Last week I was laying in bed and thought of a genius idea - there should be a platform that allows anyone to easily create an index fund with crypto tokens. People could follow the top index funds or creators of those index funds. The creators of the index funds could charge a fee, like % of assets under management, to everyone who invests into their fund.
I was really excited about this idea so I quickly wrote down a ton of thoughts on the idea.
After I got excited about this for about 2 days, I decided to call my friend James and run the idea by him. He agreed with me that something like this should exist. He told me about a couple platforms that are similar which led me into doing more research. As it turns out, there’s already a number of projects tackling this very idea.
In my opinion, the project that looks the best is TokenSets (absolutely no affiliation with them whatsoever).
The platform is setup for 2 types of users:
- Crypto Investors - People that want to invest into a bucket of tokens that represent a certain theme or thesis
- Fund Managers - Experts in DeFi that want to put together a pool of tokens into an index fund
To become a fund manager and create an index fund (which they refer to as “sets”), it’s as easy as following their 3-step creation wizard and verifying just ONE transaction on-chain.
You essentially just add tokens to your set and then choose the weight of the token within the set. There’s a slider that you can also lock once you select the % weight for each token.
Once you select the tokens in your set, you go to the next page to setup a few fields of metadata where you’re going to choose the name of the fund, the ticker symbol, and the starting price for your fund.
Once you have done that, the final page is verifying the information and creating the fund on-chain.
The one thing that I noticed when I was going through this was that gas was about $2000 (or .4 ETH). Not sure if it’s because it’s creating a new contract and needs to do a lot of stuff with the tokens, but it was enough to give me a barrier to entry on my test index fund.
Streaming Fees
Streaming fees are basically the way that fund managers make money. They are charged to the people that purchase the index funds and are paid on a yearly basis. I’ve seen a range of 0% up to 5% on most of the funds on TokenSets. I took a look at some of the top funds and did a quick calculation on how much the fund managers are making from the streaming fees based on market capitalization (assets under management) or the amount invested into their fund.
I’m going through TokenSets and some other companies now and i’ll post a more detailed write-up soon with some thoughts. For now, i’m curious to hear your feedback about index funds and TokenSets.
I’ll add to this post in the future. DM me on Twitter if you think I left anything out.
My twitter: @ryanashank