🪙Index Tokens

This documentation provides a comprehensive overview of Charisma Index Tokens, detailing their benefits, functionality, and use cases.

Introduction

Charisma Index Tokens are innovative financial instruments designed to provide diversified exposure to a basket of underlying assets within the Charisma ecosystem. These tokens represent a combination of liquid staked tokens and regular tokens, offering users a simplified and efficient way to gain exposure to a diversified portfolio without the need to manage each asset individually. Index tokens are a key component of Charisma's mission to make decentralized finance (DeFi) more accessible and user-friendly.

Key Concepts

1. Index Tokens

Charisma Index Tokens are composite tokens that represent a diversified basket of underlying assets. Each index token is created by locking up a specified combination of liquid staked tokens and regular tokens, which are then represented by a single index token.

2. Liquid Staked Tokens

Liquid staked tokens, such as sCHA, are tokens that represent assets staked in a network or protocol while maintaining liquidity. These tokens accrue staking rewards and can be traded or used in various DeFi activities.

3. Regular Tokens

Regular tokens are standard cryptocurrency tokens without staking mechanisms. These tokens can also be part of the composition of index tokens.

Benefits of Charisma Index Tokens

1. Diversification

Index tokens provide exposure to a diversified basket of assets, reducing the risk associated with holding a single asset.

2. Simplified Management

By holding a single index token, users can gain exposure to multiple underlying assets without the need to manage each one individually.

3. Enhanced Yield

Index tokens can include liquid staked tokens, which may provide additional yield through staking rewards.

4. Liquidity

Index tokens can be traded on decentralized exchanges (DEXs), providing liquidity and flexibility for users.

5. Governance

Index token holders can participate in governance decisions within the Charisma ecosystem, influencing proposals and changes to the protocol.

How It Works

1. Creation of Index Tokens

• Selection of Assets: Users or the protocol selects a combination of liquid staked tokens (e.g., sCHA) and regular tokens to include in the index.

• Locking Tokens: The selected tokens are locked in a smart contract.

• Minting Index Tokens: In return, users receive index tokens that represent their share of the locked assets.

2. Composition and Rebalancing

• Initial Composition: The initial composition of the index token is determined by the selected assets and their respective weights.

• Rebalancing: The composition of the index token can be rebalanced periodically to maintain the desired asset allocation. Rebalancing may occur automatically based on predefined rules or through governance decisions.

3. Using Index Tokens

• Trading: Index tokens can be traded on supported DEXs, providing liquidity and enabling users to react to market conditions.

• Staking and Yield Farming: Index tokens can be staked or used in yield farming protocols to earn additional rewards.

• Collateral: Index tokens can be used as collateral in lending platforms, allowing users to borrow against their diversified portfolio.

4. Redeeming Index Tokens

• Unlocking Assets: Users can redeem their index tokens by returning them to the smart contract.

• Receiving Underlying Assets: The smart contract unlocks the underlying assets, returning them to the user’s wallet.

FAQ

What are Charisma Index Tokens?

Charisma Index Tokens are composite tokens representing a diversified basket of underlying assets within the Charisma ecosystem. They offer simplified exposure to multiple assets and enhanced yield opportunities.

How do I create an index token?

To create an index token, select the desired combination of liquid staked tokens (e.g., sCHA) and regular tokens, lock them in a smart contract, and receive index tokens in return.

Can I trade index tokens?

Yes, index tokens can be traded on supported decentralized exchanges (DEXs), providing liquidity and flexibility.

What happens if I redeem my index tokens?

When you redeem your index tokens, you return them to the smart contract and receive the underlying assets back in your wallet.