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.
Set Protocols most exciting feature is that it allows for the creation of structured products that give users of all experiences access to the future of decentralised, on-chain asset management. From an everyday investor wanting to manage their portfolio and allow his friends to share his strategy, to institutional-grade asset managers wanting to create structured products for their clients in a transparent and trustless way. 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.
TokenSets is the first application built on the Set Protocol, which allows users and asset managers to create and manage their tokenised strategies by interacting with the underlying smart contracts.
Set Labs Inc. is the company building the Set Protocol smart contracts. Set Labs Inc. does not serve as managers for any Sets, act as a counter-party, or custody of anybody's funds on TokenSets.
A Set is a digital asset (ERC-20 token) that represents a fully collateralized portfolio of assets that can enable people or entities to manage their wealth & the wealth of others within a customizable and trustless environment. Set empowers individuals or institutions to create, manage and invest in innovative on-chain investment vehicles.
Build applications that are interoperable out of the box. Each Set itself is an ERC20 token with additional properties.
- Listable on Exchanges
- Borderless Transactions
- Smart Contract Ready
Holding a Set token guarantees you access to your underlying tokens. Redeem your underlying tokens by trading them back into the Set smart contract.
Set is open, permissionless, and requires no middlemen or trusted counterparties. Set is designed so that no one can steal the collateral that backs the value of your Set.
Most standard ERC20. I say most because certain tokens (most prominently PAXG), have transfer fees and that sometimes breaks the internal accounting of SetToken smart contracts. Rebasing tokens also can cause issues if not wrapped - if you're unsure please contact us.
- ERC-20 Token
- Not a token that enforces a transfer fee. This is whereupon transaction, a portion of the sent amount of tokens is redirected to another wallet.
- Must have liquidity against WETH on a DEX such as Uniswap or Sushi
If there is liquidity to trade them, you can embed Sets within Sets, a common example would be the DeFi Pulse Index.
Roadmap item, so not yet.
Governance, airdrop claiming, staking are all roadmap items, so not yet.
Upon creation, there is an intuitive UI on TokenSets that lets you set initial weightings by % of the total.
Post-creation, the UI is traded more akin to how you would swap on Uniswap so position sizes must be calculated beforehand and traded accordingly if rebalancing an Index. A more intuitive UI for rebalancing is road-mapped.
Yes (via trading out of said asset to another).
Currently, all trades are routed via 0x which is a market leader in intelligent routing and DEX aggregation capabilities.
Currently, that could be done by programmatically interacting with the underlying Set contract to make the appropriate rebalancing trades.
No, users can redeem and mint at any point in time.
No, everything is public.
A Set subgraph is road-mapped for programmatic reading. Currently, Zerion and TokenSets are the best front end interfaces currently for this with many more expected soon.
Currently,, V2 Sets are monetised via streaming fees, other fee structures such as performance fees have previously been on the platform and are likely to return in the future.
All fees are paid in the native Set token via a claiming interface on TokenSets or directly against the smart contract.
Yes, currently streaming fees can be changed.
Yes, TokenSets has a complete management UI for this purpose.
TokenSets caters for all interactions with your Set as a manager.
Only the differentiation between Manager & Investor.
You can transfer management ownership to another Ethereum address but not delegate the responsibility.
- Set Tokens Sets that you obtain through TokenSets or third party exchanges are held in your own ERC-20 compatible wallet. Since Sets are ERC-20 tokens, you can move them to any other wallet that also supports ERC-20 tokens, such as if you want to hold them in an Ethereum address you use for cold storage. All transactions that move your funds must be confirmed by your account and are verifiable on the Ethereum blockchain.
- Underlying Collateral Tokens The underlying collateral tokens that back each Set are held inside the specific Set Smart Contract itself. The manager of a set cannot withdraw these tokens that collateralise the Set, instead, the contract enables the manager to transact the assets between one another to enable their strategy. For example, the DeFi Pulse Index's underlying collateral can be seen here on Etherscan.
We do not take fees on Tokensets for any investor related operations. The only fees that currently exist are a 0.10% fee for managers trading assets within their Set using the TokenSets U and the mandatory network fees for the transaction. It's important to note that the protocol smart contracts themselves are without any fees for any direct integrations.
A Set is 100% collateralised by its underlying components, which means its 'Net Asset Value' (NAV) can be calculated by adding up the value of all the underlying component tokens inside of the Set. Prices displayed on TokenSets are sourced from CoinGecko to show the fair market value of a Set across multiple exchanges, on-chain prices used by our smart contracts are sourced from Chainlink oracles, and prices for buying and selling are sourced from DEXs that provide liquidity to Set Protocol.
Taxes vary greatly by jurisdiction. For any financial, tax, or legal matters, we recommend consulting your own professionals. While we cannot provide you with specific tax guidance, users should be aware that any exchange of crypto (e.g. ETH to WBTC) may be a taxable transaction in their jurisdiction. In certain jurisdictions, users may be able to recognise short or long term capital gains or losses when selling Sets they’ve acquired rather than after each rebalance. Because of the variety of outcomes based on jurisdictions, we are unable to provide a definitive answer to the tax treatment of TokenSets.
The security of our system is of the utmost importance to us. We recognise the complexity of the protocol, the difficulties in deploying issue-free software, and the responsibility of maintaining a value-bearing protocol. Therefore, we’ve made a considerable effort to ensure the system has been reviewed by top security firms such as ABDK and PeckSheild and heavily scrutinised line by line internally. We reached out to PeckShield for our audit, which you can see here:
Our Set Protocol contracts repository has 100% line and branch coverage over the span of over 840+ unit, integration and simulation tests. But you don’t need to take our word for it, every line of smart contract code for Set Protocol is open source, and we encourage technical community members to review and verify our code