Magnificent 7 Index

Introduction: About the Magnificent 7 Index (ticker: $MAG7)

The magnificent 7 index is a stock index only representing tech giants. Making up 29% of the weight of the NASDAQ (per 06-05-2024). The (so far) healthy performance in 2024 is due to the AI narrative led by Nvidia and Microsoft. Furthermore, there is a large chance that any ‘new kid’ in town will eventually be bought by one of these players due to their massive network effect.

How does the index function?

It is a first of its kind in crypto space. Users should KYC with our partner Dinari protocol. Dividend is automatically received and can be auto reinvested in the native stock or paid out in yield bearing USD+ token, all with 1:1 backing of offchain stored stocks.

General benefits trading stocks in the crypto space

Users investing in index tokens through crypto benefit from low management fees, auto reinvesting of dividend and (upcoming) active management of trading metrics to maximise potential outperformance. All of these whilst being onchain ensures users their right for self-custody, 24/7 tradeability (yes you can even trade when the stock market is closed) and complete transparency (no more frontrunning by shady brokers such as Robinhood).

Index Composition

The top 7 is ranked based on their market cap, below table shows the result index composition and weight determination per 22-09-2024 as an example:

Name	Symbol	Weight
Microsoft	MSFT	0.211
Apple	AAPL	0.207
NVidia	NVDA	0.190
Alphabet	GOOG	0.141
Amazon	AMZN	0.127
Meta	META	0.079
Tesla	TSLA	0.0416

Issuance and Redemption

Stock issuance and redemption process, yellow is created and owned by Nexlabs, but controlled decentrally on the blockchain. Blue is controlled by Dinari. The oracle is used to determine the required weights per index token, but not the price of the token itself. For the price, Chainlinks decentralized price feeds are used.

Key Components

Oracle An oracle is responsible for updating on-chain data from off-chain sources. Here, we obtain the top asset list from our API. The oracle sends this asset list to the smart contract, enabling the smart contract to trade and manage the vault balance according to this list. The asset list will be updated each month.

Factory The Factory is a Nexlabs smart contract responsible for trading underlying assets and minting and burning index tokens. Users interact with the Factory contract to create issuance (mint) and redemption (burn) requests. Additionally, the Factory contract is responsible for reindexing and reweighting actions.

Vault The Vault is a Nexlabs smart contract responsible for holding underlying assets on-chain. Only the Factory contract can manage the Vault smart contract through specified functions, including issuance, redemption, reindexing, and reweighting.

Order Processor Order processor is a smart contract from Dinary protocol responsible for creating buy and sell orders and also filling these orders. Factory smart contract is integrating with this order processor smart contract to buy and sell underlying assets.

Fulfilment Bot This bot is a part of the Dinary protocol which integrates with the stock market and fills orders created by the order processor.

Issuance and Redemption Smart Contract Steps

1. User sends a stable coin to the factory contract.

2. Factory contract communicates with the Dinary order processor and sends stable coins to that smart contract and the related order is created.

3. Fulfilment bot receives the order and creates the order in the market and waits for the finalisation of the order in the market.

4. The trade will be executed while the market is open.

5. The fulfilment bot fills the order of the order processor contract.

6. Order processor contract mints the stock tokens and transfer that to the vault smart contract.

7. NexLabs bot observes the event of the filled order.

8. Finally, NexLabs Bot calls the finalise function of the factory contract to mint the index token for the user.