EtherIndex Ether Trust: notes from the S-1 and NYSE’s filing

On the heels of Grayscale’s announcement of its Ethereum Investment Trust (which, buyer beware, is an investment in Ethereum classic and not Ethereum as most people know it aka Vitalik’s Ethereum) I googled around to find details and to my surprise came across this, EtherIndex’s Ether Trust. It filed with the SEC in July 2016 to scant media coverage.

The SEC filing was light on details. Seemed a bit of a rush job to be first in line to become a publicly traded Ether fund. After all, EtherIndex LLC itself was formed just a month before in June 2016.

As luck would have it I then came across this NYSE filing with the SEC regarding the EtherIndex Ether Trust. Just released this month, January 2017, with useful details.

The NYSE did the same thing with SolidX’s bitcoin trust filing. I am not a lawyer, but it seems the NYSE needs a rule change approval from the SEC before it can officially list a digital currency ETF.

So here are my notes on the EtherIndex Ether Trust from both its SEC S-1 filing and the NYSE’s filing. The only qualification I have is as a curious reader and personal investor in cryptocurrencies, so if I’ve missed important details, please let me know in the comments below or on Twitter.

  • Offering size: $1M USD in blocks of 10K shares
  • Sponsor: EtherIndex LLC, formed June 2016
  • CEO: Gregory DiPrisco – 26 years old, futures trader at Axiom
  • CFO: Joseph Quintilian – 35 years old, cofounder and partner of Axiom
  • Ether Custodian: Coinbase (which maintains insurance against theft and electronic compromise); private keys are generated on an air-gapped computer, then the keys are fragmented using a special unknown algorithm, then separated geographically
  • Administrator and cash Custodian: BNY Mellon
  • Price Index: GDAX (with Kraken as the backup)
  • Ether Exchange: none mentioned that I saw, but probably GDAX since GDAX is its price index too?
  • Shares Exchange: NYSE Arca
  • 180 day lockup period (I assume for the blocks, not for the tradable shares on Arca)
  • filed as an emerging growth company under the JOBS act
  • no insurance

EtherIndex’s description of Ether mining:

Unlike bitcoin, which has a fixed limit of 21,000,000 bitcoin, no limit has been established on the total supply of ether. The initial creation of ether was in connection with a crowd funding transaction in 2014 in which 60,000,000 ether were pre sold. Another 12,000,000 ether were created to the development fund, most of it going to early contributors and developers and the remaining to the Ethereum Foundation. All additional ether have been and will be created through the mining process. It has been reported that approximately 9,700,000 million ether have been created to date through the mining process. According to the terms of the 2014 presale, the issuance of ether from mining is capped at 18,000,000 ether per year. However, it is expected that in 2017 the Ethereum Nework will switched from Proof of Work to a new consensus algorithm under development, called Casper, that is expected to be more efficient and require less mining subsidy. While the Ethereum Foundation has stated that it is expected that the current maximum is considered a ceiling and the new issuance under Casper will not exceed it (and is expected to be much less), there is no assurance that will be the case.

For more on digital currency ETFs, here’s my comparison of the two bitcoin ETFs COIN and XBTC.