Index tokens represent the basket of fractions of assets from a collection and have different mechanics to facilitate 1000 index tokens trading at approximately the floor value for the collections. Index tokens can offer traders liquid and smaller-dollar exposure to the floor value of a collection.
The price of the index token is determined entirely by the market and supply and demand and the token may trade well above and well above 1/1000th of the floor value of a collection. However, the mechanics described earlier are designed to support the index token tracking a value relative to the floor value of the collection. This is because of the following arbitrage mechanisms.
If 1,000 index tokens are trading below the floor value of the collection, a trader can swap 1,000 index tokens for a kilo-asset, fuse to a full asset, and sell the asset on a marketplace, netting a profit.
If 1,000 index tokens are trading below the floor value of the collection and a whole asset is sold from a Bridgesplit vault, a trader can swap index tokens for the stale shares and redeem a pro-rata share of the winning bid in SOL, netting a profit.
Therefore, if an index token is trading below 1/1,000th of the floor value of the collection asset, there are profitable reasons to buy more index tokens, driving up the price of the index tokens.
Index tokens currently have the following utility:
Trading between the index token and SOL in the Floor Index AMM
Providing liquidity to the AMM (earning trading fees and optional farming rewards)
Using the index token to buy asset fractions or whole assets from the index token
The integration of index tokens into other DeFi protocol's is in Bridgesplit's short-term roadmap.