Decentralized asset management is taking the forefront

[DeFund]

Centralized and decentralized asset management are two asset management models that have emerged in the context of the digital economy and blockchain technology.

The traditional centralized asset management model is based on centralized financial institutions for asset management. These institutions have control and management rights over the assets, and investors need to trust them to protect and manage their assets. However, the centralized asset management model has some problems, such as information asymmetry, poor asset liquidity, and high management fees, which have led to a decrease in investors’ trust in traditional asset management models.

With the development of blockchain technology, decentralized asset management has gradually become a new asset management model. The decentralized asset management model is based on blockchain technology and decentralized smart contracts to manage assets. Under this model, the control and management rights of assets are fairly distributed among all participants, without the need to trust any centralized institution, and without intermediary fees or information asymmetry issues. In addition, the decentralized asset management model also has high transparency and liquidity, allowing investors to manage and transfer their assets more freely.

Overall, with the continuous development and application of blockchain technology, the decentralized asset management model is expected to become an important trend in the asset management field in the future. More and more teams are trying to provide solutions in their own way. Enzyme Finance (formerly known as Melon) is a pioneer in on-chain asset management protocols, launching as early as 2016, a whole year ahead of the ICO boom of 2017. As time goes on, more and more on-chain asset management products have emerged, such as dHedge, Solrise, Solstreet, and others, which are handling similar markets in different L1 chains. In addition, there have been some index creation protocols, such as TokenSet and Index Coop, which provide ETF-like risk exposure instead of free purchase and hold strategies. DeFund, as a decentralized asset management and investment protocol, has recognized the market’s future development trend and is attempting to provide a more user-friendly solution for cryptocurrency users.

DeFund’s solution to decentralized fund management​

• Mitigating trust issues between fund managers and investors

The traditional centralized fund management model relies on centralized financial institutions to manage and control assets, which requires investors to trust these institutions to protect and manage their assets. However, centralized institutions are susceptible to manipulation risks, information asymmetry, and unforeseen events, which compromise the safety of investors’ assets. Decentralized funds adopt a decentralized asset management model based on blockchain technology and smart contracts to manage assets. Control and management rights of assets are distributed among all participants in the network, eliminating the need to trust any centralized institutions and mitigating information asymmetry issues.

• Lowering the barriers to asset management and investment

Traditional finance incurs high legal, registration, and notarization costs when creating funds, and requires stringent qualifications. In contrast, launching an on-chain fund on Ethereum costs less than $100, and costs can be reduced to a few dollars on some high-throughput side chains. Anyone with investment experience can participate without barriers, giving ordinary people the opportunity to participate in high-yield games. Regardless of wealth or status differences, ordinary investors can invest in a fund at a lower cost and reduce trial and error costs.

• High asset liquidity, with on-demand subscription and redemption

The asset liquidity of traditional centralized funds is limited, and investors need to comply with certain lock-up periods and cannot freely exchange. In contrast, decentralized funds have higher asset liquidity and can be traded and exchanged at any time. Investors can manage and transfer their assets more freely. DeFund is open to ordinary investors for on-demand subscription and redemption, allowing them to adjust their investment portfolios according to the real-time performance of the funds.

• Strict adherence to investment scope and rules

In traditional finance, fund rules and authorizations are usually not strictly enforced according to the investor agreement, and fund managers can change them arbitrarily later on. Blockchain-based funds can strictly enforce fund rules according to the requirements of the agreement. DeFund’s fund managers strictly restrict the investment scope and interactive protocols when creating funds, and can not make changes later on. Although there are some limitations on fund management later on, this approach maximizes the safety of investors’ assets.

• Asset management composability

Decentralized asset management manages funds through on-chain protocols and establishes interactions with third-party DeFi protocols, thereby building a modular product framework that can be expanded later on to enhance the composability of asset investments, such as spot, contracts, leverage, borrowing, insurance, and other derivatives functions. DeFund previously launched on Ethereum and Polygon networks and realized spot trading and liquidity mining through Uniswap. Recently, it has launched on the Arbitrum network and supports GMX, which expands the network to access more on-chain assets and users, and enables contract and leverage trading through GMX, enriching the fund manager’s investment strategies. In the future, it will continue to connect to other networks and DeFi protocols, empowering fund managers and investors.

DeFund integrates with Arbitrum and GMX protocol​

Arbitrum, as an Ethereum Layer 2 solution, aims to improve Ethereum’s throughput and scalability while maintaining security and decentralization. By deploying DeFund’s smart contracts on Arbitrum, DeFund users will be able to enjoy a faster and more convenient trading experience without worrying about high gas fees and network congestion. In recent months, Arbitrum has become a top Ethereum scaling solution due to its innovative technology and powerful community-driven ecosystem. As of the end of April 2023, the total locked-in value on the Arbitrum network has reached $6.1B+, with a total of 5.8M+ users.

With the deployment of the DeFund protocol on Arbitrum, users now have another option when experiencing DeFund products. Ethereum is more suitable for users and fund managers with large capital volumes to operate, while Polygon has a relatively small overall fund volume, but is more friendly to retail investors who can experience our products at lower costs. Arbitrum can introduce more on-chain funds, and the problem of high gas fees that previously hindered Ethereum users has been resolved, allowing DeFund to embrace more on-chain users. DeFund now supports Ethereum Mainnet, Polygon, and Arbitrum. After connecting their wallets, users can choose to operate funds on a certain network according to their preferences.

GMX is a decentralized perpetual and spot exchange that enables users to trade BTC, ETH, AVAX, UNI, and LINK directly from their wallets on a fast and inexpensive network, with 0% slippage, a 10 bps fee, and up to 50x leverage, without KYC or geographical restrictions. Earlier versions of DeFund only supported the Uniswap V3 protocol, enabling instant spot swap, limited order, and liquidity pool addition for mainstream tokens with limited trading opportunities due to small price fluctuations and no short selling capabilities. By integrating with GMX, users can engage in spot and contract trading and amplify their profits through increased leverage. DeFund can provide fund managers with a more centralized exchange-like trading experience, enabling them to better execute their investment and trading strategies.

Empowering professional investors with DeFund​

As an asset management tool, DeFund lowers the investment threshold for ordinary players, enabling them to participate in on-chain funds at low cost. At the same time, DeFund is committed to empowering professional investors by providing them with efficient asset management tools. Professional investors usually have their own investment strategies, especially for quantitative investors. Recently, DeFund opened its platform SDK for investors with development capabilities, enabling them to deploy private strategies to local servers. While ensuring the privacy of trading strategies, this also enables automated direct interaction with the protocol, enhancing the asset management efficiency of fund managers.

In addition to the trading SDK, transparency and security of on-chain funds are also essential to asset management. Through the constraints of the fund protocol, fund managers can manage assets but have no authority to transfer them. Compared with traditional funds, ordinary investors can participate in any fund without trust, thereby reducing the fundraising threshold for fund managers. Fund managers only need to manage their funds well, and good performance will naturally attract more investors.

The future of on-chain fund management is promising​

• The market is still in its early stages, and ordinary users still lack awareness

The myth of excess returns always plays out in the cryptocurrency market, and the recent Meme coins have once again ignited people’s emotions. Most people believe their abilities can beat the market and seize the next opportunity to get rich. However, individuals find it difficult to overcome institutions. Mainstream token price fluctuations are small, making high returns difficult. There is still greater room for maneuvering through professional investment operations. Currently, ordinary investors have limited understanding of on-chain asset management, but with the rapid development of decentralized asset management, it will undoubtedly be accepted by more ordinary investors.

• Leveraging the advantages of professional investors to establish the reputation and performance of funds

In addition to the rapid expansion of the asset volume, more innovative DeFi products are emerging, which to some extent increases the learning costs of ordinary users. Initially, ordinary investors only executed simple transactions, but on-chain assets are diverse, with rich composability, price fluctuations, lending returns, LP transaction fee returns, mining returns, etc., all of which require professional investors to study. Through professional investment research, higher-return investment portfolios can be created, and real-time data on the chain can directly reflect the performance of the fund, which will be a more user-friendly way for ordinary investors.

• Huge space for decentralized asset management

The total market value of encrypted assets is around $2 trillion, and the total market value of DeFi is $140 billion. The growth of encrypted assets will also be the core driving force for decentralized asset management. In addition, although centralized trading still dominates absolutely, the share of decentralized trading is gradually increasing. Even during the entire bear market period in 2022, coupled with frequent centralization trading failures, further enhancing the status and practical significance of decentralized asset management.