> For the complete documentation index, see [llms.txt](https://cryptoindex-1.gitbook.io/cryptoindex-whitepaper/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://cryptoindex-1.gitbook.io/cryptoindex-whitepaper/introduction/indexes-strong-in-traditional-finance-blue-ocean-in-crypto.md).

# Indexes: Strong in Traditional Finance, Blue Ocean in Crypto

An index is a type of financial instrument that tracks and measures the performance of a specific basket of assets (stocks, bonds, cryptocurrencies, etc.). It enables index holders to measure and contribute to the overall performance of the financial market as a whole, rather than the instruments.

Indexes are a versatile tool that allows users to achieve various goals. The key advantages include:

* <mark style="color:blue;">**Unified Instrument:**</mark> An instrument that enables holders to receive passive income by tracking the overall market performance.
* <mark style="color:blue;">**Time Savings on Analysis:**</mark> Utilizing indexes reduces the time required for portfolio construction, eliminating the necessity to study a wide range of market sectors and numerous companies within each industry.
* <mark style="color:blue;">**Elimination of Rebalancing Requirements:**</mark> Using public indexes eliminates the routine process of rebalancing, which involves multiple buy/sell operations.
* <mark style="color:blue;">**Diversification:**</mark> Indexes are a multi-asset composite that helps reduce the impact of individual components, thereby lowering overall portfolio volatility.
* <mark style="color:blue;">**Long-Term Performance Advantage:**</mark> Holding an index long-term offers higher returns compared to active strategies focusing on individual instruments and a high transaction volume.

In traditional financial markets, index trading constitutes a significant portion of the overall turnover of investment instruments. For example, the ecosystem of products directly linked to the S\&P 500 generated $224T([1](https://defillama.com/?volume=true\&aggregators=false\&tvl=false)) in index-equivalent trading volume in 2023.

For comparison, during the same period, the trading volume of all cryptocurrencies (spot & perpetual) on TOP10 DEX and CEX amounted to \~$36.3T([2](https://www.coingecko.com/research/publications/2023-annual-crypto-report#6-crypto-trading-volume-hit-10-3-trillion-2023-q4-rising-53-1)), and the trading volume of projects in the DeFi category (to which indexes belong) amounted to \~$1T([3](https://defillama.com/?volume=true\&aggregators=false\&tvl=false)). Thus, the volume of the entire DeFi sector is currently \~0.45% of the S\&P 500 products.

Although the DeFi sector remains small in comparison to traditional financial markets, it is growing strongly, with high growth rates. Since 2023, the TVL of projects has grown \~2.6x(4) times to reach the $100B mark. Therefore, index projects will grow dizzyingly due to the growth potential of the DeFi market as a whole. &#x20;

Despite the popularity of indexes in traditional financial markets, the cryptocurrency space has a limited number of players that provide opportunities to interact with indexes. These platforms do not allow users to fully exploit the benefits for several reasons:

* Limited availability of indexes (not suitable for all strategies).
* Indexes are composed of a small number of tokens (up to 5-7).
* The list of tokens available for index composition is restricted to a few dozen.
* Indexes are rarely rebalanced (once a month, once a quarter, or less).

The Cryptoindex platform democratizes access to one of the most well-known types of holding instruments, incorporating best practices from Web2 and evolving them within the Web3 cryptocurrency space.

***

1. [S\&P 500](https://www.spglobal.com/spdji/en/documents/additional-material/sp-500-brochure.pdf)
2. [Coingecko](https://www.coingecko.com/research/publications/2023-annual-crypto-report#6-crypto-trading-volume-hit-10-3-trillion-2023-q4-rising-53-1)
3. [DefiLama](https://defillama.com/?volume=true\&aggregators=false\&tvl=false)
4. [DefiLama](https://defillama.com/?volume=true\&aggregators=false\&tvl=false)