What is RDA Index?

MOTIVATION

Between January and April 2018, the cryptocurrency market fell from $700 billion to $400 billion. The consequent loses shook investor confidence to the ground. This created an urgent need for greater insight into the cryptocurrency market. Real Digital Asset Index (RDAi) was subsequently created to clarify which cryptocurrencies are a reliable store of value. Based on multi-factor analysis, RDAi defines a set of digital asset attributes that are drivers of the cryptocurrency market and evaluates each cryptocurrency against these attributes to derive an appropriate Real Digital Asset (RDA) score. The RDA Score is indicative of how investible a cryptocurrency is. The sum of all RDA scores - the RDA Index Level - is a measure of how the cryptocurrency market is faring. RDAi's attribute-weighting delivers a unique data set to support cryptocurrency investment and regulatory considerations.


1. INTRODUCTION

Value is migrating from 'legacy' assets such as gold, silver, fiat currencies into digital assets such as Bitcoin, Litecoin, Ethereum, etc. There are a number of reasons for this transfer of value from traditional assets into cryptocurrencies. Sometimes it is due to hype, and in other cases it is due to the digital economic use-cases offered by the cryptocurrencies themselves. For example, a cryptocurrency such Winding tree lif token will enable airlines to list flights on to a database and allow travelers to book flights directly from that database at a lower price than currently possible. This will likely result in a complete deregulation of the airline industry. Such use-cases and other factors are what make cryptocurrencies attractive to 'hold'. They are not only held for their digital utility, rather as they appreciate in value over time, they evolve into an investment instrument ("Real Digital Asset") in their own right and consequently a bonafide medium of exchange.


2. THE PROBLEM

The cryptocurrency market and its players face five main challenges:

Reliability as a store of value:
Given that most cryptocurrencies lack a digital economic use-case or can serve as securitised token, the flow of value into and out of them can be both erratic and manipulative. This raises a fundamental question about their reliability as a store of value and whether they can serve as a bonafide medium of exchange.

Market understanding:
As a unique asset class that breaks traditional financial market models, the cryptocurrency market understanding continues to prove elusive to many investors and analysts.

Regulatory uncertainty:
The industry currently lacks a regulatory framework to evaluate and differentiate cryptocurrencies and clarify which ones are 'real' and which ones aren't. Some analysts argue that "of the 1,500 (cryptocurrencies in circulation), 90% are worthless, and of those, more than 90% are probably scams (Andreas Antonopoulos, author of Mastering Bitcoin and leading cryptocurrency author, speaker and educator)"

Technology Complexity:

The complexity of blockchain technology and cryptocurrency wallets remains a inhibitor to grandscale cryptocurrency adoption.

Lack of Transparency:

A comparative and easy to understand information on the attributes of most cryptocurrencies is not readily available. Research is often required to gather deeper insight into each cryptocurrency. This creates constant fear, uncertainty, and doubt for investors.
3. MULTI-FACTOR CRYPTOCURRENCY INDEXING AS A SOLUTION

In such volatile, complex and highly speculative market, to hold a more diversified portfolio of cryptocurrencies and execute successful short or long term investments, cryptocurrencies require significant clarification beyond price-series and market-capitalisation indices. The market will benefit from a cryptocurrency index that is based on a sound market theory and can compresses a large amount of unwieldy information into a reliable, investible and easy to use data sets.


5. REAL DIGITAL ASSET INDEX

In traditional asset class, MSCI, FTSE Russel etc., generally provide indices based on market capitalisation. Most cryptocurrency indices have also adopted this approach. Real Digital Asset Index (RDAi) is different. Real Digital Asset Index solves each of the above problems through multi-factor analysis of cryptocurrencies. By combining efficient market hypothesis with attribute-weighting, RDAi clarifies which cryptocurrencies contains attributes that are likely to drive a sustainable market and as such makes them investible. In a market capitalisation-weighted index, changes in the market value of larger cryptocurrencies move the index's level overall trajectory. In RDA Index, changes in market value of larger cryptocurrencies does not move the index's level overall trajectory. Rather, as a cryptocurrency acquires RDA attributes, the overall RDA Index level improves.


6. RDA ATTRIBUTES

RDA Attributes are a set of qualities that interlock with economy-wide drivers of the market to define the realness, stability, and investibility of a cryptocurrency. RDAi is built on four 'customisable' groups of attributes, namely:

Three of the four groups of attributes are fundamental and guarantee a nominal value for cryptocurrencies. Market Performance facilitates a technical analysis and enables inclusion of market-cap. weighting into the index. RDA attributes are found in some cryptocurrencies more than others which enable those cryptocurrencies to attract and retain value in the face of market panic. The more a cryptocurrency acquires real digital asset attributes, the more they become rooted in real life use and develop a strong market support.


7. BASIC RDA ATTRIBUTES

We disclose some of the basic attributes that underlie our evaluation, scoring and ranking of cryptocurrencies.


4. RDAi ADDRESSABLE MARKET

8. RDA INDEX, SO WHAT?
For each cryptocurrency, the index generates two important data set: RDA Score and CBSR.

RDA Score: Real Digital Asset score is assigned to a cryptocurrency to indicate the degree of RDA attributes constituted within it. The score indicates the strength and inherent value of the asset. The higher the score, the more stable and valuable the asset in and of itself. The lower the score, the weaker the asset.

CBSR: Cryptocurrency Basket Stability Ratio is a measure of stability for a basket of cryptocurrencies. A low CBSR can pose a high investment risk to cryptocurrencies that have a strong correlation to the market movement - even in the face of a good RDA Score.


This data couple is used to develop an efficient risk-return cryptocurrency investment strategy model (also known as the RDAi Magic Quadrant). RDAi magic quadrant shows the plot of RDA Score and CBSR for a crytocurrency and identifies the corresponding investment risk and gains probability per quadrant. RDAi Magic Quadrant aims to democratises cryptocurrency investment by making the market accessible to ordinary inexperienced investors as well large investment fund managers. The Quadrant is a work in progress as we continue to prove each quadrant with extensive data analysis and mathematical models.
9. RDA INDEX BENEFITS

Agility:
RDA Index is a hyper-efficient investment decision-support tool.
It compresses a large amount of data and perspectives into a simple, reliable, and easy to use indicators.

Market Mastery:
RDAi helps market players to identify real cryptocurrencies with intrinsic value.
Asset pricing: Beat market-hype and false information, derive the true price of every cryptocurrency.
Feel the pulse of the market: RDA Index Level provides real-time measure of how the entire market is faring.

Risk Management:
Given the multi-factor analysis involved in producing RDAi, top performing cryptocurrencies in the index are deemed to be part of a strong micro-economic value chain. The index therefore limits investor exposure to macro-economic risks such as inflation, regulatory uncertainty, and interest rates.


10. RDA INDEX TOKEN

Xtant Real is devoted to building the central nervous system for valuing and comparing the world’s cryptocurrencies. RDAi Token exists as a tokenization of the RDA Index ecosystem and services and consequently is a de facto technology-managed “Gold-Standard” for cryptocurrencies. The token will be used to facilitate objective exchange rates across cryptocurrencies.

RDAi Token is integral to the RDA Index Platform. It gives token holders a privileged access to RDA Index data and services.


Market capitalisation data source: Coinmarketcap