Nex Labs Spot Index Dual Model

Nex Labs introduces the Spot Index Dual Model, a groundbreaking approach to digital asset investment. This model harnesses ERC-20 tokens to symbolize diverse assets, from tokenized real-world commodities, stocks, and treasury bills to cryptocurrencies and NFTs.

Overview

The Spot Index Dual Model aims to enable all types of investors to diversify their portfolios by investing in an asset index rather than a single cryptocurrency. It generates a redeemable ERC-20 token, termed the "index token."

Key Objectives:

• Provide users with advanced tools for diversified crypto market investment.

• Enhance the market with innovative index assets, improving flexibility.

• Mitigate investment risks by offering a curated basket of spot assets.

Trading

Once the ERC-20 token is minted, users have the option to trade it on various exchanges. Nex Labs will ensure there is enough liquidity on major decentralized exchanges and actively arbitrates these pools to offer users a smooth and efficient trading experience.

Smart Contracts Are the Future

Nex ERC-20 index tokens compare themself in functionality with traditional finance index products. By leveraging smart contracts and blockchain technology, we intend to mimic and expand upon the role of both actively and passively managed funds. We intend to lower the trading cost, improve transparency, and give the user the ability to build their own funds.

We have built technologies to automate:

• Rebalancing At fixed intervals, index constituents are re-evaluated. Only a limited number of constituents can be promoted/removed. For example, in a "top 20 market cap" weighted portfolio, only the last two can be changed. Moreover, other conditions can be applied on a per smart contract basis. When we track for example top 20 crypto tokens by market cap, we do not intend to follow stablecoins, wrapped tokens or tokens that are undesired/unavailable.

• Dynamic Reweighting

  At regular intervals, the weighting of index constituents is modified, enabling users to maintain a balanced allocation among tokens automatically. This process includes more sophisticated metrics beyond simple market capitalization, such as inverted downward volatility, social media sentiment scores, real user transaction volume, and similar indicators.

Our approach is designed to combine the best of traditional financial indices with the unparalleled benefits of blockchain technology, making investment more accessible, cost-effective, and transparent for everyone.

CeFi & DeFi Model

To accommodate various investor requirements with respect to regulation we have built two smart contract models. One is built around CeFi and one for DeFi. The CeFi model accommodates our prospected institutional investors best by providing assets under a custodian combined with various security implementations such as:

• Nexlabs Proof of reserve: a real time display on the dApp of custodied assets representing their various index tokens.

• Chainlink proof of reserve: a partnership with an independent 3rd party auditor to verify assets at the Centralized Exchange (CEX) custodiant.

• MiCaR regulation: team vettings and meeting other requirements on the company level.

Furthermore, because certain tokens are only available within certain ecosystems/blockchains but not within a single blockchain, the CeFi model allows us to offer a range of indices with token combinations that cannot exist within a single DeFi ecosystem (or can at the tradeoff of massive gas fee/costs increase).

The DeFi model is built to accommodate permissionless building of index tokens. The disadvantage is that it is more difficult to find regulatory approval for not a single index, but a model that can build indices. We whitelist tokens and have created a system where a user can create their own index + management system. This DeFi model is fully on-chain and managed by the smart contract.

In the subchapters: CeFi model and DeFi model you can find more technical details about the method of operation of both models.

Leverage

Liquidity pairs for the index are made available on a permissionless basis, and they can be provided by users or Nex Labs for borrowing purposes.

Users can borrow liquidity within a fixed range, allowing them to theoretically access infinite leverage for both long and short positions using these assets. This solution is characterized by its simplicity and effectiveness as it eliminates the need for oracles, liquidators, insurance funds, or counterparty risks.

Further information will be disclosed in the near future as the feature is not available yet.

Leverage trading is different from spot trading. With leverage trading, users can borrow extra funds to increase their margin size, potentially increasing both profits and losses. It's worth noting that this specific functionality can be seamlessly integrated by other platforms to offer the same type of trading.