Why is dHedge, the asset management protocol of the Synthetix ecosystem, favored by DeFi investment funds?
Editor's Note: This article comes fromChain News ChainNews (ID: chainnewscom), published with permission.
Chain News ChainNews (ID: chainnewscom)
Content overview:
Chain News ChainNews (ID: chainnewscom)
, published with permission.
dHedge is expected to launch in September this year, providing ordinary investors with an opportunity to "make themselves a crypto hedge fund manager."
Content overview:
The platform has launched a trading competition, thus attracting more attention from the crypto community;
dHedge is supported by a number of well-known DeFi investment funds, and its leadership team has a rich industry background in traditional finance and blockchain development.
dHedge is starting to integrate the concept of decentralization and permission-free into traditional asset management services. By using the idea of robo-advisors and adding community support, everyone can play the role of "investment advisor robot", and investors and traders Investors will never have to pay for related consulting services.
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SNX token price movement since March 2018, source: CoinGecko
Recently, dHedge launched a trading competition on the testnet, which greatly increased the activity of the community. At present, the second trading competition of the project has been carried out on the Ethereum Ropsten test network, and dHedge has invested 125,000 native tokens DHT and 6,600 SNX. At present, more than 450 people have participated in the competition, which is expected to last until the end of early September. The top 20 in this competition can get token rewards, and the dHedge mainnet is expected to be launched shortly after the end of this trading competition.
With this background in mind, let’s delve into the DeFi project in focus this week: dHedge.
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What is dHedge? How does it work?
The dHedge investment pool can leverage the entire Synthetix product stack and will also support futures and limit orders, which Synthetix plans to launch later this year. There are currently two types of investment pools on dHedge:
Public pool: allows everyone to invest in accordance with the liquidity pool strategy;
Private Pools: Only a certain number of whitelisted addresses are allowed to add funds in the liquidity pool.
For public pools, fund managers can only deploy and manage funds in the pool, they cannot withdraw other people's capital. Funds can be managed by active fund managers who deploy funds themselves or algorithmically structure investments on top of investment predetermined strategies. There are many "elements" for fund managers to formulate investment strategies, such as market fundamentals, technology, algorithms, etc. Therefore, there will be many nuances in the investment strategies of different fund managers.
dHedge Governance Token: DHT
The dHedge ecosystem is powered by a Decentralized Autonomous Organization (DAO) and its native token, DHT.
The Decentralized Autonomous Organization is responsible for the development of the dHedge project and ensures the smooth progress of governance, and the project has chosen to be decentralized from the beginning, but at this stage only some dHedge governance participants can vote on certain issues, while others The voting results will be "enforced" according to the off-chain consensus. Of course, this situation is very common in many new DeFi protocols. After all, dHedge has not yet officially launched its mainnet.
The supply of dHedge tokens is fixed, a total of 100 million, and the tokens will be distributed to active users of the protocol through a liquidity mining strategy to encourage the adoption of the protocol. However, the dHedge token supply also requires community consensus, which means that governance participants can vote to introduce more tokens, but this is unlikely to happen anytime soon.
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Competitors and Product Comparison
Set Protocol is a well-known asset management protocol that did get some attention in 2020, while yEarn Finance only competes with dHedge in terms of automated strategies. Therefore, Melon Protocol may be the most direct competitor to dHedge at this stage.
Like dHedge, Melon Protocol also allows fund managers to create public funds or private funds. The former is also open to everyone, but Melon pools can authorize multiple exchanges to deploy funds, while also investing in almost all ERC-20 tokens. In contrast, since dHedge is built on top of Synthetix, the types of assets that can be traded also depend on the assets available on Synthetix, so it may be slightly inferior to Melon Protocol in this regard.
Not only that, Synthetix creates synthetic assets (or synthetic tokens), and the tokens on the platform are all price-fed through Chainlink oracles, which means that as long as the tokens are not supported on Chainlink or Synthetix, then dHedge cannot Provide support for the token.
The good news is that Synthetix is iterating very fast, and more tokens will be added and supported in the future, so the above-mentioned problems should be unlikely to become obstacles restricting the long-term development of dHedge.
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It should be noted that it is difficult to compare the user experience of dHedge with other competitors at this stage, because the product has not been officially released, and a simplified version of the protocol is deployed on the testnet, so there are relatively few functions that can be experienced. But even so, we can see a clue from some of the functions currently provided by dHedge:
First, the two main use cases of DeFi at present are: decentralized exchange (DEX) and currency market. Asset management is still a vertical field that does not penetrate very deeply, and has just begun to attract the attention of builders. If we look at the range of services that yEarn can provide, we know that the DeFi asset management segment still lacks breakthrough products, and dHedge may bring many surprises.
Second, unlike Set Protocol, dHedge is completely permissionless, allowing any trader to set up their own fund. At the same time, the biggest difference between dHedge and Melon Protocol is that the scope of its business support is not limited to tokens. They have planned to launch futures, binary options, and other financial instruments created by Synthetix.
Third, dHedge also plans to integrate with lending products, so that users can put idle funds into productive use for additional income. For example, if "A Fund" on dHedge has an annual asset management amount of US$10,000, but there are still idle funds worth US$500 in sUSD, then dHedge can invest it in Aave and obtain a 4.36% rate of return , which in turn increases the fund's return. Synth synthetic assets are priced according to Chainlink oracles, so there will be no slippage when trading on Synthetix - for larger funds, the integration of dHedge with lending products may change the rules of the game, because these Funds often lose small amounts of wealth due to slippage due to the lack of liquidity in the cryptocurrency market.
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The core value proposition of DeFi is to provide permission-free non-custodial financial services, and dHedge is building the infrastructure to make asset management more open and secure:
The dHedge public pool is equivalent to mutual funds and exchange-traded funds (ETFs) in the traditional financial field, but dHedge is characterized by allowing anyone to invest or redeem their own funds at any given time, eliminating the bureaucracy of the traditional financial field All kinds of "discomfort" brought by the program. Not only that, but in addition to having people handpicked by the company to manage the fund, anyone can also set up their own open source mutual fund. After all, those real traders are better at allocating capital than some "bricks" and can do better. Manage risk effectively - in essence, dHedge provides a platform for these individuals to showcase their talents.
The dHedge private pool is like a hedge fund, only addresses in the whitelist are allowed to invest in the private pool, which will enable the hedge fund to achieve a closed source structure. After completing due diligence, investor addresses are whitelisted and terms are negotiated off-chain. If your need for "decentralization" is not so strong, you can use private pools to choose different investment strategies. Fund managers do not need to perform this operation from different ETH addresses on DeFi, but can set up multiple pools from one address , so that you can get unified access.
When coupled with tools such as zero-slippage trading and futures, dHedge has the potential to become a "one-stop service provider" for mutual funds, hedge funds and sophisticated retail traders. If the demand for automated investment strategies in the DeFi market rises in the future, then dHedge will attract the attention of more small and medium-sized investors, just like yEarn Finance, using income aggregation and income farming strategies, its total lock-up volume quickly soared to $800 million— — and investment in automation may just be one aspect of dHedge's future product range.
Risks and Threats
It must be admitted that DeFi is still a relatively new concept, and the market volatility is also high in the short term. Like any nascent protocol, dHedge may not be able to quickly establish a product suitable for the market in this environment. On the other hand, product/market fit still needs to start with the market's demand for asset management tools. Taking Token Sets based on Set Protocol as an example, some tokens can outperform the market because there are excellent traders there, and There is a need for health.
But finding product/market fit is not the end. dHedge has not yet launched its mainnet, and developing DeFi products is not an easy task, not to mention that smart contracts may also go wrong. Finally, due to dHedge's dependence on Synthetix, this also creates external risks to a certain extent, not to mention the liquidity of Synthetix will also limit the demand and usage of dHedge.
Synthetix may not have slippage issues, but liquidity has become a by-product of SNX price increases and collateralization ratios. At the time of writing this article, Synthetix has a total lock-up of $982 million, and many synthetic assets have been issued on Synthetix. If calculated according to the minimum mortgage rate of 700%, it means that a total of $140 million worth of synthetic assets can exist. In order to increase the value of synthetic assets The overall market value of , either release more SNX tokens, or increase the price of SNX tokens.
Investors, Community and Users
Some of the fastest growing crypto funds are backing the dHedge project.
The bet on dHedge actually means that the investor "bet" on the team behind Synthetix and the SNX token. For example, in addition to the founding team and the exchange, dHedge’s investor Framework Vetnures is also the largest holder of Chainlink’s native tokens LINK and SNX tokens.
There are also some investors who are also very active in the wider DeFi field, and have participated in the income farming and governance proposals of many projects. In view of these rich experiences, it is still a good deal to support a decentralized and license-free asset management agreement like dHedge ", the following picture is the list of investors of dHedge:
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The development team behind dHedge has two core members: Henrik Andersson and Radek Ostrowski.
