Feb 19
MatrixETF FAQ
During the Open Test of MatrixETF process, there was quite a few users asking relevant questions about MatrixETF. This article summarizes those common questions below for better understanding by users.
WHAT IS ETF?
An exchange traded fund which is translated as (ETF) is a type of security that tracks an index, sector, commodity, or other asset, but which can be purchased or sold on a stock exchange the same as a regular stock.
DECENTRALIZED ETF:
This is based on the Blockchain technology which can track a basket of token assets like an index fund in the security. Also, the constitutional components of index are public and transparent.
Advantages of ETF:
- ETF is based on a smart contract without immediate, which is public and transparent. Being anonymous for 7/24,you can mint/Redeem/Trade it whenever you want. You can gain extra profits of farming, vault aggregator etc
- ETF shares may be able to provide an investor easy exposure to a desired market segment.
- ETF operation cost are low.
What’s is the discount and premium of ETF?
The ETF transaction price is called “Market Price” which depends on transaction of all the participants.
Since ETF can trade “Market Price” in second market and Mint/Redeem “Net Value” in primary market, once “Market Price” > “Net Value” we call it a Premium，once “Market Price” < “Net Value” we call it a Discount.
Meanwhile MatrixETF products will have premium and discount as well: Once the users do Swap/Buy, they use “Market Price”; Once the users do Mint/Redeem, they use “Net Value”.
Benefits of purchasing ETFs:
I’ll be listing below the benefits of purchasing ETFs;
- It reduce investment risk by diversified investments.
- Reduce the threshold and cost of investment
- Supported by blockchain technology, safe and efficient transactions
- Clear and transparent components, high tracking efficiency
- Arbitrage mechanism to balance Net Value and Market Price consistent
- Redeem whenever you want in the basket of assets.
The logic of Mint/Redeem
Multi Assets Mint:
- Once users enter the amount ETF which they want to purchase, APP will calculate automatically the amount of consistent tokens.
- Once you click Mint, the wallet will deduct consistent tokens to Smart Contract.
- Smart Contract will transfer consistent tokens to fund pool.
- Fund pool will transfer consistent amount of ETF to users
ERC20 Mint:
- Once users enter the amount ETF which they want to purchase, APP will calculate automatically the amount of consistent tokens.
- Once you click Mint, the wallet will deduct consistent tokens to Smart Contract.
- Divide ETH according to the proportion of fund constituent tokens and transfer them to smart contract.
- Smart Contract will transfer consistent tokens to fund pool
Fund pool will transfer consistent amount of ETF to users.
Redeem logic is exactly the opposite with Mint
About MatrixETF
MatrixETF is the next generation of decentralized ETF platform to run the cross chain, which goal is to establish a decentralized, automated, personalized and diversified portfolio for users, as well as help users easily enjoy long-term, stable and efficient financial services.
