The Layer 2 Index is a simple and fast way to aquire the established and newly launched key components of the next wave of Ethereum and on chain Decentralized Finance. Layer 2 or L2 scaling allows the security of the Ethereum blockchain to scale transactions in a manner that all value is settled rapidly and securely to the mainnet. LTI is an index of Layer 2 Ethereum Tokens and their projects.
You can can use this as your token list and buy them with a single transaction, because when you buy the LTI token you own a portfolio of these tokens today, minus the extra gas of purchasing ten separate tokens!
Owning a portfolio of Layer 2 scaling tokens can minimize risk because it will track a broader market segment, which generally rises in value over time, versus choosing a small single handful of tokens which can be more volatile in the same period.
Trading individual tokens, you’re probably not going to outperform the market. Depending on your transaction costs, daily trading can eat your gains.
The Layer 2 Index or LTI is a portfolio of protocol tokens that aspire to fundamentally disrupt large parts of the existing Layer 1 of Ethereum’s mainnet DeFi ecosystem and lower the costs for new crypto users through the use of Layer 2 scaling solutions.
The Layer 2 Index is diversified exposure to one of the fastest-growing segments of the crypto ecosystem. The Layer 2 Index’s tokens are held by an auditedsmart contract which controls the issuance and redemption of the LTI token for the constituent tokens in the Layer 2 Index.
The Layer 2 Index is a crafted and formal methodology that includes eligibility rules meant to screen out critical risks around custody, liquidity, and other concerns. New and under utilized tokens, where they are expected to grow are included with a lesser balance to capture future growth potential for the Layer 2 DeFi sector.
The Layer 2 Index divides the DeFi segment into three categories to prevent overweighting by large existing players. Some tokens have not yet released production Layer 2 functionality; where this is the case, it is expected they will benefit by the efficiencies that Layer 2 offers in the near future.
Focus
Layer 2 scaling and the speed and cost savings it enables is one of the most exciting developments in DeFi. Harnessing L2 will empower Decentralized Finance to disrupt segments of the financial industry that are worth trillions of dollars. Layer 2 and L2 will bring these features to many more mobile users, and reach 24 hour, round the clock access for global audiences based on delivering speed and reduced transaction costs.
Methodology
The Layer 2 Index provides users with a one-stop solution for gaining exposure to the most important DeFi tokens involved in Layer 2 scaling and this robust exposure can increase the chances of owning the industry winners over the long term.
Security
The Layer 2 Index evaluates security developments to stay up-to-date on industry best practices continuously. LTI and the constituent tokens are controlled with an audited and proven smart contract enabling self-custody, and immediate 24 hour access to issuance and redemption via both the Layer 2 Index interface and various public markets across the DeFi ecosystem.
Look for the Layer 2 Index on TokenSets and many crypto and DeFi exchanges today.
Composition
The Layer 2 Index is designed based on market size, and considers the maturity of the projects involved. You may import the Token List, into your favorite dex.
Periodically new tokens may be added to the index. This will require adjusting the balance of the index, and an announcement of such a decision will be made, and then subsequently the composition will be adjusted for the Layer 2 Index. Tokens that no longer meet the objectives will be removed with care so as to minimize market disruption.
The aim of the Layer 2 Index, is to provide an easily liquid entry point for these blockchain projects at the existing market price. Existing holders of the Layer 2 Index token can continue their exposure to this Index of projects as the market evolves.
The LTI token will be freely traded on multiple DEX and Crypto Exchanges. It will be available for the minimum transaction costs for each platform. An annual management fee of 0.93% will cover overhead and gas related to re-balancing the constituents throughout the year.
The Layer 2 Index LTI token is comprised of the retrievable components of the Layer 2 Index, which means that each LTI token is un-wrappable for the constituent tokens of the Layer 2 Index. This is true self-custody for DeFi users, and not dependent on an Oracle or other price feed to assign valuation of the LTI token.
Because of this the LTI token has a price which is the actual value of the underlaying member tokens at the market rate based on the ability to derive the constituents at any time, and on demand through spot selling or redemption.
Price fluctuations of individual tokens will have a impact based on the ratio to other tokens in the Layer 2 Index. The Layer 2 Index intends to smooth the peaks and troughs of individual token volatility with a broader market exposure to these multiple tokens providing Layer 2 Scaling technologies for Ethereum.
The initial weighting is based on Emergent, Productive, and Dominant classifications. Inside each classification is more or less tokens to determine that balance:
The following is the list of the component tokens of the Layer 2 Index, their descriptions and how they are classified in the index. Performance of the LTI index can be tracked on Zerion.
Dominant
GRT
The Graph is a protocol for organizing blockchain data and making it easily accessible. It is expected that they will enable serving L2 transaction data for consumers.
SNX
Synthetix is a decentralized synthetic token issuance protocol built on Ethereum. These synthetic tokens are collateralized by the Synthetix Network Token (SNX) which when locked in the contract enables the issuance of synthetic tokens (Synths), avoiding the need for counter-parties.
UNI
Now rivaling centralized incumbents on daily volume, Uniswap’s success to date — achieved without involvement of the core development team since deployment — indicates that there is considerable demand for permissionless financial services.
Emerging
BAT
The Basic Attention Token (BAT) is built on the Ethereum blockchain, and embedded into the Brave browser - it is an incentive token built into the browser to reward all players in the ecosystem - the user, advertiser and publisher. Recently Brave announced a Decentralized EXchange (DEX) where Brave will incentivize liquidity providers to grow the BAT and broader crypto ecosystems and this includes L2 solutions.
GLM
Golem is a generalized global marketplace for computing power. By the diverse nature of the applications that can be integrated into Golem, we might encounter varied remuneration models. It is expected that Golem will benefit from L2 and this will enable more granular use of the resources in the network.
POLYGON (MATIC)
Polygon (formerly Matic Network) is a layer-2 scaling solution with side-chains for off-chain computation, while ensuring token security using the Plasma framework and a decentralized network of Proof-of-Stake (PoS) validators. It aims to offer scalable and instant blockchain transactions.
LeverJ
LeverJ (L2 LeverJ Gluon) is a decentralized derivatives trading platform using a plasma sidechain designed specifically for non-custodial, high-speed, low-latency trading. One of the important distinctions of Gluon plasma versus other DEX implementations is the small footprint in terms of state required on both the main chain and the plasma side-chain.
Productive
BAL
Balancer, is a protocol for multi-token automated market-making. It enables portfolio owners to create Balancer Pools, and traders to trade against them. Balancer Pools contain two or more tokens, each with an independent weight representing its proportion of the total pool value.
LRC
Loopring’s objective is to design and engineer the best-in-class orderbook-based DEX protocol on Ethereum. With Loopring v3 - they are using a cutting-edge construction called zkRollup.
SHIB
Shiba Inu tokens allow investors to store millions, billions, or even trillions, in their wallets. SHIB was the first to be registered and incentivized on ShibaSwap, a proprietary decentralized exchange.
Characteristics
For a token to be included in the Layer 2 Index, the token MUST be available on the Ethereum blockchain.
The token must be associated with a decentralized finance protocol or dapp.
The token must be a bearer instrument.
None of the following will be included in the Layer 2 Index:
Wrapped tokens.
Tokenized derivatives.
Synthetic tokens.
Tokens that are tied to physical assets.
Tokens that represent claims on other assets.
Liquidity
Mining and Yield Farming with LTI tokens.
An incentive to hold LTI tokens may be provided by staking in an LP mining pool on different platforms.
LP tokens are issued by AMM pools to LP Providers. For example, the LP token of the Uniswap LTI-DAI Pair, and Honeyswap LTI-wxDai Pair. The relative proportion of LP tokens represents your actual ownership of the AMM pool.
If you transfer LP tokens to other accounts, it is equivalent to transferring the corresponding underlying tokens in the pool to other parties. Please treat the value of LP tokens, as representative of the LTI token and thus the underlying components of the Layer 2 Index. Staking or yield farming should be done on trusted platforms.
Maintenance
Maintenance for the Layer 2 Index is performed in two phases:
Observation
The Observation phase takes place during the third week of the month. It is the phase when the changes needed for the next reconstitution are determined.
Orientation on Supply:
The Circulating Supply is evaluated during the third week of the month and published before the monthly reconstitution.
Decision on additions and deletions:
The tokens being added and deleted from the Layer 2 Index calculation are decided during the third week of the month and published before monthly reconstitution.
Action
The Action phase, is when the Layer 2 Index components are adjusted, added and deleted as per the instructions published after the end of the observation phase.
New index weights, additions and deletions are incorporated into the Layer 2 Index during the monthly reconstitution, which will take place on the first business day of the month. As tokens tracked by the Layer 2 Index grow, the reconstitution window will expand to more than one day to lower the reconstitution’s market impact.
Details on the Supply
The LTI token is issued based on the specified weight of the constituent tokens. As tokens are added to LTI they are not available on the market.
New LTI tokens may be issued on demand to meet market needs; this issuance requires fractional tokens for each component in weight to equal 1 LTI token. Thus the new issuance is the inclusion of at the market price of tokens, comprising the index in total to sum a valuation of 1 LTI. This issuance has gas costs associated with the transaction of wrapping a single LTI token or a batch.
At anytime the market price of LTI should be at or very near the individual component tokens added together in weight. Low liquidity on some platforms can cause demand to exceed supply. It is expected that these price changes will be short lived as additional LTI tokens are issued at the market price of the underlying constituent tokens to meet that demand. When deciding to purchase LTI, evaluate the current supply, and check on the issuance cost for the number of LTI tokens you are purchasing.
For a token to be included in the Layer 2 Index it must maintain a liquidity / availability ratio of no less than 1% for a 30 day window. If liquidity cannot be sourced at this rate, the token may be removed in the next Maintenance phase.
To be considered for inclusion a token’s economics must not have locking, minting or other patterns that would significantly disadvantage passive holders of the token.
Disclaimer
The Layer 2 Index is built on components of the Ethereum DeFi ecosystem. There is risk to usefulness and long term value of the LTI token based on the constituent tokens, and the ability to use and continue to use the DeFi tools.
Every attempt has been made to minimize risk that could jeopardize the value of the LTI token. Consumers of this DeFi product should be able to make a determination on their own as to how much risk they can or should assume.
There is no guarantee that LTI will hold value, or go up. It is simply an index of a broader market segment in the Ethereum DeFi space. In this case the ability for projects and products to offer and sustain Layer 2 or L2 Scaling on the Ethereum Mainnet. The holders of LTI tokens understand and acknowledge this risk.
Glossary
AMM
Automatic Market Maker, They allow digital tokens to be traded in a permissionless and automatic way by using liquidity pools rather than a traditional market of buyers and sellers.
LP
Liquidity Pool, When tokens are deposited into a crypto liquidity pool, the platform automatically generates a new token that represents the share the depositor owns of that pool. This is called a liquidity provider (LP) token.
TOKEN
Crypto tokens represent a particular fungible and tradable utility often found on a blockchain. Such blockchains work on the concept of smart contracts or decentralized applications, where the programmable, self-executing code is used to process and manage the various transactions occurring on the blockchain.
No reconstitution for the month of April is planned. Migration to Uniswap v3 on L2 is planned after May 10th which will lower the cost of transacting with LTI Token.
[1.0.0] - 2021.02.27
Added
The initial Launch of LTI Token and Layer 2 Index on the ethereum blockchain.