10 months ago ·
7 min read
In this article we’ll show you how to buy 1 token for exposure to over 50% of the total value locked in all of Decentralized Finance with the DeFi index called DEFI5 created by Indexed.Finance.
With the recent hype around Decentralized Finance many newcomers are entering the space and asking us for advice about which tokens to invest in. This is an incredibly tough question.
One great starting place is a crypto ETF or Index. Diversifying one’s risk across a basket of assets is the number 1 lesson in any Finance 101 course and the same holds true for DeFi. Especially in a high growth market, an index of tokens tends to perform better than actively managed portfolios.
Imagine you had been an investor in the internet dot com era. What would have been the odds that you identified Amazon as the promising company among all the companies that went bust later. Holding an index of tech stocks would have been easier and performed extremely well.
Many novice (and expert) investors could benefit from exposure to DeFi as a whole as a foundation of their crypto portfolio. We’re glad we can now point them towards the DEFI5 token! DEFI5 is a DeFi index token from Indexed.Finance that uses an automated trading mechanism to hold the top 5 Defi tokens in its vault.
The balances of each token adjust with their real time prices. This re-balancing and re-weighting to follow the trends in the market sector is done by fund managers in traditional finance but in the case of Indexed it's happening 100% on-chain thanks to smart contracts. DEFI5 tokens represent a user’s share of those top projects. By holding the top 5 DeFi coins the index captures the value of the market share of about 60% of the Ethereum DeFi ecosystem (about 47 Billion of the roughly 78B in DeFi at time of publication). That is similar to the S&P 500’s 75% share of the US stock market.
Currently the DeFi index is targeting the tokens in the chart above which also shows their target weights. The target weights are derived from the square root of their market caps. Indexed Finance uses this square root of market cap to enhance the weights of the "smaller" projects.
Currently, the index tokens from Indexed.Finance are only available through apps that connect to a personal crypto wallet. They will be available on central exchanges soon. Central exchanges are the big names like Coinbase, Bittrex, Binance, etc. So if you do not have a crypto wallet you need that first and here are some options we wrote about in another article. Dharma is a fairly new wallet designed to help onboard new users so they can learn and benefit from DeFi. Dharma could be a great option if you are just stating out.
Here is a referral link giving you $50 of ETH after you connect a bank account and buy at least $500 of crypto or use referral code RFXJSB.
Once you have your wallet you will need to fund it. This is generally called a “fiat onramp”. This could be done from any of the major cryptocurrency exchanges or directly in Ethereum wallets such as the Argent or Dharma who have built in ways to send money from your bank or credit cards to your crypto wallet.
OK - so you have a crypto wallet with some funds, now we can talk about ways to buy the DeFi index DEFI5.
First, head to Uniswap. Currently the Indexed family of index tokens are available on V2 of Uniswap and have not migrated to V3. So if you get a message that there’s no liquidity on V3 like the picture below on the left, just click on the trade with V2 button to head to V2. Then input the token you want to use to purchase DEFI5 and the quantity and click “Swap”
Note, if you haven’t approved Uniswap to access either of the tokens in your trade you will need to “Approve” them first. Each approval will be a separate confirmation in your wallet and will require a gas fee.
Once the transaction is complete you will have your DEFI5 tokens, congrats. In some wallets you may need to add the token address to your wallet so it looks up and displays your balance. The contract address for DEFI5 is 0xfa6de2697d59e88ed7fc4dfe5a33dac43565ea41 or if you are adding it to Metamask you could use the little fox link on the Coingcko page to add it automatically.
Buying DEFI5 on Quickswap is very similar to buying on Uniswap. Quickswap is a “fork” or copy of Uniswap. The big difference is Quickswap is on the Polygon/Matic network.
The main benefit to buying on Quickswap is lower transaction fees. This is a major factor if you are buying anywhere from zero to say a few thousand dollars worth of DEFI5. At those amounts you may want to consider Quickswap since a greater portion of your purchase will go towards DEFI5 and not fees.
1) Connect to the Matic/Polygon network
When you go on the Quickswap page, you will see a button in the navigation bar that says "Switch to Matic". If you click this button your Metamask wallet will automatically be connected to Matic instead of the default Ethereum network. You can imagine this like connecting to a different WiFi network,.
2) Get funds on Polygon
If you need to bridge funds say from Ethereum to Matic you have a few options, one is the Zapper bridge or use the official Matic bridge. Both do the same thing but the Zapper interface is arguably more user-friendly.
If you don't have any funds on Ethereum to transfer, you can also use the “Buy” tab on Quickswap to purchase crypto with a credit card (see image) and get it delivered straight into your Metamask account on Polygon.
3) Buy DeFi index on Quickswap Once you have funds you can use Quickswap to swap ETH, USDC or any other token to buy your DeFi index.
There will be an approval confirmation and a trade confirmation, but notice the miniscule transaction costs! Each transaction on Polygon costs just fractions of pennies right now.
Zapper.fi is a convenient place to buy DEFI5. Zapper is a dashboard/portfolio app with built in functions for trading, staking, bridging, etc - this method requires a crypto wallet and does not have a method to add money via bank/credit card. Once you have funds in your Ethereum wallet you can make trades at Zapper.fi.
Head to the “Exchange” tab and select the token you want to exchange to buy DEFI5 Once you complete your purchase you can switch over to the Dashboard tab and use that to track your investments
Zerion is a popular app (Apple/Android/web) is a Crypto/DeFi portfolio tracker. It gives you a dashboard of information, transaction history and a built in trading page you can use to buy the DEFI5 index. it also gives you the option to buy crypto using bank tranfer or credit card if you don't have any crypto funds to begin with.
Once you have funds in your Eth wallet you can make trades at https://app.zerion.io/exchange. Simply, head to the “Exchange” tab and select the token you want to exchange to buy the DeFi index. Once you complete your purchase you can switch over to the Dashboard tab to track your investments. Zerion will give you your hourly, daily, weekly, monthly and yearly portfolio performance.
Indexed.Finance gives users a few different ways to buy their index tokens.
For users buying less than about $10,000 the last option, “Swap through Uniswap…” will probably be your best bet. On Index.Finance scroll down and click on “DEFI5 Top 5 Index”. The default option should be “Buy DEFI5” which is what you want as opposed to MINT, BURN, SWAP.
Use ETH to purchase DEFI5 - this option only works if you are buying with ETH. If you want to buy with another token head to Uniswap directly.
The minting options above require more transactions and computations which means more gas in order to complete the order. If you are looking to make a larger purchase (>$100k) however, the minting option could be worthwhile. Check out this guide on minting or join the Indexed.Finance Discord group and ask questions. Community or team members will walk you through the minting process.
The DeFi index token, DEFI5 by Indexed Finance is an awesome way to get warm with DeFi. We’ll make sure to shill it to whoever asks us for investment tips and we can’t wait to see the ingenious ways it will be integrated into other DeFi projects.
10 months ago ·
7 min read
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