Why UNIT Focuses on Native Assets: Avoiding Double Counting, Centralization, and Stablecoin Risks

In the cryptocurrency market, transparency and accuracy are paramount. At UNIT, we’ve taken a deliberate approach to exclude derivative tokens, such as wrapped coins, staking tokens, stablecoins, and pegs, to ensure that our index only reflects real, decentralized value. This decision allows us to avoid issues like double counting, centralized control, and stablecoin risks—common pitfalls associated with many derivative financial products in the crypto space.

Here’s why this approach matters and how it protects the integrity of our index:

Avoiding Double Counting: Clarifying Market Value

One of the biggest issues with derivative tokens, like Wrapped Ethereum (WETH) and stETH (staked Ethereum), is that they represent the value of an underlying asset without creating new value. These tokens are used across DeFi ecosystems for increased liquidity and utility, but their value is still tied directly to the original asset, including both the native coin (Ethereum) and its wrapped or staked version in an index resulting in double counting.

For example, WETH allows Ethereum to be used on decentralized exchanges and DeFi platforms, but it is still backed 1:1 by ETH. If both ETH and WETH are included in an index, the total market value is artificially inflated by counting Ethereum’s value twice.

At UNIT, we exclude these derivative tokens to ensure that the true value of each project is represented only once. This eliminates any inflation or overestimation in the index, providing a clear and accurate view of the cryptocurrency landscape.

Avoiding Centralization: Decentralization as a Core Principle

Many derivative tokens, including wrapped assets like WBTC or renBTC, are controlled by centralized entities or custodians. For example, renBTC is minted by the Ren Protocol, which holds the original Bitcoin in custody. This introduces centralization risks, as a single entity controls the backing of the token. In some cases, if that custodian fails or becomes compromised, the value of the wrapped asset could plummet.

At UNIT, we are deeply committed to decentralization. Including tokens that rely on centralized entities undermines the trust and autonomy that decentralized finance (DeFi) stands for. This decision also aligns with our goal of creating an index that reflects the health and growth of the broader blockchain ecosystem—where projects are truly decentralized and operate independently of third-party custodians.

Stablecoins and Peg Tokens: Risks of Including Synthetic Assets

Stablecoins and peg tokens, such as USDT (Tether), USDC (USD Coin), and DAI, present another set of challenges. While these coins are designed to maintain a stable value—often pegged to the US dollar—they do not represent decentralized value creation. Instead, they are synthetic assets that rely on collateral or centralized backing to maintain their price stability.

The inclusion of stablecoins in an index can distort the representation of value in the cryptocurrency space. USDT and USDC, for instance, are centralized stablecoins whose supply is controlled by specific companies. These companies hold reserves to back the value of the tokens, which introduces centralization and regulatory risks. Should these entities face legal challenges or mismanage their reserves, the stability of the stablecoin could be compromised.

Similarly, even decentralized stablecoins like DAI, while algorithmically managed, are still synthetic assets pegged to an external value (the US dollar). They do not contribute to the kind of decentralized innovation and real value creation that we prioritize in the UNIT index.

By excluding stablecoins and peg tokens, UNIT avoids the risks of relying on external pegs or centralized reserves, ensuring that all assets in our index are truly value-driven and tied to decentralized ecosystems.

UNIT’s Focus: Real, Long-Term Value

At UNIT, our approach is simple but powerful: we focus only on native coins—those that contribute directly to decentralized technology and innovation. By excluding derivative tokens, staking coins, wrapped assets, stablecoins, and pegs, UNIT ensures that our index captures the true long-term value of the cryptocurrency market. This allows people to gain exposure to top-performing projects without the noise and risks introduced by synthetic or derivative products.