DePlutus, The Next-generation Asset Management Protocol to Open The Era of on-Chain Funds
April, 26, 2021
How can investors balance efficiency, security and high returns to break the “DeFi Impossible Triangle”? DePlutus, a next generation of decentralized asset management protocol, has found the answer to this “impossible” question with a series of innovations such as fund-specific token, comprehensive risk control mechanism, and the ability to interact with mainstream DeFi applications. These innovations make the long-silent DeFi asset management category eye-catching again.
DePlutus is a decentralized crypto asset management protocol. Users can follow the target fund manager to invest in the fund on the platform, without disclosing their private keys. Fund managers can only perform invest by invoking smart contracts. In this way, there is no need for mutual trust between the investors and fund managers during the on-chain fund operation period to fulfill the concept of “No Trust, Just Verify”.
With the current on-chain asset management sector already having more mature protocols such as TokenSets, dHEDGE and Enzyme, DePlutus, the latest player on the market, has not only absorbed the advantages of the first entrants, but also delivered a satisfactory solution to a number of key pain points.
Pain points of asset management market
Before the emergence of decentralized on-chain asset management, Token Fund was a relatively common mechanism in the blockchain industry. Like traditional off-chain funds, Token Fund still suffers from the persistent problem of black-box operation, which is further amplified by the fact that the funds raised are in the form of anonymized crypto assets.
In addition, with the explosion of DeFi, the arbitrage opportunities that exist on decentralized protocols such as DEX and lending are unprecedentedly huge, coupled with new revenue models such as stake and liquidity mining, making the on-chain asset management platforms gradually lose its competitiveness in DeFi.
So it seems that the emergence of the next-generation DeFi asset management protocol is much desired. For retail investors, decentralized asset management platforms use smart contracts to fulfill the initialization, investment and redemption processes of funds, completely avoiding the trust crisis of investment under the traditional model; for institutions, they can leave their idle capital to be managed by funds on the platform, thus getting a share of the pie in areas that require certain technical capabilities to achieve.
Although such a DeFi asset management market has great potential, it also faces new challenges beyond solving, such as high entry barriers, limited investment categories, and high gas fees, etc. DePlutus offers a series of solutions to these pain points.
How is DePlutus different?
Lower access threshold
Existing asset management platforms such as TokenSets and Enzyme refer to traditional fund products and set strict entry barriers for fund managers. To some extent, this approach does avoid some of the risks, but it also keeps out those professional investors who have the ability to invest but not the qualifications, and it goes against the decentralized spirit of DeFi. The DePlutus protocol, combined with the risk control mechanism, allows anyone to initiate a fundraising request without the need for strict qualification checks.
The potential benefits of arbitrage and liquidity mining in DeFi, as mentioned above, cannot be viewed through traditional investment eyes; instead, DeFi investors who are well versed in the DeFi mechanism are more vocal.
While lowering the entry barrier for fundraisers, DePlutus requires that fundraisers must invest a certain percentage of their own money and can only invest in whitelisted cryptocurrencies or invoke whitelisted DeFi protocols to prevent possible mischief from an overly lenient policy. It can be said that this is a more open platform with more room for investors to choose compared to the past.
Enriching investment portfolios
DePlutus has established a whitelist mechanism, whereby fund managers who wish to add new crypto assets to their portfolios can initiate a poll of investors and those who pass the poll will be added to the whitelist. This expands the portfolio and prevents managers from investing in assets that are too risky.
In addition to a variety of underlying assets, the DePlutus protocol has added modules for futures and options trading, which allows for risk hedging and maximizing returns during market drawdowns.
DePlutus is the first DeFi asset management protocol to enable the tokenization of specific fund. In the same way that shares of traditional fund products can also be packaged for trading in the stock market, the fund-specific tokens can also be exchanged or traded, with their price determined by the fund’s NAV.
Yet the fund-specific tokens can do much more than that in DeFi. In addition to being able to setup pools for trading in DEX, the fund-specific tokens can also be used for collateralized lending via Aave, Compound and staked for liquidity mining to claim PLUT, DePlutus governance tokens. This not only makes investors’ assets more flexible, but also incentivize them to participate in community governance.
Reducing gas fees
As the price of ETH has significantly increased, so have the gas fees. DePlutus now is deployed Ethereum, BSC, and Heco, which cuts gas fees and increases transaction speed for on-chain fund investors.
Supporting exchanges’ public chains will also bring more users to the platform. At present, a large number of users of CEXs only know about blockchain in terms of bitcoin, but just like last year’s booming fund brought in many users who had never set foot in the stock market, the on-chain fund is both a need and a boon for newcomers to crypto asset investment.
Asset management is a key piece of the DeFi Lego
Although DeFi is highly open, this openness does not mean a lower threshold. With the Internet already so advanced, there are still people who have difficulty using the functions of mobile apps proficiently, not to mention DeFi, whose current usage experience is completely incomparable to traditional Internet platforms. If investors in traditional funds are still within the range of common sense in terms of their knowledge of the underlying investment, DeFi may have gone far beyond their understanding.
So the future investment in the blockchain industry may still be like the traditional financial market today with the trend of institutionalization, and because of the special nature of the industry, this trend may come more quickly than expected.
If we use the traditional asset management industry, which has survived for a century, as a reference and comparison, global fund managers are currently managing about $100 trillion of assets. The booming DeFi world, along with the rapid growth of mainstream crypto assets, coupled with the development of synthetic asset protocols, the total amount of on-chain assets in near future still has huge imagination, and on-chain asset management is a very important piece of the DeFi Lego in such a hefty market.