Digital Assets FAQs
ETH Merge Index Treatment
What is the ETH Merge?
Why is there an ETH Proof-Of-Work Fork?
As the Merge nears, discussions around a potential hard fork for an “ETHPoW” (Ethereum Proof-of-work) chain are getting louder. Originally Ethereum 2.0 was planned as a non-contentious protocol upgrade and not a contentious hard fork (unlike Ethereum Classic) . The “fork” terminology in the Ethereum 2.0 specs is used more for public messaging than anything else. When the upgrade is complete, there will be no fork because the network will not end up with multiple competing chains. There will only be one ETH, and the amount of ETH you hold will remain the same .
However, some miners of the current Ethereum chain have a different view. Ethereum mining is a multi-billion dollar industry, generating hundreds of millions of dollars in revenue (sometimes billions) to hardware miners every month. After the Merge, the mining hardware will be useless. There will be a fight to keep this business alive. The ETH miners will protest the Merge by forking into the new ETHPoW chain that retains PoW validation. They already have some support from developers, who removed the difficulty bomb . A migration to Ethereum Classic (ETC), which is also based on PoW was already ruled out by a majority group. ETC cannot practically absorb all of the mining power of Ethereum.
What should Investors do?
How do we treat the Fork form an Index Perspective?
At MarketVector, our hard fork policy is outlined in the index guidelines. Section 5.2 gives details on the hard fork treatment policy . On top of the hard fork treatment policy, indexes have some additional rules (like custodian support defined by the index owner or the client) which might affect the treatment of the fork in the corresponding index.
As soon as news are published, MarketVector starts tracking the development of the fork. If the corresponding index allows the addition of the forks, forks that fulfill the rules as defined in Section 5.2.1 will qualify to be added to our indexes. After this step, we apply the following checks:
- For the indexes that have the requirement in which the index components must be listed on at least one of the exchanges with AA/A rating by CryptoCompare’s Exchange Benchmark, the inclusion of the fork will be dependent on the listing status at any one of the exchanges.
- The indexes may also have the requirement in which the index components should be supported by the designated custodians of the index owner or the index client. If the fork is not supported by at least one custodian, it will not qualify for the index.
If the fork fulfills the rules to be added to an index, the following will be applied:
- Each additional component resulting from a fork is immediately added to the index for at least one day, if traded. In case it does not trade, it will be kept with a 0 price until the first price is retrieved. It will then be kept in the index for at least one day or the next review becomes effective.
- For indexes that have fixed number of components: If the fork trades, the index component with the lowest market capitalization is detected after the first closing file is generated. On the days announced in the event file, the index component with the lowest market capitalization is removed from the index to keep the number of index components at the fixed number.
- For the indexes that do not have fixed number of components: The fork will be kept until the next review and the investability rules as defined in the index guide for the corresponding index are applied to check whether the fork qualifies for the index.
Customized Indexes will be adjusted according to their specific rules.
When do we add the new Fork?
The Ethereum Mainnet Merge has been tentatively scheduled for around September 15th/16th. The final part of the upgrade, known as “Paris,” will happen when Ethereum’s hash rate (a measure of a network's computing power) reaches a certain level. That's currently expected to happen on September 15.
But this could change in the coming days and weeks, since a network's hash rate is not constant and could increase or decrease over time.
The fork will be added by MarketVector intraday as soon as the Merge is confirmed. Clients get the data via our Real-Time API and a standard closing file with the corresponding closing price will be disseminated.
How will clients get to know what we do?
This FAQ represents a collection of questions our clients keep on asking. Please do not hesitate to contact us if you have additional questions.
What are digital assets?
Why digital asset indexes?
How does MarketVector Indexes pick the top 5/10/25 digital assets?
What are digital asset classifications?
|DeFi||Financial services built on top of distributed networks with no central intermediaries||Uniswap, Aave|
|Exchange||Tokens owned and operated by a centralized cryptocurrency exchange||Binance, FTX|
|Infrastructure Applications||A decentralized computer program designed to perform specific tasks||Polygon, Chainlink|
|Media & Entertainment||Used to reward users for content, games, gambling or social media||Axie Infinity, Basic Attention Token|
|Payments||Digital, non-stable money for use in a distributed network||Bitcoin Cash, Litecoin, wallet apps|
|Smart Contract Platforms||Blockchain protocol designed to host variety of self-developed and 3rd party applications||Ethereum, Cardano, Solana|
|Stablecoins||Designed to minimize volatility by pegging to a more stable asset||Tether, USDC|
|Store of value||Designed to hold or increase purchasing power over time||Bitcoin|
Why does MarketVector Indexes not have indexes for all the digital asset categories?
- Exchange: many exchange tokens such as BNB (Binance) and FTT (FTX) may eventually end up classified as securities by US regulators. Indeed, some of the largest exchanges are already public or planning IPOs. As such, we see less demand from market participants at the moment for an investable index based on this category.
- Payments: this category includes meme coins such as Dogecoin and Shiba Inu, and prominent forks such as Bitcoin Cash and Bitcoin SV. While a “meme coin” category might emerge in future iterations, for now, MarketVector Indexes sees less demand among market participants for a category that includes both meme coins and prominent forks. If and as the digital assets market cap grows as we expect, investors should expect further sub-categorization of “Payments” etc.
- Stablecoins: these coins aim to peg their value to another asset. While MarketVector Indexes believes market participants will find value in an index that tracks the yields on stablecoins, there is currently no use case for a stablecoin price index.
- Store of Value: this category includes Bitcoin, wrapped Bitcoin and Bitcoin Gold. Bitcoin itself offers pure enough exposure to this category.