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Creates, maintains, and licenses
innovative financial indices
for a decentralized world.

Scalara, the index provider and methodologist behind some of the leading indices in DeFi, will bring your index idea to life!

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<p>Here at Scalara, we leverage our traditional finance expertise and crypto-native know-how to deliver some of the most innovative index products in the DeFi space.</p>



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<h4 id="wp-block-themeisle-blocks-advanced-heading-a6deb206" class="wp-block-themeisle-blocks-advanced-heading wp-block-themeisle-blocks-advanced-heading-a6deb206"><strong>We&#8217;ve developed each index with the investor in mind, and each one addresses a unique need.&nbsp;</strong></h4>



<p>We only include protocols with significant usage and commitment to ongoing maintenance and development. To be included in one of our index products, any related DeFi protocol and corresponding tokens must pass a rigorous screening methodology.&nbsp;</p>



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<h3><strong>The DeFi Pulse Index (DPI)</strong></h3>



<p><strong>Gain exposure to Ethereum&#8217;s blue-chip protocols&nbsp;</strong></p>



<p>The DeFi Pulse Index tracks the performance of blue-chip DeFi protocols offering broad and diversified exposure to the DeFi ecosystem built on Ethereum.<strong><a href="https://www.scalara.xyz/indices/dpi" target="_blank" rel="noreferrer noopener">&nbsp;</a></strong></p>



<p><strong><a href="https://www.scalara.xyz/indices/dpi" target="_blank" rel="noreferrer noopener">Track DPI&#8217;S performance here&gt;</a></strong></p>



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<h3><strong>Flexible Leverage Index (FLI)</strong></h3>



<p><strong>Making leverage strategies simple and accessible.&nbsp;</strong></p>



<p>Our FLI implements a collateralized debt position in a controlled and efficient way to achieve leveraged returns. Packaged up into a simple and accessible.</p>



<p><strong><a href="https://www.scalara.xyz/indices/fli">Track FLI&#8217;s performance here &gt;</a></strong></p>



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<h3><strong>Passive Omnichain Net Yield Index (PONY)&nbsp;</strong></h3>



<p><strong>Stablecoin yields from multiple different blockchains</strong></p>



<p>Looking for yield but tired of bridging, swapping, claiming, selling, reinvesting? PONY Index can simplify your life. The PONY Index is a one-click omnichain yield solution.</p>



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<p><strong><a href="https://www.scalara.xyz/indices/pony">Track PONY&#8217;s performance here &gt;</a></strong></p>



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<h3 id="wp-block-themeisle-blocks-advanced-heading-eda8c2bf" class="wp-block-themeisle-blocks-advanced-heading wp-block-themeisle-blocks-advanced-heading-eda8c2bf"><strong>Not seeing the index of your dreams? </strong></h3>



<p>Why not speak to us about developing your very own index? We can create and maintain an index that delivers diversified market exposure and provides a powerfully innovative investment solution for your community.</p>



<p><strong><a href="https://share.hsforms.com/1mLThvHcvTLiD6gWhvgWUIwd1av5">Talk to us &gt;</a></strong></p>


Boring, Simple, Automated Crypto?


<p><strong>Scalara</strong> announces the results of the <strong>July 2022 rebalance</strong> of the Passive Omnichain Net Yield (PONY) Index. This is the first rebalancing of the PONY Index after its inception in the beginning of July. PONY Index is implemented as a single token by <a href="https://ponyfinance.xyz/" target="_blank" rel="noreferrer noopener"><strong>Pony Finance</strong></a>.</p>



<p>The index is a basket of <strong>auto-compounding stablecoin vaults</strong> from multiple blockchains. The vaults are selected and weighted by the <a href="https://www.scalara.xyz/indices/pony"><strong>rules-based methodology</strong></a>&#8216;s broad range of quantitative and qualitative criteria. The result is an index that grows in value based on its underlying stablecoin vaults while offering full on-chain transparency.</p>



<p>Since inception PONY Index’s <a href="https://www.scalara.xyz/blog/pony-index-how-to-calculate-its-net-asset-value"><strong>net asset value</strong></a> grew from $1.10 to $1.1074.</p>



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<h2><strong>PONY Index rebalance weights</strong></h2>


<div class="wp-block-image">
<figure class="aligncenter size-large"><img width="1024" height="454" src="data:image/gif;base64,R0lGODlhAQABAIAAAAAAAP///yH5BAEAAAAALAAAAAABAAEAAAIBRAA7" data-src="https://matthewd210.sg-host.com/wp-content/uploads/2022/08/image-3-1024x454.png" alt="Results of July 2022 rebalancing of PONY Index." class="wp-image-1102 lazyload" data-srcset="https://matthewd210.sg-host.com/wp-content/uploads/2022/08/image-3-1024x454.png 1024w, https://matthewd210.sg-host.com/wp-content/uploads/2022/08/image-3-300x133.png 300w, https://matthewd210.sg-host.com/wp-content/uploads/2022/08/image-3-768x340.png 768w, https://matthewd210.sg-host.com/wp-content/uploads/2022/08/image-3.png 1167w" sizes="(max-width: 1024px) 100vw, 1024px" /><noscript><img width="1024" height="454" src="https://matthewd210.sg-host.com/wp-content/uploads/2022/08/image-3-1024x454.png" alt="Results of July 2022 rebalancing of PONY Index." class="wp-image-1102 lazyload" srcset="https://matthewd210.sg-host.com/wp-content/uploads/2022/08/image-3-1024x454.png 1024w, https://matthewd210.sg-host.com/wp-content/uploads/2022/08/image-3-300x133.png 300w, https://matthewd210.sg-host.com/wp-content/uploads/2022/08/image-3-768x340.png 768w, https://matthewd210.sg-host.com/wp-content/uploads/2022/08/image-3.png 1167w" sizes="(max-width: 1024px) 100vw, 1024px" /></noscript><figcaption>Results of July 2022 rebalancing of PONY Index.</figcaption></figure></div>


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<h2>Rebalance Summary</h2>



<p>The above index weight factors and weights were calculated using vault prices and other input data as of August 8, 2022.</p>



<p>At the July 2022 index rebalance, <strong>four vaults are added</strong> while <strong>three are removed</strong>. As a result, PONY Index will hold vaults from Optimism (51.4%), Polygon (35.5%), and Avalanche (13.1%). The rebalancing implies a one-way turnover of 68%. <strong><a href="https://beefy.com/" target="_blank" rel="noreferrer noopener">Beefy</a></strong> remains the sole yield farming platform used and all employed strategies are stablecoin liquidity pools without impermanent loss. sUSD, <strong><a href="https://synthetix.io/" target="_blank" rel="noreferrer noopener">Synthetix</a></strong>’ overcollateralized stablecoin, is added to the list of eligible stablecoins.</p>



<p>At time of weightfactor calculation the new index composition represented a 10% spot APY, compared to 6.7% based on the previous composition.</p>


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<figure class="aligncenter size-full"><img width="480" height="239" src="data:image/gif;base64,R0lGODlhAQABAIAAAAAAAP///yH5BAEAAAAALAAAAAABAAEAAAIBRAA7" data-src="http://matthewd210.sg-host.com/wp-content/uploads/2022/05/image002.png" alt="" class="wp-image-864 lazyload" data-srcset="https://matthewd210.sg-host.com/wp-content/uploads/2022/05/image002.png 480w, https://matthewd210.sg-host.com/wp-content/uploads/2022/05/image002-300x149.png 300w" sizes="(max-width: 480px) 100vw, 480px" /><noscript><img width="480" height="239" src="http://matthewd210.sg-host.com/wp-content/uploads/2022/05/image002.png" alt="" class="wp-image-864 lazyload" srcset="https://matthewd210.sg-host.com/wp-content/uploads/2022/05/image002.png 480w, https://matthewd210.sg-host.com/wp-content/uploads/2022/05/image002-300x149.png 300w" sizes="(max-width: 480px) 100vw, 480px" /></noscript></figure></div>


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<p><em>Scalara is dedicated to creating and maintaining indices for a decentralized world.</em></p>


July 2022 Rebalance PONY Index


<p><strong>Scalara</strong> announces the results of the <strong>July 2022 rebalance</strong> of the DeFi Pulse Index.</p>



<p>The <strong>DeFi Pulse Index</strong> is a digital asset index designed to track the performance of some of the largest protocols in the Decentralized Finance (DeFi) space. Over the last three months the DeFi Pulse Index returned <strong>-28%</strong> beating Ethereum&#8217;s -40%.</p>


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<figure class="aligncenter size-full"><img width="476" height="547" src="data:image/gif;base64,R0lGODlhAQABAIAAAAAAAP///yH5BAEAAAAALAAAAAABAAEAAAIBRAA7" data-src="https://matthewd210.sg-host.com/wp-content/uploads/2022/08/image-2.png" alt="" class="wp-image-1093 lazyload" data-srcset="https://matthewd210.sg-host.com/wp-content/uploads/2022/08/image-2.png 476w, https://matthewd210.sg-host.com/wp-content/uploads/2022/08/image-2-261x300.png 261w" sizes="(max-width: 476px) 100vw, 476px" /><noscript><img width="476" height="547" src="https://matthewd210.sg-host.com/wp-content/uploads/2022/08/image-2.png" alt="" class="wp-image-1093 lazyload" srcset="https://matthewd210.sg-host.com/wp-content/uploads/2022/08/image-2.png 476w, https://matthewd210.sg-host.com/wp-content/uploads/2022/08/image-2-261x300.png 261w" sizes="(max-width: 476px) 100vw, 476px" /></noscript><figcaption>Coingecko data.</figcaption></figure></div>


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<h2>DeFi Pulse Index rebalance weights</h2>



<p class="has-text-align-center"><img class="lazyload" src="data:image/gif;base64,R0lGODlhAQABAIAAAAAAAP///yH5BAEAAAAALAAAAAABAAEAAAIBRAA7" data-src="https://lh3.googleusercontent.com/CaD2PruqCp_fdFiWrwYGKd93F7zvqDQ-VyNw1pLzJIE-nXN64k4WsBWDe03WP1zGN2LcmHmJxj6ndRcMUD4ZbPtH7MllWQRxvgd1sUK6agLxw7Gqs8Ntlcd8mED4mmoJ1kJVsSD-e3l4WqpKFzCHqMo" width="624" height="404"><noscript><img class="lazyload" src="https://lh3.googleusercontent.com/CaD2PruqCp_fdFiWrwYGKd93F7zvqDQ-VyNw1pLzJIE-nXN64k4WsBWDe03WP1zGN2LcmHmJxj6ndRcMUD4ZbPtH7MllWQRxvgd1sUK6agLxw7Gqs8Ntlcd8mED4mmoJ1kJVsSD-e3l4WqpKFzCHqMo" width="624" height="404"></noscript></p>



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<h2>Rebalance summary</h2>



<p>The above index weight factors and weights were calculated using prices and circulating supplies of all 14 constituents as of July 24, 2022.</p>



<p>At the July 2022 index rebalance, <strong>no tokens are added while the smallest token FARM is removed</strong>, reducing the number of constituents to 13.</p>



<p>The total one-way turnover of the rebalancing is 5.2%. Starting with this rebalance the index is rebalanced on a quarterly basis, hence the turnover is higher compared to the previous rebalances that were run on a monthly basis. For <strong>most constituents</strong> of the DeFi Pulse Index, the index <strong>weight only changed marginally </strong>this quarter. UNI’s 39% allocation under market cap weighting once again would have breached the allocation limit of 25% for any single constituent without any capping. The <a href="https://www.scalara.xyz/blog/methodology-change-defi-pulse-index-introduction-of-flexible-capping">Flexible Capping</a> rule moved its weight half the way from the current weight to the 25% target to reduce turnover. FARM’s weight would have been below the 0.5% threshold and therefore the token was removed from the index following the <a href="https://www.scalara.xyz/blog/methodology-change-defi-pulse-index-introduction-of-minimum-weight-requirement">Minimum Weight Requirement</a> rule.</p>



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<p><em>Scalara is dedicated to creating and maintaining indices for a decentralized world.</em></p>


July 2022 Rebalance DeFi Pulse Index

From TradFi to DeFi


<h2>PONY Index&nbsp;simplifies the tedious task of finding attractive yield opportunities for stablecoins all around the blockchain world.</h2>



<p>In this article we show how the <strong>Net Asset Value (NAV)</strong> of PONY, the token implementation by <a href="https://ponyfinance.xyz/" target="_blank" rel="noreferrer noopener"><strong>PONY Finance</strong></a> that tracks <a href="https://www.scalara.xyz/indices/pony"><strong>PONY Index</strong></a> can be calculated. The NAV of an index token is an important metric for both traders and holders.</p>



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<h2>Why do I need NAV?</h2>



<p>An index is a basket of assets. PONY Index specifically is a basket of <strong>auto-compounding vaults</strong> holding <strong>stablecoins</strong>. Currently these vaults are all from <a href="https://beefy.finance/" target="_blank" rel="noreferrer noopener"><strong>Beefy Finance</strong></a>. The NAV of such a composite index token is the sum of the values of all its constituents.</p>



<p>Related: <a href="https://www.scalara.xyz/blog/why-invest-in-an-index">Why invest in an index?</a></p>



<p>When buying an index tracking token on a decentralized exchange (DEX) the user doesn’t necessarily pay this NAV though. Instead she pays the current market price quoted by the automated market maker (<a href="https://www.defipulse.com/blog/amms-derivatives-markets-history" target="_blank" rel="noreferrer noopener"><strong>AMM</strong></a>) on a specific DEX pool. This market price is deterministically set by the&nbsp;AMM based on the current token ratio or liquidity distribution in the pool. If the market price is above the NAV, the token is said to trade at a <strong>premium</strong>, if it is below NAV, it is trading at a <strong>discount</strong>.</p>


<div class="wp-block-image">
<figure class="aligncenter size-large"><img width="1024" height="440" src="data:image/gif;base64,R0lGODlhAQABAIAAAAAAAP///yH5BAEAAAAALAAAAAABAAEAAAIBRAA7" data-src="https://matthewd210.sg-host.com/wp-content/uploads/2022/07/pony-premium-discount-1024x440.png" alt="Schematic of index token trading at a premium or at a discount." class="wp-image-1009 lazyload" data-srcset="https://matthewd210.sg-host.com/wp-content/uploads/2022/07/pony-premium-discount-1024x440.png 1024w, https://matthewd210.sg-host.com/wp-content/uploads/2022/07/pony-premium-discount-300x129.png 300w, https://matthewd210.sg-host.com/wp-content/uploads/2022/07/pony-premium-discount-768x330.png 768w, https://matthewd210.sg-host.com/wp-content/uploads/2022/07/pony-premium-discount.png 1133w" sizes="(max-width: 1024px) 100vw, 1024px" /><noscript><img width="1024" height="440" src="https://matthewd210.sg-host.com/wp-content/uploads/2022/07/pony-premium-discount-1024x440.png" alt="Schematic of index token trading at a premium or at a discount." class="wp-image-1009 lazyload" srcset="https://matthewd210.sg-host.com/wp-content/uploads/2022/07/pony-premium-discount-1024x440.png 1024w, https://matthewd210.sg-host.com/wp-content/uploads/2022/07/pony-premium-discount-300x129.png 300w, https://matthewd210.sg-host.com/wp-content/uploads/2022/07/pony-premium-discount-768x330.png 768w, https://matthewd210.sg-host.com/wp-content/uploads/2022/07/pony-premium-discount.png 1133w" sizes="(max-width: 1024px) 100vw, 1024px" /></noscript><figcaption>Schematic of index token trading at a premium or at a discount.</figcaption></figure></div>


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<p>Ignoring any fees and gas that have to be paid to acquire the constituents, NAV is an approximation of the value of the <strong>assets that are necessary to mint</strong> an index token. Equivalently it is the value of the asset a holder receives when redeeming (burning) the index token. Minting and redeeming (actions often referred to as happening in the &#8220;primary market&#8221;) is fully permissionless in DeFi and therefore open to anyone &#8211; in contrast to <a href="https://www.blackrock.com/au/intermediaries/ishares/authorized-participants-and-market-makers" target="_blank" rel="noreferrer noopener">TradFi</a>.</p>



<p>Keeping an eye on the <strong>difference between NAV and market price</strong> is important when dealing with index products.</p>



<p>For example, see below the spread between NAV and market price for DPI, the token tracking the <a href="https://www.scalara.xyz/indices/dpi"><strong>DeFi Pulse Index</strong></a>:</p>



<figure class="wp-block-image size-large"><img class="lazyload" src="data:image/gif;base64,R0lGODlhAQABAIAAAAAAAP///yH5BAEAAAAALAAAAAABAAEAAAIBRAA7" data-src="https://lh4.googleusercontent.com/_kF7nrCezyqS2Iio0lsy9WrTY2SRLHsGBq-dft8EPMg0rRnUGL50-2eRChTxs_9iSuRY7Cj6nx1-zOngd6EZ7CQOs_yhH1rGZXP7QAv9VehoLaA_RJID4NMxs_dWvOm1QQEUCFCg" alt="DPI NAV-price spread"/><noscript><img class="lazyload" src="https://lh4.googleusercontent.com/_kF7nrCezyqS2Iio0lsy9WrTY2SRLHsGBq-dft8EPMg0rRnUGL50-2eRChTxs_9iSuRY7Cj6nx1-zOngd6EZ7CQOs_yhH1rGZXP7QAv9VehoLaA_RJID4NMxs_dWvOm1QQEUCFCg" alt="DPI NAV-price spread"/></noscript><figcaption>DPI spread. Data from Dune, @jdcook, Feb. 25, 2022</figcaption></figure>



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<h2>How to calculate NAV</h2>



<p>As written above, the NAV of an index token is defined as the <strong>sum of the values of its holdings</strong>:</p>


<p>\[NAV = \sum_{V\ in\ PONY} value_{V}\]</p>



<p>To find the value of vault token <em>V</em> in PONY, one has to multiply the <em>weightfactor</em> of <em>V</em> with the price of <em>V</em>. The <em>weightfactor</em> (not to be confused with the “weight” which typically refers to the percentage allocation) quantifies how many <strong>units of vault <em>V</em> are in one unit of PONY</strong>. Since there is a streaming fee continuously deducted from the token balance, the index implementation protocol&nbsp;<a href="https://kuiper.finance/"><strong>Kuiper</strong></a>&nbsp;introduces an <em>IBRatio</em> factor. The <em>IBRatio</em> is used to adjust the token balances so the <em>weightfactors</em> can remain constant between rebalances. At index inception the ratio is set to 1 and afterwards it is decreasing according to the streaming fee:</p>


<p>\[value_{V} = IBRatio \cdot weightfactor_{V} \cdot price_{V}\]</p>



<p>IBRatio and weightfactors are publicly accessible on the Kuiper website by looking up&nbsp;<a href="https://etherscan.io/token/0x0d97fee619d955509e54b046c9992b6e9f5b0630">PONY’s Ethereum contract address</a>:</p>



<figure class="wp-block-image size-large"><img width="1024" height="368" src="data:image/gif;base64,R0lGODlhAQABAIAAAAAAAP///yH5BAEAAAAALAAAAAABAAEAAAIBRAA7" data-src="https://matthewd210.sg-host.com/wp-content/uploads/2022/07/image-1024x368.png" alt="Kuiper Finance basket manager for PONY." class="wp-image-1015 lazyload" data-srcset="https://matthewd210.sg-host.com/wp-content/uploads/2022/07/image-1024x368.png 1024w, https://matthewd210.sg-host.com/wp-content/uploads/2022/07/image-300x108.png 300w, https://matthewd210.sg-host.com/wp-content/uploads/2022/07/image-768x276.png 768w, https://matthewd210.sg-host.com/wp-content/uploads/2022/07/image.png 1233w" sizes="(max-width: 1024px) 100vw, 1024px" /><noscript><img width="1024" height="368" src="https://matthewd210.sg-host.com/wp-content/uploads/2022/07/image-1024x368.png" alt="Kuiper Finance basket manager for PONY." class="wp-image-1015 lazyload" srcset="https://matthewd210.sg-host.com/wp-content/uploads/2022/07/image-1024x368.png 1024w, https://matthewd210.sg-host.com/wp-content/uploads/2022/07/image-300x108.png 300w, https://matthewd210.sg-host.com/wp-content/uploads/2022/07/image-768x276.png 768w, https://matthewd210.sg-host.com/wp-content/uploads/2022/07/image.png 1233w" sizes="(max-width: 1024px) 100vw, 1024px" /></noscript><figcaption>https://app.kuiper.finance/</figcaption></figure>



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<p>Current Beefy vault prices are available through <a href="https://api.beefy.finance/mootokenprices" target="_blank" rel="noreferrer noopener"><strong>Beefy&#8217;s pricing API</strong></a>. As of writing, the following vaults are part of PONY Index:</p>



<figure class="wp-block-table"><table><tbody><tr><td><strong>Beefy API Key</strong></td><td><strong>Vault</strong></td></tr><tr><td>mooMaiUSDC-miMATIC</td><td>MAI-USDC LP (Quickswap/Polygon)</td></tr><tr><td>mooMaiMAI-av3CRV</td><td>MAI/DAI/USDC/USDT (Curve/Avalanche)</td></tr><tr><td>mooJoeUSDC.e-USDC</td><td>mooJoeUSDC.e-USDC (Trader Joe/Avalanche)</td></tr><tr><td>mooCurveAm3CRV</td><td>DAI/USDC/USDT (Curve/Polygon)</td></tr><tr><td>mooCurveG3CRV</td><td>fUSDT/DAI/USDC (Curve/Fantom)</td></tr></tbody></table><figcaption>PONY Index constituents as of July 1, 2022.</figcaption></figure>



<p>The respective vault pages show a more granular break-down of each Beefy vault.</p>


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<figure class="aligncenter size-full"><img width="725" height="311" src="data:image/gif;base64,R0lGODlhAQABAIAAAAAAAP///yH5BAEAAAAALAAAAAABAAEAAAIBRAA7" data-src="https://matthewd210.sg-host.com/wp-content/uploads/2022/07/image-1.png" alt="Break-down of MAI/DAI/USDC/USDT vault on Beefy Finance." class="wp-image-1017 lazyload" data-srcset="https://matthewd210.sg-host.com/wp-content/uploads/2022/07/image-1.png 725w, https://matthewd210.sg-host.com/wp-content/uploads/2022/07/image-1-300x129.png 300w" sizes="(max-width: 725px) 100vw, 725px" /><noscript><img width="725" height="311" src="https://matthewd210.sg-host.com/wp-content/uploads/2022/07/image-1.png" alt="Break-down of MAI/DAI/USDC/USDT vault on Beefy Finance." class="wp-image-1017 lazyload" srcset="https://matthewd210.sg-host.com/wp-content/uploads/2022/07/image-1.png 725w, https://matthewd210.sg-host.com/wp-content/uploads/2022/07/image-1-300x129.png 300w" sizes="(max-width: 725px) 100vw, 725px" /></noscript><figcaption>Break-down of MAI/DAI/USDC/USDT vault on Beefy Finance.</figcaption></figure></div>


<p>Note that <strong>even stablecoin prices fluctuate</strong>. This fluctuation is typically small though, in the order of +/-25bps around $1 at regular times. Hence, the vault prices and as a result PONY NAV will fluctuate as well. The diversifying effect of having exposure to several stablecoins may lower this volatility though on the index level.</p>



<p>Combining above formulas, the NAV can be calculated as:</p>


<p>\[NAV = IBRatio \sum_{V\ in\ PONY} weightfactor_{V} \cdot price_{V}\]</p>



<p>Scalara publishes the current NAV on the <a href="https://www.scalara.xyz/indices/pony" target="_blank" rel="noreferrer noopener">index page (&#8220;Data&#8221; tab)</a>.</p>



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<h2>What to do with NAV?</h2>



<p>The previous sections hopefully made it clear that a discrepancy between NAV and market price can indicate an <strong>arbitrage opportunity</strong>. In reality, of course, there are a lot more practical considerations to be made. Gas fees, bridging fees and delay, price impact, to name a few, have to be considered. On the other hand there may be pool imbalances (e.g. on Curve) or &#8220;positive&#8221; slippage that can be <strong>at times in favor of the minter</strong>. We will not get into details of the profitability of such strategies though.</p>



<p>Below chart shows a high level schematic of minting PONY. This is only one path though, vaults and pools often allow any asset combination in it to be deposited (e.g. MAI or USDC or any mix of it in the Quickswap vault). </p>



<figure class="wp-block-image size-large"><img class="lazyload" src="data:image/gif;base64,R0lGODlhAQABAIAAAAAAAP///yH5BAEAAAAALAAAAAABAAEAAAIBRAA7" data-src="https://lh6.googleusercontent.com/Z1A0KB3_8IEjCSDl4UEHv7Ox6gqBMqzLwI1F_-U1N1DELoTmCHLk1jDGGsDeO-25z8Dk6jagLABA0ks53TsrJaU-y-PRVIMELzWFRYoRdlQCnzcODCc5zQhgbA2fk-m1Fw58sfJoTNpnVnUIcA" alt="PONY minting schematic."/><noscript><img class="lazyload" src="https://lh6.googleusercontent.com/Z1A0KB3_8IEjCSDl4UEHv7Ox6gqBMqzLwI1F_-U1N1DELoTmCHLk1jDGGsDeO-25z8Dk6jagLABA0ks53TsrJaU-y-PRVIMELzWFRYoRdlQCnzcODCc5zQhgbA2fk-m1Fw58sfJoTNpnVnUIcA" alt="PONY minting schematic."/></noscript><figcaption>PONY minting schematic (USDC path).</figcaption></figure>



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<p><em><strong>None of the above should be considered investment advice. Please do your own research.</strong></em></p>



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<p><em><strong>Scalara</strong>, a subsidiary of&nbsp;<a href="https://defipulse.com/"><strong>DeFi Pulse</strong></a>, creates and maintains indices for a decentralized world.</em></p>


PONY Index: How to calculate its Net Asset Value


<h2>Find out how the PONY Index methodology screens the vast universe of yield opportunities in DeFi to find its constituents.</h2>



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<p>The <a href="https://www.scalara.xyz/indices/pony"><strong>PONY Index</strong></a> is a passive strategy that simplifies the tedious task of finding and earning stablecoin yields across the blockchain universe. The index is maintained by <a href="https://www.scalara.xyz/"><strong>Scalara</strong></a>, the methodologist and index provider of <strong><a href="https://www.defipulse.com/" target="_blank" rel="noreferrer noopener">DeFi Pulse</a></strong>. The index is available as a single token, PONY, through the <strong><a href="https://ponyfinance.xyz/" target="_blank" rel="noreferrer noopener">Pony Finance</a></strong>. In the following article, Scalara highlights the selection criteria that a yield opportunity has to pass to join the PONY Index.</p>


<div class="wp-block-image">
<figure class="aligncenter size-full is-resized"><img src="data:image/gif;base64,R0lGODlhAQABAIAAAAAAAP///yH5BAEAAAAALAAAAAABAAEAAAIBRAA7" data-src="https://matthewd210.sg-host.com/wp-content/uploads/2022/06/pony_logo.png" alt="PONY Index logo" class="wp-image-987 lazyload" width="83" height="84" data-srcset="https://matthewd210.sg-host.com/wp-content/uploads/2022/06/pony_logo.png 300w, https://matthewd210.sg-host.com/wp-content/uploads/2022/06/pony_logo-298x300.png 298w, https://matthewd210.sg-host.com/wp-content/uploads/2022/06/pony_logo-150x150.png 150w" sizes="(max-width: 83px) 100vw, 83px" /><noscript><img src="https://matthewd210.sg-host.com/wp-content/uploads/2022/06/pony_logo.png" alt="PONY Index logo" class="wp-image-987 lazyload" width="83" height="84" srcset="https://matthewd210.sg-host.com/wp-content/uploads/2022/06/pony_logo.png 300w, https://matthewd210.sg-host.com/wp-content/uploads/2022/06/pony_logo-298x300.png 298w, https://matthewd210.sg-host.com/wp-content/uploads/2022/06/pony_logo-150x150.png 150w" sizes="(max-width: 83px) 100vw, 83px" /></noscript></figure></div>


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<h2>Goal and rationale</h2>



<p>The PONY Index is a <strong><em>Passive</em></strong> strategy that simplifies the task of harvesting yield on top of secure stablecoin exposure. Its <strong><em>Omnichain</em></strong> approach allows it to find attractive yield opportunities beyond Ethereum. Utilizing curated vaults allows users to get the <strong><em>Net Yield</em></strong> without all the work: Claiming, selling and reinvesting of incentives or other distributions is costly and takes a lot of time. PONY Index&#8217;s major features are:</p>



<ul><li><strong>Secure principal</strong><br>The number one priority of the PONY Index is to minimize the risk of loss to the index notional.</li><li><strong>Transparent</strong><br>On-chain implementations of PONY Index such as $PONY token allow users to benefit from full blockchain transparency. At all times users can verify their holdings and exposures.</li><li><strong>Attractive yield</strong><br>The PONY Index seeks to provide a stable and competitive yield. Its goal is to beat “local” yield opportunities on Ethereum Mainnet such as simple lending.</li><li><strong>Single token</strong><br>The index is investable and makes a single ERC20 token that tracks the index possible.</li><li><strong>Passive</strong><br>The index methodology aims to balance the trade-off between yield and risk.</li><li><strong>Low cost</strong><br>Pooling of assets through an index and utilization of curated yield farming vaults socializes large parts of the maintenance fees.</li></ul>



<p>Related: <a href="https://www.scalara.xyz/blog/why-invest-in-an-index">Why invest in an index?</a></p>



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<h2>Methodology</h2>



<p>The core of the PONY Index methodology is the rigorous&nbsp;<strong>selection of eligible yield opportunities</strong>. The index is reviewed on a monthly basis.</p>


<div class="wp-block-image">
<figure class="aligncenter size-full is-resized"><img src="data:image/gif;base64,R0lGODlhAQABAIAAAAAAAP///yH5BAEAAAAALAAAAAABAAEAAAIBRAA7" data-src="https://matthewd210.sg-host.com/wp-content/uploads/2022/06/pony-funnel.png" alt="PONY Index funnel" class="wp-image-990 lazyload" width="389" height="439" data-srcset="https://matthewd210.sg-host.com/wp-content/uploads/2022/06/pony-funnel.png 480w, https://matthewd210.sg-host.com/wp-content/uploads/2022/06/pony-funnel-266x300.png 266w" sizes="(max-width: 389px) 100vw, 389px" /><noscript><img src="https://matthewd210.sg-host.com/wp-content/uploads/2022/06/pony-funnel.png" alt="PONY Index funnel" class="wp-image-990 lazyload" width="389" height="439" srcset="https://matthewd210.sg-host.com/wp-content/uploads/2022/06/pony-funnel.png 480w, https://matthewd210.sg-host.com/wp-content/uploads/2022/06/pony-funnel-266x300.png 266w" sizes="(max-width: 389px) 100vw, 389px" /></noscript></figure></div>


<p><strong>Chain screening</strong><br>PONY Index&#8217;s goal is to bring &#8220;omnichain&#8221; yields back to Ethereum. Therefore, it has to be possible to bridge any selected yield vault to Ethereum Mainnet. Only chains that allow for efficient bridging in both directions are eligible. Bridges have to be audited and be considered safe and mature.<br>In addition, the chain needs to have a Total Value Locked (TVL) of at least $1 billion.</p>



<p><strong>Yield farming platform screening</strong><br>Yield farming vaults play an important part in the PONY Index design: They are the actual index constituents. Hence, the vault tokens have to be transferable.<br>Farming vaults compound the trading fees, deposit fees or incentive tokens that build up the yield of a strategy.<br>PONY Index only selects vaults that do this process automatically as the index is a passive vehicle. Claiming of rewards, selling, and reinvesting has to be an automated part of the vault design.<br>Only existing, &#8220;off the shelf&#8221; vaults are considered. Vaults have to be live for at least a month to ensure that the design has been thoroughly tested.<br>In order to do a fair comparison, only the yield net of fees are considered in the selection process.</p>



<p><strong>Stablecoin exposure screening</strong><br>PONY Index applies a very strict screen when it comes to its stablecoin selection. This means that only vaults that farm a small set of high quality stablecoins can be selected.<br>Most importantly, the stablecoin has to be pegged to the US Dollar.<br>The stablecoin has to be either fully collateralized with fiat USD or be significantly overcollateralized with crypto assets. This means that so-called &#8220;algorithmic&#8221; stablecoins, that are undercollateralized and hence are completely depending on the peg mechanism for stability, are not eligible.<br>The market cap of the stablecoin has to be greater than $100 million and the its price must have shown price stability over the past 6 months.<br>The stablecoin cannot have hidden dependencies to or backing by ineligible stablecoins.</p>



<p><strong>Yield source screening</strong><br>There are plenty of strategies that a vault could employ to generate yield. In order to not put the index notional at risk and avoid impermanent loss only a small set of strategies can be selected:<br>Only overcollateralized lending and stable-stable liquidity pools pass these strict criteria.</p>



<p><strong>Risk score screening</strong><br>PONY Index utilizes the <a href="https://docs.beefy.finance/safu-protocol/beefy-safety-score" target="_blank" rel="noreferrer noopener">Beefy &#8220;Safety Score&#8221;</a>. This score aggregates several important safety aspects of yield farming: Complexity and maturity of the strategy, impermanent loss, market capitalization of assets and their volatility, audits by trusted reviewers and contract verification. Only vaults scoring above 8 (out of 10) can be selected.<br>If the Safety Score is not available Scalara will mimic Beefy&#8217;s methodology.</p>



<p><strong>Weighting</strong><br>Several metrics have to be considered when determining the final weights of the eligible yield opportunities: Yield, risk, diversification, capacity, and turnover. PONY Index solves this problem by solving a simple optimization problem:</p>


<div class="wp-block-image">
<figure class="aligncenter size-full"><img width="572" height="309" src="data:image/gif;base64,R0lGODlhAQABAIAAAAAAAP///yH5BAEAAAAALAAAAAABAAEAAAIBRAA7" data-src="https://matthewd210.sg-host.com/wp-content/uploads/2022/06/optimization-2.png" alt="PONY Index weighting optimization." class="wp-image-998 lazyload" data-srcset="https://matthewd210.sg-host.com/wp-content/uploads/2022/06/optimization-2.png 572w, https://matthewd210.sg-host.com/wp-content/uploads/2022/06/optimization-2-300x162.png 300w" sizes="(max-width: 572px) 100vw, 572px" /><noscript><img width="572" height="309" src="https://matthewd210.sg-host.com/wp-content/uploads/2022/06/optimization-2.png" alt="PONY Index weighting optimization." class="wp-image-998 lazyload" srcset="https://matthewd210.sg-host.com/wp-content/uploads/2022/06/optimization-2.png 572w, https://matthewd210.sg-host.com/wp-content/uploads/2022/06/optimization-2-300x162.png 300w" sizes="(max-width: 572px) 100vw, 572px" /></noscript></figure></div>


<p>In the objective function the exposure to a yield-capacity score is maximized. The score is a weighted geometric average of yield and underlying TVL. The second term in the objective function is a measure for diversification (<a href="https://en.wikipedia.org/wiki/Herfindahl%E2%80%93Hirschman_index" target="_blank" rel="noreferrer noopener">Herfindahl Index</a>, the larger the more concentrated).</p>



<p>The constraints ensure a minimum weighted risk score of the index (1) and minimum weighted underlying TVL to lower the dilution sensitivity (2), limit turnover (3) and concentration (4).</p>



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<h2>Conclusion</h2>



<p>PONY Index <strong>simplifies </strong>the complex, time-consuming and costly job of finding <strong>attractive yields</strong> to be earned on top of stablecoin exposure. At times of low real rates globally this task becomes more pressing for more and more people. But simplifying a strategy into a one-token solution isn’t the only benefit of PONY Index. Full <strong>on-chain transparency</strong> allows users to verify at all times their index holdings and underlying exposures.</p>



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<p><em><strong>Scalara</strong>, a subsidiary of&nbsp;<a href="https://defipulse.com/"><strong>DeFi Pulse</strong></a>, creates and maintains indices for a decentralized world.</em></p>


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DeFi Pulse Index

Passive Omnichain Net Yield Index

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News & Research

Boring, Simple, Automated Crypto?

July 2022 Rebalance PONY Index

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Diversified exposure &
automated strategies