# How it works?

<figure><img src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXcIsVuAJYiCj1kyHQZHawKVqPq4wZ7mH0WCpCIeF_Kcwyot-XxpZrPUNNBwHo0cP00Y4rGVc6TFgkq6Q6ns2mRzEfOwZsxuYrQ8RiWTe6pbEJjX0xxSr2D3QuRhvnYc6fZgPVFM?key=sjqAM8bDuJzrbcS1GnCRMvIS" alt=""><figcaption></figcaption></figure>

1. Index Curation: The AI Agent selects tokens based on market capitalization, performance metrics, and growth potential.
2. Index Calculation: The relative weight of each token in the index is determined by its market cap, creating a balanced and diversified portfolio.
3. Dynamic Management: Users can buy into or trade out of the pool at any time, with the system automatically calculating the index value and minting or burning tokens accordingly.

NOTE: AI Accuracy: AI Agents achieve 3.5x better accuracy in investment predictions compared to traditional human strategies.

1. Token Selection

* Select Top 10 AI Cryptos based on market capitalization or performance.

2. Index Value Calculation

* Calculate the market cap-weighted average price of the selected tokens:&#x20;
* Index Price = (Σ (Market Cap of Token\_i × Price of Token\_i)) / (Σ Market Cap of Token\_i)
* Here, the Market Cap of Token is used to determine its relative weight in the index.

3. Minting and Burning

* Minting: When a user buys the index token, assets are purchased from the market, and new index tokens are minted.\
  New Supply = Existing Supply + (Investment / Index Price)<br>
* Burning: When a user sells the index token, assets are sold, and the equivalent number of tokens are burned.\
  New Supply = Existing Supply - Tokens Sold

4. User Interaction

* Buy: Users invest in the index, gaining exposure to all 10 tokens through one asset.
* Sell: Users sell their index tokens, which triggers the burn mechanism and releases the equivalent value in underlying assets.

***

Example Calculation

* Top 10 Tokens: Token A, Token B, ..., Token J.
* Token Prices: $10, $20, $30, ..., $100.
* Market Caps: $1B, $2B, $3B, ..., $10B.

Index Price = \[(1B × 10) + (2B × 20) + ... + (10B × 100)] / \[1B + 2B + ... + 10B]\
Index Price = (10B + 40B + 90B + ... + 1000B) / 55B = 65

* When a user buys $130 worth of the index:
* Assets worth $130 are added to the pool.

Minting occurs:\
Tokens Minted = Investment / Index Price = 130 / 65 = 2 tokens

When a user sells 2 index tokens:

* Assets worth $130 are removed from the pool.
* Burning occurs: Tokens Burned=2 tokens