DeFi projects exist on a spectrum of decentralization. Trustlessness is at the heart of decentralization. But the word ‘trustlessness’ in itself is almost an oxymoron because trust is almost never eliminated from the equation but instead is simply shifted from one counterparty to another. The goal is to minimize the required trust in the pursuit of trustlessness. Even our most trustless examples of smart contracts still require a certain amount of trust that the blockchain infrastructure it is built on will continue to function properly. Additionally, there are internal economic and smart contract security risks in DeFi platforms themselves. Looking beyond that, DeFi platforms face external risks like composability with other protocols and even further out is oracle integrity and off-chain infrastructure.
Adding complexity typically comes with a wider attack surface for smart contracts. Many recent hacks have been caused by oracle manipulation. By simplifying the process of non-custodial asset management, you’re able to limit the attack surface of the average user. This is the guiding principle of DEXTF, permissionless non-custodial oracle-less fund management infrastructure. DEXTF enables digital-native funds where two parties, the portfolio manager and the investor, which are mutually distrusting of each other can cryptographically verify the status of the funds and enforce their rights directly through a digital wallet.
DEXTF is an asset management protocol that allows anyone to create, mint, and redeem XTF funds. At present, DEXTF supports 44 different assets and funds are soft-limited to 10 tokens although this limit can be changed. The ticker symbol and asset weights are determined by the fund manager when creating the fund. Each XTF fund is an ERC20 token with its own address and contract allowing users to hold, trade, redeem and utilize XTF fund tokens like any other token.
The DEXTF team spotted a gap in the DeFi ETF space for an easy, accessible way for anyone to create and manage funds in DeFi. They sought to create simple and efficient asset management infrastructure that followed the team’s philosophy that only the bare minimum of logic should be on chain. DEXTF does not rely on oracles. The risk of manipulation present in complex oracle or rebalancing mechanisms tends to result in the use of admin keys in order to respond in a timely manner to attacks or exploits. The DEXTF team is skeptical that any protocol with these mechanisms can truly eliminate the need for these admin keys and subsequently the risk of capture these keys pose to the protocol. With DEXTF, there are no oracles to manipulate that can be used to steal or drain the fund; XTFs can only be minted with or redeemed for their underlying weight of tokens.
DEXTF simply provides a permissionless way to mint new XTF tokens and relies solely on arbitrage and market forces for fund pricing. While only so much logic can be programmed into a smart contract, a community of properly incentivized stakeholders can be the strongest and smartest solution to many problems. Ultimately, reducing ETFs to their simplest form makes XTFs simpler to utilize in a way that is reminiscent of the highly modular design philosophy of UNIX. DEXTF can almost be thought of as a trust-minimized set of building blocks that creates economic incentives and opportunities for the community to be rewarded for taking up each role in the ecosystem.
Let’s break down the four roles in the DEXTF ecosystem to understand how they fit together to create highly liquid XTF token funds that are redeemable for their underlying assets. Investors, fund managers, and liquidity providers are eligible to receive ecosystem rewards for participating but we’ll cover that more later on. The team is also planning to add rewards for arbitrageurs.
Those looking to invest in XTF fund tokens can buy existing fund tokens listed on decentralized exchanges like Uniswap. Alternatively, you can mint more XTF fund tokens by providing the underlying tokens although this costs more in gas fees. If you do not have them already, you can purchase the required tokens from Kyber right inside the DEXTF interface after selecting your desired fund. I recommend taking a look at DEXTF’s video tutorials to see how the fund investment process works.
The process of creating XTF funds is designed to be simple and self-service. The idea is to promote decentralization by giving anyone the ability to freely and easily create funds with idle tokens.
Anyone can create a fund in 4 easy steps:
- Click the ‘Create Fund’ button and select your fund’s name and ticker symbol
- Select which assets to include in your fund and the weight of each asset
- Assign a risk rating and add a description to your fund
- Finally, launch your fund on the blockchain
Yet again, I recommend taking a look at DEXTF’s video tutorials to see for yourself how it works.
As of this writing, fund managers are currently able to choose from 44 different assets with a soft limit of 10 assets wrapped around a single XTF token fund (this limit can be changed) but the DEXTF team plans to gradually expand the list of supported assets. You’ll even be able to create a fund consisting of other XTF fund tokens eventually. The DEXTF team also plans to continue adding new features like fund management fees and new asset types including real world assets such as equity, debt, and options.
In order for new investors to be able to purchase XTF funds from a DEX, existing XTF fund token holders must provide liquidity. Fund managers and investors can take newly minted XTF tokens and create a pool on Uniswap to earn trading fees and liquidity mining rewards. Liquidity providers are important for ensuring smaller investors can efficiently enter and exit XTF funds while arbitrageurs are able to effectively take advantage of opportunities to drive XTF fund prices in the market.
As previously mentioned, DEXTF’s oracle-less design relies on market forces to fairly price XTF funds. When the price of an XTF fund token differs from the value of its underlying assets, it’s up to arbitrageurs to seize the opportunity, balancing out price inefficiencies in the market. For example, an arbitrageur that spots an XTF token that is overvalued on Uniswap can provide the underlying tokens to mint and sell new XTF tokens. This action rewards the arbitrageur with profit for keeping the XTF fund properly priced and also pays trading fees to the pool’s liquidity providers. Arbitrageurs are vital to the DEXTF ecosystem because they indirectly provide price information to the protocol through their actions which eliminates the need for the oracle. To reward their participation, DEXTF is planning to provide ecosystem rewards to arbitrageurs soon.
DEXTF is an ERC20 token created to govern the DEXTF protocol. DEXTF tokens can be used to vote on proposals for potential protocol changes including the adjustment of system parameters like management fee factors or interest rate algorithms. DEXTF holders may also delegate their voting power to another address or delegate who may propose, vote on, and execute proposals on their behalf.
Additionally, the distribution of DEXTF tokens has been designed to reward network participants for performance, liquidity, volume and other interesting metrics in an effort to increase adoption of the DEXTF Dapp and XTF token funds.
DEXTF Rewards fall into three categories: Monthly Incentive Program (for Fund Managers and Investors), Milestone-based Incentive Program (for Fund Managers) and Liquidity Mining Incentive Program (for any user). These rewards are to be distributed over a 5 year period to encourage long-term adoption.
Users are eligible to receive DEXTF rewards for performing the following actions:
Launch a new XTF fund token
You can receive DEXTF tokens for launching new XTF fund tokens by selecting the underlying assets and relative weights. 17,000,000 DEXTF tokens or 17% of the total supply is reserved for monthly incentives for being one of the top funds, top new funds, and top performing new funds.
5,000,000 DEXTF or 5% of the total supply is set aside for Milestone Incentives, more specifically for the first funds to cross certain milestones. Learn more details about DEXTF incentives.
It’s worth noting that when you take your idle tokens and launch your own fund, you’re competing to win a ratio of DEXTF rewards relative to the total. You can find the list of supported tokens here.
Minting of XTF fund tokens
You can receive DEXTF tokens for either minting XTF fund tokens via in kind contribution of the underlyings or through KyberSwap (except for tokens that are currently not supported by Kyber itself in which case a link to Paraswap will be provided to secure the missing tokens). 3,000,000 DEXTF or 3% of the total supply is set aside for Investors’ Monthly Incentives. The top 20 investors are eligible to receive a share of these rewards each month.
You can receive DEXTF tokens for providing liquidity to the whitelisted Uniswap pools with XTF pairings. Out of the total 25,000,000 of all DEXTF tokens reserved for liquidity miners, 30% of it are reserved for the DEXTF/ETH pool LPs while the remaining 70% or 17,500,000 DEXTF are distributed across all other pools proportionally to the size of each pool in USDT terms. You can contact the DEXTF team at [email protected] to request a pool be whitelisted.
Monthly Incentive Program rewards are streamed daily to a unique smart contract, starting from the end of term plus 1 day. Terms start on 15th of the month and ends on the 14th of following month. DEXTF liquidity mining rewards are streamed every block. Reward tokens are claimable in full only after 30 days. Liquidity providers receive a 10% bonus reward in DEXTF for staying for the full term.
For example, let’s say you started providing liquidity on November 15th and continued to do so for one month (so until December 14th), then you would only fully receive the rewards for that month of providing liquidity until January 15th, 2021.
See here for the latest update regarding the liquidity mining program.
Decentralized Structured Tokens (DEXSTs) are hybrid tokens with adjustable risk-return profiles, better suited to express non-linear market views. DEXSTs can utilize yield generating assets, derivatives, synthetics, and options from many different DeFi projects. Incorporating these sophisticated assets allows DEXSTs to take advantage of more opportunities in the market and allows their creators to adjust the risk-return profile to cater to a variety of market views.
Capital Protected Structured Token (CPST)
The first Decentralized Structured Token (DEXST) is a Capital Protected Structured Token (CPST) for ETH. As the name implies, Capital Protected Structured Tokens attempt to protect you from potential downside to your capital, ETH in this case, while maintaining exposure to the potential upside. CPSTs can be designed to be anti-fragile, suitable for any market conditions potentially performing best when the market is volatile in a range-bound market.
The first iteration of CPST was launched in late September 2020. In the time since, the DEXTF team has worked with Opyn and UMA to incorporate feedback from the first iteration to co-build the next iteration of the primitive which could generate sustainable liquidity making it attractive to buyers. New CPSTs will be using UMA’s Zero-Coupon Bonds, a longer maturity version of the yield dollar, and a longer maturity Opyn call option with June 2021 expiry. The idea is to create a floor value of sorts for the underlying ETH but still allow investors to participate in any upside. So if you’re bullish but don’t want to remain fully exposed, CPSTs offer an efficient way to invest.
The DEXTF team has built simple yet sophisticated fund management infrastructure that anyone can take advantage of to manage their portfolio. The permissionless and oracle-less design of DEXTF makes it highly scalable and resistant to capture or manipulation. DEXTF is also working in partnership with many prominent members of the DeFi community such as Opyn, UMA, Kyber, Ren Alliance, Set Protocol, and so many more to expand their already flexible set of components. All the necessary components and incentives are there for any community member to build or participate in an efficient ecosystem around digital-native funds and be rewarded for doing so.
What are you waiting for? Go explore DEXTF’s interface and scroll through the existing funds. Try making your own fund. If you’d like a guided tour, check out these video tutorials which teach you how to create a fund, invest in funds, and redeem funds for their underlying assets. To keep up with everything happening in the DEXTF community, jump with your preferred platform Discord, Twitter, Medium, Telegram.