Overview
Set Protocol is an Ethereum-native DeFi primitive that leverages existing Open Finance protocols to allow for the bundling of crypto-assets into fully collateralised baskets, which are represented as ERC20 tokens on the Ethereum blockchain. These Set tokens act as structured products that represent the manager's strategy, which others can replicate by simply holding the Set.
The underlying contract that enables management of the Set supports external integrations with exchanges, lending platforms, automated market makers and asset protocols, also enabling more advanced strategies employing not only DEX trades but yield farming and margin trading.
Today, some of the largest structured products by AUM (assets under management) have been built using the Set Protocol, including the DeFi Pulse Index ($DPI) and ETH 2x Flexible Leverage Index.
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Investors allocate capital, receiving the Set tokens that represent their share in the portfolio or structured product. Investors retain full custody of assets as funds are inaccessible to managers outside of managing the Set via the underlying smart contract.
Managers create and maintain structured products in the form of Sets to cater for their use-case, whether they intend to offer their Sets as an investment opportunity for investors as an individual or organisation, or a DAO with a treasury needing an on-chain, transparent method of management. Managers can use streaming fees to monetise their products and build lucrative avenues of income through their products as they grow.
Developers build the next generation of financial applications using the Set Protocol layer as their base and achieve their objectives faster. Whether you are running an algorithmically rebalanced cryptocurrency index or a long-only large investment portfolio that caters to an existing customer base - the Set Protocol has limitless opportunities on what innovative projects can be built, with TokenSets being a core example.
Institutions or entities can create structured products for customers with a refined methodology behind them that fills a market need or niche. The largest crypto indices today are built on top of the Set Protocol infrastructure
​DeFi Pulse Index ($DPI) - DeFi Pulse
​ETH 2x Flexible Leverage Index ($ETH2X-FLI) - DeFi Pulse
​FAANG Index ($FAANG) - Terra
​Metaverse Index ($MVI) - Index Coop
Anyone can become a social trader using our V2 Portfolio Sets that give the Set manager the ability to replicate their trading strategy on-chain, build assets under management and monetise their clients.
​TokenSets gives a user-friendly experience to Set managers to perform these actions, but also a frictionless experience for clients to invest into your Set too.
Ethereum ecosystem projects are trusting Set Protocol to manage project treasuries in a trustless, decentralised manner. One example of this is YamHOUSE, which is an actively managed portfolio by Yam.Finance DAO with the aim to achieve long term capital appreciation to support the growth and development of the Yam.
As a Manager, there are currently no fees for utilizing the Set Protocol directly for your business products outside of standard Ethereum network gas fees. If interacting with Set Protocol via the TokenSets UI the only fee currently invoked is a 0.10% fee on trades executed through the trade module on the UI.
As an Investor, in addition to the standard Ethereum network fees, you might encounter a 'streaming fee' on Sets, which is the managers way of monetizing their product.
The streaming fees are fees that are paid out to Set managers over time based on the entire market cap of the Set (e.g. 2% of market cap over 1 year). This incentivizes managers to increase the value of their Sets over time for their users.
The streaming fee is calculated linearly over the lifespan of the Set. For example, if a Set has a 2% streaming fee and 6 months has passed, 1% of streaming fees would have been collected.
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