[C20] - Crypto20 cryptocurrency index MIP6 collateral application

[C20] - Crypto20 cryptocurrency index MIP6 collateral application

This is a MIP6 Proposal for the addition of Crypto20 tokenized cryptocurrency index to MCD.

C20 is a standard erc20 token with approximately $16 million market cap.

1. Who is the interested party for this collateral application?

@befitsandpiper, A member of the makerdao community.

2. Provide a brief high-level overview of the project, with a focus on the applying collateral token.

C20 algorithmically rebalances a market cap weighted index of the top 20 cryptocurrencies. No cryptocurrency is allowed to make up more than 10% of the weighting. As index investing tends to produce better long term returns and lower volatility than active management, this could potentially be a valuable asset for MCD.

3. Provide a brief history of the project.

No history page, but there is a fact sheet: https://s3.amazonaws.com/cdn.invictuscapital.com/factsheets/c20-factsheet.pdf

4. Link the whitepaper, documentation portals, and source code for the system(s) that interact with the proposed collateral, and all relevant Ethereum addresses. If the system is complex, schematic(s) are especially appreciated.

white paper: https://cdn.crypto20.com/pdf/c20-whitepaper.pdf

here is their github: https://github.com/cryptotwenty

5. Link any available audits of the project. Both procedural and smart contract focused audits.

6. Link to any active communities relating to your project.

They have a discord: https://discord.com/invite/QwaFrxX
And a twitter page: https://twitter.com/CRYPTOtwenty

Among other links on their website.

7. How is the applying collateral type currently used?

Collateral is used to purchase a roughly market cap weighted index of the top 20 cryptocurrency tokens, rebalanced weekly. No cryptocurrency tokens are allowed to exceed 10% of the total value of the fund.

8. Does one organization bear legal responsibility for the collateral? What jurisdiction does that organization reside in?

Yes, CRYPTO20 Cayman Islands LLC:

"CRYPTO20 has been established in the Cayman Islands jurisdiction. The Caymans are a popular international jurisdiction for the incorporation of investment funds.

The Cayman jurisdiction has seen a strong increase in private equity funds year on year over the past decade. The popularity of Cayman private equity funds has been fuelled by the increase in hedge fund managers growing into the private equity space and by the increased use of private equity funds to pursue distressed asset investments.

The Cayman limited liability company (LLC) was introduced last year as a flexible, tax-neutral low-cost fund vehicle with a corporate personality.

The LLC is a flexible structure ideally suited for use as a closed-end investment vehicle. The Cayman LLC was established under legislation that was drafted with the key terms of private equity vehicles in mind.

The registration, due diligence and reporting requirements which arise from this legislation is generally delegated to a private equity fund’s administrator. The procedures are closely aligned with existing anti-money laundering (AML/KYC) requirements to ensure that the use of Cayman vehicles for private equity structures remains a low cost option."

9. Where does exchange for the asset occur?

Hit-BTC is the largest exchange. The asset also trades on fork delta and other exchanges shown here: https://crypto20.com/en/portal/exchange/
There is also a small amount of liquidity on uniswap, but it is not much. Hopefully onboarding would improve overall liquidity, since we could add the token to oasis, and hopefuly spur more people to participate in the uniswap market.

I have posted this application in their discord, hopefully a representative will sign up and be able to answer any questions

The rest of these questions will have to wait for a Crypto20 representative:

  1. (Optional) Has your project obtained any legal opinions or memoranda regarding the regulatory standing of the token or an explanation of the same from the perspective of any jurisdiction? If so, those materials should be provided for community review.
  2. (Optional) Describe whether there are any regulatory registrations for the token and provide related documentation (including an explanation of any past or existing interactions with any regulatory authorities, regardless of jurisdiction), if applicable.
  3. (Optional) List any possible oracle data sources for the proposed Collateral type.
  4. (Optional) List any parties interested in taking part in liquidations for the proposed Collateral type.
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Full disclosure: I hold C20 in not insignificant amounts, so I’d be a beneficiary here, but it’s a very small fund and may not generate enough Dai to justify the overhead, ultimately that decision will fall on governance though.

Pros:

  • Age: C20 has been operating without scandal for over a year and a half.
  • Stability: C20 has been smoothing out the price spikes we see in the broader crypto market.

Cons:

  • Capped: Current mktcap of $20mm reflects roughly $16.5mm NAV + $3.5mm premium. This fund is capped and doesn’t accept new investment, so only a small amount of Dai can be generated from this asset unless there’s a significant jump in the overall market.
  • Custodial risk: keys are held off-chain by a firm in the Cayman Islands, there is regulatory risk and risk of theft.
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