Home » News » Token Selection Criteria

Token Selection Criteria

As part of the token inclusion assessment, Scalara considers a wide range of characteristics of the token, the project and the protocol. These criteria can be placed in four groups:

Token Descriptive Characteristics

  • The token must be available on the Ethereum blockchain.
  • The token must be associated with a decentralized finance protocol.
  • 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 Supply Characteristics

  • It must be possible to reasonably predict the token’s supply over the next five years.
  • At least 7.5% of the five year supply must be currently circulating.
  • Token must have reasonable and consistent DeFi liquidity on Ethereum.
  • The token’s economics must not have locking, minting or other patterns that would significantly disadvantage passive holders.

Project 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 for index inclusion.
  • The protocol or project must not be insolvent.

Protocol 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.

Leave a Reply

Your email address will not be published. Required fields are marked *