BGT Index

The BGT Index captures the fee-adjusted market premium of BGT LSTs and applies it to native BGT pricing, allowing incentive mechanics to reflect real-time market conditions.

Core Assumption

BGT LST markets provide the best observable price signal for BGT exposure. However, because some LSTs apply minting fees, the index normalizes prices to reflect the true economic cost of acquiring BGT exposure. The index weights those adjusted prices by market depth and long-term relevance.

Important: This index represents fair market valuation, not execution guarantees. Actual prices will vary based on trade size, market conditions, mint paths, and DEX-specific slippage.

---

Index Composition

Asset Set

The index tracks liquid BGT LSTs that meet listing requirements:

$$x \in \{aBGT, bBGT, cBGT, ...\}$$

Listing Requirements

To be eligible, an asset must meet ALL criteria:

Basic Requirements

• Trusted oracle price feed

• Minimum supply: 200,000 BGT equivalent

• Minimum liquidity: $100,000 USD (7-day average)

• Contract age: 30+ days

• Verifiable on-chain reserves

Stability Requirements

• Liquidity stability: <50% week-over-week change

• Price stability: Within 10% of index for 14 consecutive days

Circuit Breaker

• If the index moves >10% in any 24-hour period, automatic review is triggered

---

Index Calculation

Step 1: LST Liquidity Weights

Each LST is weighted by market liquidity using the geometric mean of normalized supply and liquidity:

$$\hat{S}_x = \frac{S_x}{\sum_{i} S_i} \quad \hat{L}_x = \frac{L_x}{\sum_{i} L_i} \quad \tilde{w}_x = \sqrt{\hat{S}_x \times \hat{L}_x} \quad w_x = \frac{\tilde{w}_x}{\sum_{i} \tilde{w}_i}$$

Where:

• S_x = Total supply of LST X (in BGT equivalent)

• L_x = Total liquidity of LST X (in USD)

• w_x = Final normalized weight of LST X

The geometric mean captures "effective market size". Supply that is actually liquid and tradeable.

Step 2: Price Determination (Hybrid Oracle)

For each LST, the index derives a fee-adjusted price that reflects the true economic cost of acquiring BGT exposure.

$$\begin{aligned} P_{oracle} &= \text{Chainlink/Pyth oracle price} \\[8pt] P_{twap} &= \text{30-minute time-weighted average price} \\[8pt] P_x &= \begin{cases} P_{oracle} & \text{if } \frac{|P_{oracle} - P_{twap}|}{P_{twap}} < 5\% \\ P_{twap} & \text{otherwise (trigger alert)} \end{cases} \end{aligned}$$

$$\text{FeeAdjustedPrice}_x = P_x \times (1 - f_x)$$

Rationale:

• Oracle prices update quickly and reflect current conditions

• TWAP provides manipulation resistance and failsafe

• 5% threshold catches oracle failures or manipulation attempts

Step 3: Index Price

$$P_{index} = \max\left(P_{BERA}, \sum_{x} w_x \cdot P_x\right)$$

The index price is the liquidity-weighted average of all eligible LST prices, with a hard floor of 1 BERA.

---

Hard Floor

The index has a guaranteed minimum of 1 BERA, which is the baseline redemption value through Berachain's native mechanism. This ensures BGT is never priced below intrinsic value.

---

Design Principles

• Simplicity: Only two factors (supply and liquidity). Persistent and hard to manipulate

• Manipulation Resistance: TWAP fallback, liquidity requirements, and circuit breakers prevent gaming

• Market Reality: Liquidity weighting reflects where users can actually trade

• Safety: Hard floor, stability requirements, and hybrid pricing protect against edge cases

---

Risk Considerations

Temporary Liquidity Manipulation An actor could provide large temporary liquidity to game weights. However, since LSTs trade relatively close together, this requires significant capital for minimal impact.

Oracle Failure If all oracles fail, the index falls back to on-chain TWAP data.

Market Stress The circuit breaker (10% in 24h) triggers review during extreme volatility.

---