DeFi Spotlight — Set Protocol
Set Protocol is a DeFi project that allows anyone to leverage automated trading strategies simply by holding ERC20 tokens in their wallet. Whether its following a “robo-set” or an expert trader, Set Protocol allows anyone with a cryptocurrency wallet to leverage the power of automated trading.
The non-custodial design combined with transparent on-chain rebalancing of the sets mean Set Protocol’s social trading and robo-sets minimize counterparty risk for users. Compared to centralized competitors like eToro, Set also has very low fees.
Why Automate?
Most of us make mistakes while trading, either out of lack of experience, or because we let our emotions affect our trading. Even if your trades are 90% good, that one bad trade can wipe out months of profits. Set Protocol offers regular crypto investors an opportunity to trade more intelligently, by either following a basic automated strategy or letting an expert trader do trades for us.
Robo Sets
Robo Sets are ERC20 tokens that have an automated trading algorithm managing the underlying assets. Ideal for users with a basic understanding of Technical Analysis, these tokens have their underlying assets automatically rebalanced when technical indicators are tripped.
Social Trading
Set’s social trading sets are even more interesting. Similar to other social trading platforms like eToro, users can allow their trades to follow the trades of a certain person. Generally speaking, these are “expert” traders, but they can also be crypto influencers or other personalities.
Interview with Set CEO Felix Feng
Being in San Francisco this month, I took the opportunity to sit down with Set Protocol CEO and Co-founder Felix Feng to learn more about Set — how it started, what its goals are, and its upcoming plans.
How did Set Protocol start?
Set Protocol was born at ETHWaterloo 2017. At the time I was working at a startup as a software engineer. I was heavily into crypto, and was going to ETHWaterloo to hack on a web3 project about TypeScript. But a wave of inspiration hit me on the plane ride over, and I ended up creating the beginnings of Set Protocol instead.
That year, I had been participating in some ICOs, and the financial protocols like 0x and dydx really stood out to me. Reading about dydx blew my mind. It made me realize you could actually create sophisticated financial products using smart contracts.
I had originally been going to ETHWaterloo to hack on web3 and Typescript, but on the plane ride over I realized that no one was working on a fully decentralized index fund. I architected this concept on the flight and ended up being so compelled by this idea that I ended up ditching my original team and created the first version of Set during the hackathon.
I was able to present this idea to Joe Lubin, Will Warren of 0x, and Linda Xie of Scalar Capital at the event and even formally presented to Consensys at a later time. I was offered an EIR position there, but in the end I decided to start Set on my own instead.
Have you always been into Crypto?
I heard about crypto in 2013, from a friend. Soon I was trading it. I remembered buying $1000 worth of bitcoin and later selling it for a small profit. It was just a $10 profit, but it got me hooked.
In 2014, I attended Bitcoin 2014, a big annual Bitcoin conference. There I saw all the bigshots from Coinbase, Charlie Lee, etc. I left the conference thinking wow, the technology behind bitcoin is going to change the financial and legal industries the same way the Internet did with media and communications.
I left the conference thinking Wow, the technology behind bitcoin is going to change the financial and legal industries in the same way the internet did with media and communications, so I thought this is gonna be huge — I need to get involved.
How did you get involved?
I actually got involved with crypto originally from the financial side, and later transitioned to engineering. So I studied business at UC Berkely, and after I graduated I worked in finance. It was then that I met Paul from Pantera Capital. In my spare time, I helped Pantera look at companies such as exchanges and wallets. We also looked at companies such as Civic and Filecoin.
After helping Pantera part-time, I joined 21.co (now Earn) full-time. It was a Bitcoin mining company at the time, and I helped them make the transition from mining datacenters, to a Raspberry Pi Product, to Earn, which is a paid email service.
In 2016 I actually was so turned off of crypto by the scaling debates that I decided to take a break from it. At the time I was a Bitcoin maximalist. It was during this time that I took a coding bootcamp and actually started working at a startup as a software engineer. While I was at this coding job in 2017, Paul from Pantera told me “You should look at Ethereum.” And that led me down a rabbit hole that has now led to Set.
How has Set been doing?
In early 2018 we started fundraising and we ended up doing a seed round with some of the best investors in Silicon Valley that were doing crypto at the time. This included Craft ventures, VY Capital, DFJ, Social Capital, Kindred, and a number of other angels as well. This initial capital helped us build out, and we launched on mainnet in April of 2019
Since then, our protocol has grown from 0 dollars to about 5.7 million USD AUV ( AUV stands for Assets Under Vault — as those assets are controlled through smart contracts)
You recently launched Social Trading — how has that been doing?
What we launched recently is social trading, which is a platform for experts to share their trading strategies or fund strategies, and they can monetize people who follow them. People who aren’t that experienced at investing or trading can follow someone who is more experienced and leverage their trades.
That’s been doing really well.
We launched with 13 traders about a few weeks ago, and 18 sets. These traders are very powerful for us because they end up spreading the word about Set in their communities. For instance, Aaron Kruger has done really well. In two days he was able to get $500,000 into his set.
Social trading has also expanded our market internationally. One of our star traders is Fidelitas Lex. He is based out of Turkey and has 36,000 followers on Twitter. When we onboarded him, we saw our customer base shift from being mostly Western to having Turkey as our second-largest market. It made us realize that social traders are really important for us, not just in pure number figures but as an opportunity to expand Set to other countries.
We see ourselves in some ways as a gateway to DeFi, and Social Traders can help that mission. Most people will not learn about DeFi through compound or maker. These products are too esoteric for most retail users. Instead, they learn about these products from people they already trust.
For example, if you’re already watching somebody on youtube and they share something about their set or token sets, you’re going to trust them, and they’re going to speak your language. They’re gonna share your culture, your ideals, and values, and those are the people who are most successfully going to share with what DeFi projects like Compound, dydx, Set are about and how they can benefit you.
That's what we believe and that's why traders are so important to us. We hope to onboard traders from all over the world who are experts, who understand the value proposition of this new technology and are able to communicate it to their following.
That kind of global education and outreach is something DeFi isn’t very good at today. DeFi is still mostly Western, very US-centric and English speaking. It hasn’t developed the ability to penetrate other cultures yet, and that’s something we at set are very focused on trying to do — onboard the next 10k, 100k people into DeFi
If you liked this article, please show appreciation by 👏ing!
More article on DeFi:
