The crypto world has proven to be a lucrative market for investors and traders alike. So, the industry is profitable. However, the vastness of the space is a problem. The market is overly saturated with noise. This makes it difficult to separate the chaff from the real stuff.
Also, the presence of multiple protocols and projects is another huge challenge for investors. Many potential investors are attracted to DeFi. But, knowing which to invest in is somewhat of a concern. However, this is where asset management protocols come in.
Covduk is a crypto writer who tweets DeFi guides and actionable information. He recently highlighted the importance of asset management protocols in a series of tweets. According to Covduk, asset management protocols are one of the biggest secrets of top traders. Pros leverage these protocols to stay on top of the DeFi market. So, the knowledge of the DeFi space is an edge some traders have over others.
Keeping up with DeFi can be impossible
What if you could leave it to the experts & follow them instead
That's what crypto asset management protocols aim to do.
Here's a breakdown of asset management in crypto and how it works 🧵
— Covduk (@Cov_duk) May 26, 2022
What Are Asset Management Protocols?
Decentralized finance is a term that refers to financial services that are implemented on the blockchain. Also, there is no central authority involved in DeFi. This makes it unique. Furthermore, DeFi features the core elements of conventional finance. However, it replaces intermediaries with smart contracts. So, it makes sense to see DeFi as a hybrid of traditional banking and blockchain technology.
The growth and popularity of the DeFi space created room for asset management protocols. Asset management is the process of accumulating, preserving, and trading investments with the potential to develop in value over time in order to increase overall income. This is a service that asset management professionals provide for others.
Keeping up with DeFi is hard.
DeFi moves a mile every minute.
• There’s so much of noise in DeFi
• Differentiating good from bad is so tough
• Very few have the time to keep up
Despite spending hours, most people fail to find the right strategies & plays.
3/
— Covduk (@Cov_duk) May 26, 2022
The DeFi world introduced exchanges, protocols, derivatives, and others to the blockchain space. So, this created the perfect climate for asset management professionals to practice their craft in the crypto market.
DeFi empowers asset management in three key ways:
- Transparency
2. Composability
3. Trustlessness
Characteristics of Asset Management Protocols
The following are some of the most prominent features of asset management protocols:
- Automated – An increasing number of asset management platforms are automated. So, this allows for easy collateralization, rebalancing, and liquidations without the need for user intervention.
- Composable – Some top asset management protocols integrate with a variety of DeFi projects. This results in a complete DeFi experience.
- Accessibility – Asset management protocols are available to everyone. This is regardless of background or income level.
- Pseudo-anonymous – Asset management protocols frequently connect via a wallet address. This implies that sharing one’s identity is entirely voluntary.
- Non-custodial – The underlying assets’ ownership is never revoked. Furthermore, they often stay in the user’s wallet.
Top Asset Management Protocols
Different asset management protocols offer different solutions. So, there are asset management protocols for private individuals and groups. These private asset management protocols assist private groups in various activities. These include pooling, investing, and managing funds. For example, they assist DAOs with treasury management.
Public asset management protocols help users to create investment strategies. They then make them accessible to the public. In addition, these platforms reward experts for curating and sharing investment strategies.
Here are some asset management protocols in the space.
Babylon Finance
Babylon is a community-driven asset management protocol. It allows users to pool their funds to invest in DeFi. Here are a few features of the platform:
- It is Ethereum-based
- Transparent and permissionless
- Non-custodial
- Community-governed
Babylon aims at leveraging the power of investing as a tribe.
Remember Wall Street Bets & GameStop?
The WSB tribe rallied GME & challenged Wall Street.
What happened next?
The big shots changed the rules & pulled strings to crush it.
12/
— Covduk (@Cov_duk) May 26, 2022
Babylon utilizes a DAO model with the BABL token to facilitate community voting. So, this ensures that it acts in the best interests of its users. Furthermore, the community has a huge level of control. They control the treasury, fees charged, and other key elements. In addition, Babylon enables its users to build investment circles known as “Gardens.” Participants can join these communities to deposit money, make suggestions, vote, and earn money.
Furthermore, each Garden has its own investment thesis, risk appetite, and liquidity needs. Community participants can also propose strategies on which members can vote. Babylon runs a performance-based incentive approach. This means that Babylon rewards participants for their involvement and contributions. Additionally, community members share gas costs, increase capital efficiency, and reduce taxable transactions by pooling their funds.
Set Protocol
Set Protocol is a market-leading asset management platform. It enables users to use advanced trading strategies by buying ERC20 tokens called Sets. The platform also compiles a detailed list of automated trading strategies that rebalance based on technical indicators and trends.
Set Protocol is a web3 asset management platform that provides financial infrastructure tooling
Set enables managers to create customizable baskets of collateralized assets, known as Set Tokens (ERC20)
21/
— Covduk (@Cov_duk) May 26, 2022
Furthermore, users can “set and forget” because Sets instantly rebalance in relation to their target strategy. This enables passive investors to profit from market movements without needing to trade themselves. Set also uses streaming fees to reward and compensate managers. However, creating a Set necessitates submitting a proposal to the team.
Core features of Set:
- The managers manage Set; holders are unable to vote on its direction.
- There is no native token.
- Simple and easy-to-understand user interface.
- It uses fees to incentivize managers.
- It’s simple to invest in a strategy or index.
Balancer
Balancer is one of the leading platforms for asset management. It serves as a liquidity provider, an automated portfolio manager, and a price sensor. Balancer also takes a unique approach to liquidity. It enables users to create and manage their own portfolios without being forced into a position that could result in a temporary loss. So, Balancer’s users can deposit any sum of a supported asset into their Balancer account based on their own discretion.
Balancer provides its users with the chance to adjust allocations to suit their purposes. This makes the platform an excellent choice for DeFi users.
In conclusion, DeFi asset management protocols intend to focus on stability while addressing risks. The steady expansion of the DeFi space would undoubtedly popularize these protocols as people seek more ways to gain an advantage.
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