- What is Bitcoin?
Bitcoin is a software program that was created in 2008 by an individual, or a group of individuals, under the pseudonym of Satoshi Nakamoto. In its essence, Bitcoin is a settlement network that allows its participants to transact with each other without the need for a trusted intermediary. The digital asset used to transact in this network is bitcoin (with a lowercase b), which acts as the “currency” users need to own in order to participate in the network.
- What is a blockchain?
A blockchain is a data structure (a specific way to organize data) that is used by the Bitcoin network and by the many other blockchain networks that came after it. A blockchain contains blocks that store information about transactions. These blocks are cryptographically linked to each other so that the chain is a tamper-evident log of transactions. By having a summary of the information (hash) contained in the latest block, a network participant is able to validate the chain of blocks to confirm that it has not been tampered with.
If used in conjunction with proper validation and incentive systems, a blockchain can act as a decentralized, append-only ledger of information. In the specific case of the Bitcoin network, every ten minutes on average a new block of transactions is produced.
- How are new Bitcoins created?
New bitcoins are created through a process called mining. Some participants in the network, called miners, perform energy-intensive computations that provide security to the network. As a reward for this activity, miners receive newly-minted bitcoins in a special transaction contained in each block called the Coinbase transaction.
Currently, the participant who mines a block is awarded 12.5 newly-minted bitcoin. Approximately every four years, or every 210,000 blocks produced, the number of bitcoins created in each block is cut in half, in an event called the “halving”. The next halving is expected to occur in mid-2020.
- What is a smart contract?
A smart contract is a term coined in 1997 by the computer scientist, lawyer, and cryptocurrency pioneer Nick Szabo to define a contract that is purely enforced by computer systems. These are self-executing agreements that can be written in computer code. Smart contracts permit transactions that are more sophisticated than only sending and receiving digital assets, and they are considered one of the key use-cases that digital assets can enable.
- What is the Lightning Network?
The Lightning Network was launched in 2018 and is considered by many the most exciting recent development in the Bitcoin network. Through a scheme called payment channels coupled with a specific type of smart contract, two users can lock bitcoin in the Lightning Network and transact within it with unprecedented speed and privacy for negligible cost. The Lightning Network is an example of a layer two (L2) solution that leverages the security and decentralization of the Bitcoin Network.
- What are digital assets and what can they be used for?
Digital assets are considered by many an emerging asset class. A digital asset is a bearer instrument that has both its utility and scarcity completely defined by computer systems. Following the success of bitcoin, the first digital asset, many other digital assets came into existence.
Digital assets can be used as monetary assets, but they can also have other uses. For example, digital assets can be used for time-stamping (a sort of digital notary that proves that a certain piece of information existed at some point in time); as a digital representation of goods or assets that can be used for more efficient transfer mechanisms; or as a digital token that incentivizes a smart contract to work according to pre-designed incentives.
Hashdex Digital Assets Index – HDAI
- What is the HDAI – Hashdex Digital Assets Index?
The HDAI is an index designed to replicate the performance of the overall digital asset market. Specifically, the HDAI tracks digital assets that represent a substantial portion of the total digital assets market capitalization, after undergoing strict index eligibility criteria.
- What are the principles that guide the HDAI methodology?
The HDAI is guided by three key principles:
Adaptable: provide a rules-based methodology capable of dynamically adjusting the index composition over time. This ensures that the HDAI accurately reflects the overall digital asset market as it changes over time.
Representative: include digital assets that comprise a significant portion of the digital asset class by market capitalization and digital assets that reach a minimum threshold of market significance.
Trackable: utilize straight-forward automated rules and thorough selection criteria, such as digital asset custody standards, that allow the HDAI to be tracked by funds and other investment vehicles.
- How are HDAI constituents determined?
HDAI constituents are determined quarterly based on eligibility and market capitalization criteria.
A digital asset is eligible for inclusion in the HDAI if it satisfies the following criteria:
– Is traded on a qualified exchange;
– Is supported by an institutional-grade custodian;
– Exceeds minimum daily trading volume thresholds; and
– Has free-floating pricing (i.e., not be pegged to the value of any asset).
The HDAI utilizes a dynamic asset selection process in which eligible digital assets with minimum 0.25% representation by market capitalization are added to the Index. Additional eligible assets will be included if the HDAI has not reached a floor of 75% representation of the eligible market.
- How are weights for HDAI constituents calculated?
Weights for HDAI constituents are calculated according to their relative market capitalizations.
Market capitalization calculation uses each asset’s real-time pricing and a fixed outstanding supply determined once every quarter.
Hashdex Digital Assets Index Fund
- What is the Hashdex Digital Assets Index Fund?
The Hashdex Digital Assets Index Fund is a passively managed fund designed to give sophisticated investors broad exposure to the digital asset market by tracking the Hashdex Digital Assets Index (HDAI). In tracking an index that is designed to capture a significant part of the digital asset market over time by automatically adjusting the number and weighting of included digital assets as the market evolves, the Fund seeks to offer highly diverse exposure to a market that is rapidly changing.
- Why should I invest in the Hashdex Digital Assets Index Fund instead of buying the assets directly?
Digital assets are a nascent asset class which demands unique investing infrastructure. As such, management of a digital assets portfolio requires calls for technical expertise in trading, administration and storage, which can be challenging to investors used to traditional financial assets.
Hashdex is uniquely positioned to provide investors with maximum operational efficiency: the Fund is managed by a multidisciplinary team of early investors in digital assets, highly qualified experts in finance, engineering and law, working with industry-leading service providers to ensure true tracking of the digital assets landscape combined with state-of-the-art security.
Furthermore, the taxation of your investment in the fund is far more simple and effective than the requirements you would be subject to if purchasing and rebalancing a basket of assets directly.
- What is the Fund’s liquidity?
The fund offers daily subscriptions and redemptions. In case of redemptions, the investor needs to give a notice at least 3 days in advance.
- How are the digital assets held by the fund secured?
The fund processes are designed in a way that Hashdex has no direct access to private keys, which are the cryptographic tools controlling account ownership in digital assets networks. All fund’s keys are granted institutional grade custody by at least one of our three providers: Vo1t, XAPO, and Kingdom Trust. These custodians implement sophisticated processes to avoid attacks by hackers and other criminals.
Fund’s assets are transferred daily to those secure storage solutions and are disconnected from the internet (cold storage). This means we don’t keep any relevant amount of assets in exchanges or in hot wallets solutions that are commonly targeted by hackers.
Withdrawals from secure storage are enforced by multisig technology, that requires multiple authorizations from our side to initiate the process of creating and signing transactions, and planned delays of up to 2 days from the authorization to the actual transfer of assets. This service is generally provided by custodians and adds an extra layer of security around failed (or fraudulent) withdrawals.
- Is the fund regulated?
The Fund is registered in the Cayman Islands and subject to the Cayman Islands Monetary Authority.
- Who is the manager of the fund?
The Fund is managed by Hashdex Asset Management, a registered asset manager under the Securities Investment Business Law of the Cayman Islands, subject to the Cayman Islands Monetary Authority. The firm has also filed as an Exempt Reporting Advisor in compliance with SEC rules and under the U.S. Advisers Act of 1940. While the investment manager is an Exempt Reporting Adviser, its provision of services to the Fund will generally not be governed by the U.S. Advisers Act.
- What is the fund’s governance structure?
The Fund has a Board of Directors with a majority of independent members. In addition to Mr. Bruno Ramos de Sousa (Head of Legal and Compliance at Hashdex Asset Management), Mr. Mark Fagan (a partner at Highwater) and Mr. John D’Agostino (a partner of DMS Governance), who have extensive experiences in the investment management industry, oversee the Firm’s management of the Fund and convene regularly to decide on major issues.
The Board of Directors will review the operations of the Company at meetings generally held on a quarterly basis. For each such meeting, the Board of Directors will receive periodic reports from the Firm detailing the performance of the Company and providing an analysis of its investment portfolio.
The asset manager and the Fund also rely on a network of premium service providers to handle legal, compliance, tax and other issues related to the Fund’s management.
- Who is eligible to invest in the fund?
Shareholders in the fund must either be “accredited investors” within the meaning of Regulation D under the U.S. Securities Act of 1933, as amended, or not “U.S. Persons” as defined in Regulation S under the Securities Act.
Start a conversation with us.
We would love to speak with you.