Index Token Burn Function
This feature is currently not launched. Burning index tokens will allow investors to receive the true value of their tokens. Burning will also allow for arbitrage opportunities to be taken advantage of by users, allowing for more volume, liquidity, and price correction for index tokens. Zem Finance will offer some tools to aid arbitragers including APIs and calculators for discounts and premiums on arbitrage trades.
Zem Finance will allow users to burn their index tokens for the NAV (Net Assets Value) that is directly backing a token.
An example to illustrate the functioning of index token burns:
Index A has net $1M assets backing, comprising 50% BTC & 50% ETH.
Investor owns $100K worth of Index A.
Index A has gone up 50%, now with $1.5M assets backing of the same respective weightings and token allocations.
Investor burns their now $150K Index A token on Zem Finance. They receive $75K BTC and $75K ETH directly from Index A's assets backing.
View the development timeline for the burning function here.
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