top 5 coins from the list covers more than 85% of the staking coin value in terms of market capitalization. The weights of each index member is market capitalization weighted.The index is rebalanced monthly. NEODash, Lisk, Qtum and Stratis are the five initial CMS index members. Based on each of their expected coin gifts, the CMS index has an expected staking rewards of 0.47% per month or about 6% per year (as of 22 Mar 2018). While 6% is not a large number in cryptocurrencies, it is nonetheless, a good thing for coin users. Similar to a dividend (but not a dividend), it should be given back to the stakers.

As the market grows and matures we expect the tail of the index to get fatter and might increase the number of coins in the index.

If you think staking coins are cool, give us a shout.

© 2017-2018 Cryptomover.com