Index tokens are financial instruments that represent a diversified portfolio of various cryptocurrencies. They allow investors to gain exposure to a wide range of assets without needing to purchase each one individually. These tokens are often created by aggregating multiple cryptocurrencies into a single digital token. As a result, when an investor buys an index token, they essentially own a fraction of the entire collection of underlying assets. This approach can help reduce risk, as the performance of the portfolio is not solely dependent on one specific asset.Index tokens can be dynamically adjusted by rebalancing the underlying assets based on set rules or market conditions. Some popular examples include tokens that track sectors of the crypto market, such as decentralized finance (DeFi) or non-fungible tokens (NFTs).Overall, index tokens provide a convenient way for individuals to invest in the cryptocurrency space while achieving diversification and potentially smoother asset performance.