This guide on how to buy DPI, the DeFi index fund will walk you through what DPI is and why it is powerful to get a diversified exposure to DeFi with minimal effort.
DeFi, or decentralized finance, is having a moment on Ethereum. The rise of “blue-chips” like AAVE, SNX, and YFI has been followed by the rise of newer tokens like UNI and SUSHI and then a long-tail of promising projects from there on out.
For a regular crypto investor who isn’t spending 24/7 in Discord channels and Telegram groups, keeping up with everything can be daunting. Even then, buying and rebalancing a DeFi portfolio isn’t trivial due to increasing gas costs.
What is a DeFi Index Fund?
A DeFi index fund is an index that is backed by several other DeFi tokens. This index itself is tokenized and assets held in reserve, i.e. each token of the DeFi index fund can be redeemed for underlying assets and each token can be created by supplying the underlying assets in the specific ratio.
A DeFi Index is an ideal instrument that grants exposure to underlying DeFi tokens and does the rebalancing automatically on behalf of holders. Its value is fully backed by the DeFi tokens backing the index, just like a regular Index Fund in traditional equities.
What is the DPI Index?
The DPI index is maintained by the popular DeFi Pulse team and built using the Set Protocol.
As of this writing, there are 10 components of the DPI. They are as follows:
- AAVE at 25.80%
- UNI at 23.79%
- SNX at 16.31%
- MKR at 9.42%
- COMP at 7.20%
- YFI at 6.50%
- LRC at 3.89%
- REN at 3.67%
- KNC at 1.98%
- BAL at 1.63%
Now of course you may not agree with the weighting here and that’s the whole point of the index. For example, YFI feels underweight in the index at the current valuations, but that’s a personal opinion.
How to Buy DPI Index
In order to buy the DPI index, you can simply need to buy the DPI token from any exchange. However, due to the nature of the index being backed by other tokens, you can also “create” a token of DPI by supplying the underlying assets.
If you want to supply all the assets and get DPI tokens, we refer you to the tokensets page of DPI. This may be a good play for DeFi whales who may get better pricing and even find arbitrage trades in volatile markets and make a profit off of price discrepancies.
If you’re a smaller investor or don’t want to deal with the creation and redemption process, then buying DPI off an exchange is the easiest way to gain exposure to this DeFi index.
To buy DPI, follow these steps:
Step-1: Go to a DeFi aggregator like 1inch to find the best pricing for DPI.
Step-2: Connect your Web3 wallet like MetaMask.
Step-3 (optional): Make sure you have ETH or another ERC20 token in your wallet. If not, you can buy from exchanges like Binance or Coinbase.
Step-4: Select which token you want to convert to DPI, or just stick with ETH.
Step-5: Execute the trade and you should have DPI in your Web3 wallet.
This should route your order through the best DEXes on Ethereum even for pretty complex paths. For example, here is a sample routing to convert from RLC to DPI.
If you are an investor DPI, let us know your thoughts in the comments below and what tokens you would like to see added to DPI.
Thanks for the step-by-step