Bit20 - The cryptocurrency index fund
What is Bit20 ?
Bit20 is a cryptocurrency index fund.
But how exactly is it made, what are the coins in it and how can I invest in it?
I'm here to share with you this promising blockchain project and answer all your questions.
I wanted to create a tool that allows anyone to invest in the global economic growth of cryptocurrencies without a headache. Just buy something that will track this soon economic Cambrian explosion.
This tool had to be decentralised because we all know how centralised projects dealing with money end up, especially in the cryptocurrency world. So my team and I have created a cryptocurrency index fund (ETF like).
I want to spread the information about this index fund in the crypto community so everyone can invest in a great asset that will grow as the cryptocurrency global market grows. Not something going up and down wildly, but more something like a monster slowly waking up and devouring the fiat money markets.
I want it to be a place where you can store your value with a high probability that months later, you will still have your investment intact and a nice return on investment.
I also want to spread the word out of cryptocurrencies. My plan is to start with the cryptocurrency savvy crowd and then move on to trading forums, forex, stock markets and others. This is how I aim to make new money comes into this space. The bigger the index daily volume will grow, the easier is going to be to promote it and make people interested in crypto.
The index took almost a 2 years to be fully tested and heavily reviewed. It´s finally ready and has been officially launched on the BitShares decentralised exchange on 16/12/2016. The index is fully decentralised and every Bit20 will always be backed by a minimum of 175% of its value.
This is 100% secure, 100% decentralised, 100% pure cryptocurrency !
If you have any question, please have a look on the website at the "FAQ" or "About Bit20" tab. If you don't find what you are looking for, I'll do my best to answer you in this post.
WHAT IS AN 'INDEX FUND' ?
Choosing how many cryptocurrencies would be included in the index
Including ten cryptocurrencies was our first approach for the index, however we thought that we were overlooking some interesting projects currently ranked in the 11th - 20th range, so even if the market capitalization of these coins is lower than the top 10 cryptocurrencies we felt they deserved to be part of the index since they have a lot of growth potential, we incorporated these coins with less weight on the Bit20 index and we left out coins below the top 20.
Ripple was intentionally excluded from the index since it constitutes a private and centralised institution, it is not considered a cryptocurrency and it is similar to a bank using the blockchain technology.
Percentage by coin
If we added the total market cap of the top 20 cryptocurrencies, we would obtain the total market capitalization of all of them. If we were to use the respective percentage of each cryptocurrency in the top 20 to define which part of the index they should have, we would end up with an index moving in parallel with Bitcoin which represents around 80% of this total market cap of all these coins.
Therefore, we opted for using the same system applied by traditional indexes which consist in having a maximum percentage by asset inside the index. So we proceeded by topping the first one, Bitcoin, at 10%. It left us with 90% to share on the remaining total market capitalization of the last 19 cryptocurrencies. Litecoin (july 2015) was the second biggest one and it also represented more than 10% of the total, so we capped it too. The same process was done to all of the 18 remaining cryptocurrencies, only the few biggest coins reach 10% and the vast majority have percentages going from 9% to 1%.
Having the distribution well balanced was a precise task to do. To give a value to the index, we just had to arbitrary chose one. It could have been one dollar, the price of a cereal box or the national debt of a country. To keep things simple and elegant, we chose to gave to our index the price of an ounce of gold on his birthday date, the 21 of july 2015.
The average of several sources on the gold price created the initial value of Bit20 at: 1103.4733333333 USD.With this value in mind and the percentages of each cryptocurrencies in the index, we can determine how much of each cryptocurrency will constitute the index.
How do I purchase BTWTY (BITTWENTY) ?
In order to buy BITTWENTY, you need an account on the BitShares Decentralised Exchange. Just like in Europe where all your purchases have to be done with euros, on the BitShares ecosystem, you need BTS (bitshares) to operate. It's the currency of the platform. You will find all the explanations you need below on how to create an account on BitShares but also how to send BTS to your account, change Bitcoin to BTS directly from the wallet and how to proceed if you don't have Bitcoin in the first place.
How do I purchase BTC (bitcoins).
There is a lot of options available on the Internet to buy bitcoins.
On of the most popular and reliable is Coinbase. The process to buy on their website is very clear and easy. You still can watch one of the several tutorials videos available on youtube if you are more comfortable with visual information.
PROMOTION : At the moment, buying at least 100$ of bitcoins using this link, Coinbase, rewards you with 10$ more worth of bitcoins !!!
Another practical exchange is Coinimal. In this one, you can buy your bitcoins instantaneously with some of the methods provided. You can use traditional online bank transfer but also Visa, MasterCard, Paypal, Neteller, Skrill, Giro pay, EPS and Ok Pay.
How to create a BitShares account.
This tutorial will explain how to create an account in BitShares. The whole process will take one single minute
You will create an account on the BitShares blockchain, then you will be able to use the BitShares wallet and your account to buy BITTWENTY.
This video explains in detail how to create an account. Go at www.openledger.info and follow the tutorial video (1 min 20)
How to purchase BTS (bitshares) with BTC (bitcoins).
There is a lot of options available on the Internet to change cryptocurrency. In this video, you will see one easy way to do that without having to go in an exchange.
This method is simple and easy if you want to trade a few BTC to BTS. If you plan on changing a big quantity of BTC, it could be better to use an exchange like Poloniex where there is enough liquidity for your trade.
How to buy BTWTY.
BitShares' Decentralized Exchange (The DEX) can be intimidating to new users who simply want to trade or buy BITTWENTY for $, €, ¥ or Bitcoin. This tutorial will start from scratch assuming you've never seen BitShares before.
Frequently asked questions (FAQ) :
# What is exactely a BTWTY ou Bittwenty ?
The whole explanation is at the "BTWTY" tab in the menu.
# Where can I buy BITWTYs ?
The detailed process is at the "How to invest ?" tab in the menu.
# Where does BITWTYs come from ? Who sells them ?
It’s a free market. BTWTY team doesn’t create nor sell BTWTYs. Short sellers (traders) are the ones creating BTWTYs by locking 200% collateral of their value in BTS and then sell them. Once they are created and sold, they are acting as any other asset in the market and can be sold again and again.
# How secure is BTWTY ?
BTWTY is a smartcoin in the BitShares blockchain and does possess the same properties as the core asset BTS. We can agree that Blockchain technology has demonstrated so far that is more reliable than centralised online exchanges.
# Can BTWTY team manipulate the price to dishonestly win money ?
No we can't ! The new composition of the index is monthly sent in a BitShares Blockchain block. Once in a block, it can not be changed. The nodes of the BitShares blockchain (called “Witnesses”) are reading this composition, calculating the price and sending it into the next block so it can be displayd in the market BTS : BTWTY. The number of witnesses and their high reputation in the system guarantee the decentralisation of the price production and its trustless characteristic.
# What kind of fee are involve when buying or selling BTWTYs ?
The BitShares ecosystem takes around 0.1 BTS for the trading operation, which is worth around 0.0005$ at the time of this writing. That’s obviously extremely low. Besides this, the BTWTY team set 0.2% fee on the market trades. This fee aims to provide money for the development of Bittwenty, the website maintenance and future evolvements, publicity and anything that can help this market to grow.
# How the market will evolve and grow ?
At the every beginning, this market will be empty. Then, as we believe BTWTY is an amazing tool to invest in cryptocurrencies, the market will experience a disequilibrium with much more buyers than sellers (shorters).
The short sellers are mainly traders in the BitShares ecosystem. If there is liquidity in the buying side of the market, they will gain interest in using this market to trade and gain on the volatility of the index.
That will create more sellers and increase to market depth.
# What would happen if the collateral of the shorter drop below the value of the BTWTY I possess ?
BitShares provide a protection that margin call any short position if the collateral decreases below 175% of the value of the index. Consequently, the value of your investment is well protected.
# Can I get my money back at any time ?
Any time you wish, depending on the buy orders present in the market, you can sell your BTWTYs and have your BTS back. Once you have BTS, you can change them in any currency you like in the BitShares ecosystem or through a centralised exchange. The whole process take seconds !