DePlutus, A Dark Horse Player in $100 Trillion Asset Management Market
By The Economist Magazine Community
April 14th, 2021
In the April 2021, the Total Value Locked (TVL) in DeFi is very likely to exceed $100bn. Witnessing an explosive growth, industry observers come to believe the DeFi will disrupt traditional finance in the foreseeable future, but wonder which DeFi protocol will be the final disrupter?
By the end of 2020, the global asset management industry had over $100 trillion assets under management (AUM), and Blackrock’s AUM is $8.7 trillion, almost 4 times of the total market cap of all crypto currencies combined. In the asset management sector of DeFi, a powerful player has yet to show and step in the arena.
In traditional finance, investing in a hedge fund can be hard for the average person. Launching a fund can be even harder. Asset Management Platforms in DeFi have changed this though. They help to streamline and codify the fund launch process, while the open nature of the networks they’re built on democratizes access to all investors, in addition to boosting transparency.
In DeFi today, Asset Management Platforms are utilized by two main user types. Risk-taking fund managers that think they have what it takes to generate alpha, and the risk-seeking retail investors who are willing to outsource due diligence and investment decisions by paying a fee.
Indeed, asset management is not a novel thing in Defi. Before this round of Defi boom started from last summer, a group of investment bankers has already setup a few on-chain fund operation platforms to allow retail investors to follow the trading of professionals by depositing in a selection of on-chain funds. Over the past few years, these platforms survived in the turbulent crypto market, but didn’t see an exponential growth in TVL compared to the hefty DeFi market.
One such protocol is dHEDGE, a non-custodial asset management platform built on top of the Synthetix ecosystem. Any wannabe fund manager can start a fund and deploy capital across the full range of Synthetix-minted assets. A significant drawback in dHEDGE is their capital inefficiency. The underlying synthetic assets remain idle in the absence of yield farming or money market integrations. This is common among portfolio managers in long positions who have no intention to trade in the short term.
Enzyme Finance, a rebrand of Melon Protocol, is another player in the space. Enzyme’s fund managers can choose which assets they want to accept for deposit and whitelist certain addresses who can participate. The funds can invest in more than 180 assets, but mainly adopt passive strategies instead of active ones. Whereas, certain studies have shown that actively managed funds tend to outperform during downturns.
Finally, with the launch of DePlutus Protocol in April 2021, the next-generation on-chain asset management platform, brings the solution to enable asset management protocols to catch up with pace of DeFi development without compromising the openness and fairness of DeFi.
As the latest innovation in asset management sector, DePlutus introduced a novel idea of specific fund token. The investors can decide which vehicle they want to allocate capital to and receive the fund’s pool token in return, representing their pro-rata share of the fund. The fund specific token can be traded and exchanged via DEX before the fund’s termination date. It is also allowed to deposit on mainstream lending protocols, such as Aave, to earn an interest from collateralized lending, providing additional liquidity to investors and further increasing capital efficiency.
Andrew Shi, founder of DePlutus Protocol, said that, “PLUT and the fund token are powerful tools helping us to hide away the details of underlying tokens and focus on higher-level concepts. DePlutus serves as a fundamental application for composing more complex financial instruments in the crypto world. It is a powerful tool that allows fund managers and invests to seize the current market growth opportunities. We believe there will be a limitless number of use cases for the DePlutus Protocol in the near future.”
In addition, the DePlutus Protocol allows fund managers to carry out various active strategies, which are more likely to generate excess earnings in an uptrend market and secure minimum drawback in a declining market condition experienced in 2019.
Featuring transparency, openness, low handling fee and no middle-man, the DePlutus Protocol leads the trend of next generation on-chain fund operation. It is well-positioned to become the go-to crypto asset manager for retail investors, who are ready to step into the crypto world in search of much higher yields compared to the off-chain asset management market.
The information in this article does not constitute any form of advice or recommendation and is not intended to be relied upon by users in making (or refraining from making) any investment decisions or in interacting with DeFi protocols.