Taxonomy
Description
We designed the Vinter Taxonomy for Crypto Assets ("VTAXO") to be a tool for index creation. The purpose of the taxonomy is not to create a comprehensive taxonomy of the entire crypto universe. Given the fast pace of the crypto market, such efforts risk becoming irrelevant quickly after publication. Instead, the VTAXO applies relevant labels to constituents of Vinter's thematic indexes. Assets can have zero, one, or multiple labels. The taxonomy, which is updated monthly, provides a practical and useful approach to labeling crypto assets.
Output Matrix
The Output Matrix shows the current labels for the top 60 assets by market capitalization. Each row represents an asset and each column represents a label. The matrix is populated with TRUE if the label applies to an asset. The Output Matrix contains supporting arguments and sources for clarity, transparency and traceability.
Labels
Vinter calculates and maintains several thematic crypto indexes including, but not limited to, Decentralized Finance, Metaverse, Layer 1, Web 3, and Smart Contract Platforms. Each of these indexes has a specific label defined in this section.
Short definitions
Label | Definition | Examples | # of Assets* |
Layer1 | Serves as the foundation for building decentralized applications and executing transactions securely and directly on the blockchain. | BTC, ETH, BNB, XRP, ADA | 37 |
SmartContractPlatform | Allows for the creation and execution of automated contracts without the need for intermediaries, using blockchain technology. | ETH, BNB, ADA, ETH, SOL | 34 |
Metaverse | Represents ownership or participation within a virtual reality-like world. | APE, SAND, EGLD, MANA, AXS | 6 |
MetaverseChain | Hosts at least one crypto asset labelled as Metaverse. | BNB, ADA, SOL, TRX, AVAX | 19 |
DeFi | Allows users to participate in various financial activities such as lending, borrowing, trading, and earning interest without the need for traditional intermediaries like banks. | UNI, LDO, SAND, AAVE, RPL | 9 |
DeFiChain | Hosts at least one crypto asset labelled as DeFi. | ETH, BNB, SOL, TRX, AVAX | 24 |
Web3 | Enables the emergence of the next generation of the internet, where decentralization, user control, and enhanced privacy are prioritized. | UNI, ICP, FIL, LDO, BIT | 16 |
Web3Ecosystem | Is regrouping all the assets labelled Web3, Metaverse, DeFi and SmartContractPlatform. | BNB, MATIC, SOL, TRX, LINK | 48 |
Meme | Leverages the internet culture, humor, and social media trends to gain popularity and price appreciation. | DOGE, SHIB, PEPE | 3 |
Privacy | Uses cryptographic methods to obscure or conceal transaction information such as the sender's address, recipient's address, and transaction amount. | DASH, XMR, ZEC | 3 |
*in the top 60 of the Vinter Full Universe as of May 22nd, 2023
Layer1
A layer 1 blockchain is a fundamental blockchain that provides the base infrastructure for all other blockchain layers. It notably uses its own consensus mechanism to secure transactions and data. Three examples of assets with the “Layer1” label are Bitcoin (BTC), Ether (ETH), and Solana (SOL).
Layer2
A layer 2 or side chain is a separate blockchain that is linked to a main blockchain. Side chains are used to offload transactions from the main blockchain, which can improve the scalability and performance of the main blockchain. Three examples of assets with the “Layer2” label are Polygon (MATIC), Arbitrum (ARB), and Optimism (OP).
Privacy
Privacy coins are designed to protect the privacy and anonymity of the user and their blockchain transactions. Privacy coins use cryptographic methods to obscure or conceal transaction information such as the sender's address, recipient's address, and transaction amount. Three examples of assets with the “Privacy” label are Monero (XMR), Dash (DASH), and Zcash (ZEC).
TransferOfValue
The initial crypto assets that arose from 2009 to 2014 were labeled "cryptocurrencies" because their primary role was to serve as mediums of exchange or stores of value, akin to conventional currencies. These assets utilize blockchain technology for transaction verification and security, enabling direct value transfer in a decentralized, often public ledger. These assets specifically lack the programming languages and tools for deploying smart contracts. Three examples of assets with the “TransferOfValue” label are Bitcoin (BTC), Ripple (XRP), and Litecoin (LTC).
SmartContractPlatform
Smart contracts execute computer code automatically when certain conditions are met. A smart contract platform is a blockchain-based system that enables the creation, execution, and management of self-executing contracts. Ethereum is the most well-known smart contract platform. Three examples of assets with the “SmartContractPlatform” label are Ether (ETH), Binance Smart Chain (BNB), and Chainlink (LINK).
Web3
The internet has evolved from Web1 to Web2, and is now advancing towards Web3. During the early 2000s, Web2 allowed users to write information to the internet, which extended the read-only functionality of Web1 available in the 1990s. The next step in the evolution of the internet is Web3, which offers a read-write-own functionality. Users of Web3 platforms can buy tokens that aims to capture the value that the network creates through its services. Token can also allow users to vote on the future direction of the platform. Users own their data in Web3, as opposed to Web2 where user data is owned by large corporations like Meta Platforms, Amazon, Netflix, Alphabet, among others. Web3 is decentralized, permissionless and trustless.
Web3 replicates services provided by Web2 companies in a decentralized manner. These products and services include cloud storage, cloud gaming, file sharing, search engines, data querying, a metaverse, voting on the direction of a blockchain project, a marketplace, login credentials, networks for the Internet of Things, content sharing, social media, advertising, as well as the streaming of music, video and games. Three examples of assets with the “Web3” label are Filecoin (FIL), The Internet Computer (ICP), and The Graph (GRT).
DeFi
Decentralized finance ("DeFi”) operates similar functions as the traditional financial industry, but allow users to access these services in a decentralized way. A defining feature for DeFi is that it is permissionless. Users do not need to rely on intermediaries (such as brokerages, exchanges, or banks) to borrow, lend, trade derivatives, swap assets, or perform other financial services. Three examples of assets with the “DeFi” label are Uniswap (UNI), Compound (COMP), and Aave (AAVE).
DeFiChain
A blockchain can get the label "DefiChain" if at least one of the Crypto Assets built on top satisfies the "DeFi" label requirements. This inheritance rule does work between a blockchain and an application but not a blockchain and a scaling layer/sidechain. Three examples of assets with the "DeFiChain" label are ETH, ADA and BNB due to MKR, MIN and CAKE respectively.
Illustration
ETH is labeled DefiChain, based on the following line of reasoning.
MKR is an asset that fulfills DeFi requirements so it gets the label "DeFi".
ETH is an asset that fulfills layer 1 requirements (requirements to be a blockchain) so it gets the "Layer1" label.
MKR uses the Ethereum blockchain to create and manage its decentralized stablecoin system.
Note that ETH is not labeled “DeFi” because it does not fulfill the requirements. In general, it is possible for an asset to be labeled both “DeFi” and “DeFiChain”.
Asset | Chain | Label |
MKR | ETH | DeFi |
APE | ETH | Metaverse |
ETH | ETH | DeFiChain MetaverseChain SmartContractPlatform Layer1 |
Metaverse
A metaverse is a shared, immersive virtual world in which users (usually represented by avatars) can interact with each other, construct experiences, and create in-world objects and landscapes. Metaverses typically have their own intrinsic economies and currencies. Users can adopt these currencies to buy, sell, and trade digital real estate, items, avatar accessories, and more. A metaverse is a massively scaled-up series of networks that render real-time 3D worlds that can be experienced synchronously and persistently by a massive amount of users. A crypto metaverse is a decentralized immersive virtual world that incorporates crypto assets. In the metaverse, users can create digital assets with distinctive qualities and values, such as non-fungible tokens which can be purchased, sold, and traded in an online environment. Three examples of assets with the "Metaverse" label are Decentraland (MANA), Enjin Coin (ENJ), and Sandbox (SAND).
MetaverseChain
A blockchain can get the label "MetaverseChain" if at least one of the Crypto Assets built on top satisfies the "Metaverse" label requirements. This inheritance rule does work between a blockchain and an application but not a blockchain and a scaling layer/sidechain. Three examples of assets with the "MetaverseChain" label are ETH, ADA and SOL due to APE, COPI and AFFL respectively.
Illustration
ETH is labeled “MetaverseChain”, based on the following line of reasoning.
APE is an asset that fulfills Metaverse requirements so it gets the label "Metaverse".
ETH is an asset that fulfills layer 1 requirements (requirements to be a blockchain) so it gets the "Layer1" label.
APE uses the Ethereum blockchain to process and secure transactions such as voting on proposals that affect the future of the ecosystem or purchasing goods/services.
ETH is not labeled with “Metaverse” because it does not fulfill the requirements. In general, it is possible for an asset to be labeled both “Metaverse” and “MetaverseChain”.
Web3Ecosystem
Web3 is a subset of the ecosystem around it. It includes assets that have any of the following labels: Web3, Metaverse, DeFi, SmartContractPlatform. In the ecosystem of Web 3.0, there is a natural interaction between
the self-governing data of Web 3.0,
the permissionless trading in decentralized finance,
the immersive virtual worlds in a metaverse, and
the smart contract platforms that offer automatically executed agreements.
The Web3Ecosystem label encapsulates the broader ecosystem of Web3. The “Web3Ecosystem” label is programmatically generated by selecting any asset that is “Web3 or Metaverse or SmartContractPlatform or DeFi”. Three examples of assets with the "Web3Ecosystem" label are Filecoin (FIL), Decentraland (MANA) and Uniswap (UNI).
Meme
A meme can be an image, a video, or a piece of text – typically humorous in nature – that is copied and spread rapidly online by users. Meme coins are crypto assets that are based on, or inspired by, memes and internet jokes. Three examples of assets with the “Meme” label are Doge (DOGE), Pepe (PEPE) and Shiba Inu (SHIB).
CentralizedExchange
A centralized exchange crypto asset is a token issued by a centralized cryptocurrency exchange on top of a smart contract platform. It is often used to access special features such as reduced fees, participating in the crypto exchange governance, or receiving loyalty rewards. Three examples of assets with the “CentralizedExchange” label are BNB (BNB), OKB (OKB) and KuCoin (KCS).
Labeling
Every month, Vinter creates and applies labels to relevant crypto assets by following the below series of sequential steps:
Extract the top 100 assets by market capitalization.
Remove the assets that do not meet Vinter’s Constituent Minimum Eligibility Criteria.
Select the top 60 assets by market capitalization.
Apply the relevant labels for any new asset entering the top 60 assets for the first time.
Update the relevant labels for any asset re-entering the top 60 assets, if necessary.
Review the complaints that were filled in if any (and update the labels if necessary).
Date and publish the updated Output Matrix.
Complaints
Customization
Vinter builds all indexes on a unified taxonomy. This ensures a harmonious, coherent, and robust system. A unified taxonomy gathers expertise from the entire market instead of relying on a few individuals. Some index users nevertheless require bespoke asset classifications that align with their unique requirements. When creating a classification, it is crucial to adhere to regulatory standards to prevent the classification from being considered discretionary asset selection. A financial instrument built on a non-compliant taxonomy introduces the risk of being de-listed or not listed. Vinter can write taxonomies and asset classifications that comply with regulatory and financial benchmarking standards. Contact Vinter at hello@vinter.co if you are interested in a customized taxonomy.
Licensing
The Vinter Taxonomy is free to use under the Creative Commons Attribution-NoDerivatives 4.0 International Public License. For full terms visit creativecommons.org.
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Disclaimer
Invierno AB is not a registered investment or tax advisor or a broker/dealer. The content of this document is intended only to provide general and preliminary information and shall not be construed as investment, tax, legal or financial advice. The reader shall ensure that all of his or her investment decisions are not made based on the content of this document and shall be solely responsible for all financial losses made in connection with investment decisions. Nothing contained in this document constitutes a solicitation, recommendation, endorsement, or offer by Invierno AB or any third party associated with Invierno AB to buy or sell any financial instruments in this or any other jurisdiction. Although best efforts are made to ensure that all information on this document is accurate and up to date, occasionally unintended errors and misprints may occur. Invierno AB (559207-4172) is a registered Benchmark Administrator by Finansinspektionen (FI) and the European Securities and Markets Authority (ESMA) under Article 34 of the European Benchmarks Regulation (2016/1011). The index owner grants the benchmark administrator an exclusive, royalty-free, non-transferable, non-sublicensable license to use the index owner's intellectual property rights, for the purpose of fulfilling the benchmark administrator's obligations under the index agreement and the Benchmarks Regulation, including registration of identifiers for indexes. Vinter is a registered trademark owned by Invierno AB. Invierno AB and its indexes are protected by various intellectual property rights. All third-party use of Vinter and its indexes require by law a licensing agreement with Invierno AB.
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