# UNIT's Algorithm

*The UNIT* paper describes the basis of the UNIT's algorithm. UNIT's algorithm aims to track what it would be to hold the top cryptocurrencies over the long haul.

### How to Obtain UNIT's Value

In short, the value of 1 UNIT comes from the relative price motions of the top cryptocurrencies. To follow the value of UNIT we display three charts of the value of 1 UNIT over time on our website: the Bitcoin chart (denominated in SATS), the Ethereum chart (in Finney), and the USD chart.

### Calculating the Value of UNIT

First, we chose the first cryptocurrency ever created, Bitcoin, to price other coins in terms of that one.

We define the weight $w_{C, m}$ of a coin $C$* *on a given month $m$* *as the market cap of that coin at the beginning of the month over the total market cap of all coins in the UNIT at the given month.

As usual, the total market capitalization is calculated by adding the circulating supplies $S_c$ times the price of each cryptocurrency in the UNIT, * *$P_{c}$, in terms of the first cryptocurrency, Bitcoin.

Let the UNIT on month* *$m$, $U_m$, be defined by

where $P_{c,m}$* *is the price of a coin $c$* *in the Unit at month $m$* *and $w_{c,m}$* *is the weight of a coin $c$* *in the Unit at month $m$.

## UNIT's Selection Criteria

Let $S_1$ be the total current supply of the Rank 1 currency (currently Bitcoin), and let $\phi$ be the golden ratio $\frac{1+\sqrt{5}}{2}$. Then the coins creating UNIT must satisfy the following conditions.

Valuation: The 30D average daily market capitalization must be greater than $\frac{S_1}{\phi^{12}}\approx\frac{S_1}{322}$.

Fundamental Metrics: - Volume of Trade: The currency trades widely with at least a year of public trading. - Fees Accrued: The currency or underlying project brings profits to miners, validators, and other verifying participants.

Issuance: The consensus rules must define the currency supply.

Availability: As a weak rule, 50% of the supply must be available for trading.

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