The Mechanics of Index Payments

Let’s say this is someone’s wallet. Each bar represents a currency of some value:

⁠

On the left of the line is a $1 payment. The portion of each currency sent is proportional to its value.

⁠

If someone has a wallet with these entries, all denominated in USD:

⁠

[USD36][Ethereum100][Bitcoin64]

⁠

and they’re going to pay you

000

140

⁠

dollars

You’ll receive this as the composition of your payment:

⁠

18.00% USD 50.00% Ethereum 32.00% Bitcoin

⁠

Which is:

⁠

[USD$25.20][Ethereum$70.00][Bitcoin$44.80]

⁠

In total, you receive

$140.00

⁠

, just like you expect.

The key idea of an index payment is that the amount of each entry you receive is always proportional to the value of the entries in the payer’s wallet. You can test this by noticing that no matter how you change the quantity they pay you, the proportion of

USD, Ethereum, and Bitcoin

⁠

in the payment remains unchanged.

A common misconception is that Index Wallets allow you to either pay with an index payment, or remove your currencies individually. This is not correct. Index Wallets are constrained so that once a currency enters the wallet, it can only ever exit as part of an index payment. It’s permanently mixed.

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