Please enter CoinGecko Free Api Key to get this plugin works.

The Exchange-Traded Fund (ETF) Market Is Broken. Is Decentralisation the Answer?

D-ETF is a decentralized ETF project that employs a decentralized autonomous organization (DAO) to address issues with the existing ETF market. Traditional ETFs are inefficient in the crypto market. ETFs have an expiration date, so if the investor isn’t ready to withdraw, the funds must “roll” into a new ETF, which can incur annual fees of up to 13% if held for a year.

It’s a community-based investing methodology that reduces risk while also addressing the TradFi issues that traditional crypto ETFs have.

Some argue that decentralization of the financial industry is only a matter of time. With new crypto ETFs being released on a regular basis, it appears that ETFs are doing just fine, providing risk-managed exposure to nontraditional assets. However, I spoke with the D-ETF team, and they have a different perspective.

ETFs Have a Problem

If you ask a DeFi (decentralized finance) fanatic about their vision for the industry, they’ll almost certainly say that everything will be decentralized one day. However, as TradFi companies try to merge digital and decentralized assets, it’s becoming evident that the two paradigms don’t necessarily work well together.

Attempting to capture crypto price swings with a standard ETF is a good illustration of this.

“Most of the approved ETFs are futures based, meaning the ETF issuer is not actually holding the simulated asset,” the D-ETF team says. As a result, these items do not offer value to the crypto industry as a whole. Furthermore, we see a problem with trading hours in general, particularly with crypto products; most news occurs outside of trading hours, leaving investors vulnerable to abrupt market changes while exchanges are closed.”

Traditional ETFs fail crypto markets with inefficiency, in addition to logistical and ideological incompatibilities. ETFs have an expiration date, so if the investor isn’t ready to withdraw, the funds must “roll” into a new ETF, which can incur annual fees of up to 13% if held for a year.

To top it off, crypto ETFs face a slew of challenges, including overregulation, high minimums, and ineffective and costly KYC.

ETFs with a decentralized structure

The D-ETF team recommends decentralizing ETFs to address these challenges. The project makes use of a DAO to invest in a variety of cryptocurrencies while also allowing consumers to participate in a single token. Investors who possess the D-ETF DAO (decentralized autonomous organization) token enjoy diversified crypto exposure as well as the option to vote on the DAO’s portfolio currencies.

It’s a community-based investing methodology that reduces risk while also addressing the TradFi (traditional finance) issues that standard crypto ETFs face.

DAOs are reshaping the way the world is organized, and the finance industry stands to benefit. “In the traditional world, you can have one or just a few people making choices on behalf of all the investors,” the D-ETF team replied when asked if a DAO was required for a decentralized crypto ETF. With a DAO, you can include the investors in the fund’s direction. Investors, both retail and institutional, get a lot more control and autonomy over their investments.”

Keep in mind that a DAO is only useful to a protocol if it is truly autonomous. The D-ETF DAO smart contract, unlike some other DAOs in the sector, immediately executes the results of community votes, assuring transparency and efficiency.

All are welcome to attend.

Another significant distinction between standard ETFs and decentralized crypto ETFs is their simplicity of usage. A MetaMask wallet and an internet connection are all that is required to use D-ETF. TradFi onramp processes will be available in the near future.

According to the team, the entry barriers are low:

“The D-ETF makes it easier for crypto investors to have broad exposure with less work and at a cheaper cost. With transaction costs on DEXs ranging from 100 to 800 USD per token swap and slippage eroding the value of your investment, a large investment is necessary to make a trade worthwhile.

When you buy the D-ETF, however, you only pay a single gas fee and get exposure to 10-20 different tokens.”

Investing is a very personal decision that necessitates the transformation of markets by entire populations. Markets are likely to witness increased human influence over investing processes as old centralized paradigms give way to new decentralized ones. Although paradigms shift, danger remains constant. Whether you’re doing DeFi or TradFi, proceed with caution.

Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.

Leave a Comment

Your email address will not be published. Required fields are marked *

Facebook
Twitter
Telegram

Recent Posts

Follow Us