Introducing the concept of DeHive CLUSTER✨🐝
Guys, there are a lot of changes that will come to our hive very soon. Today is the day to introduce something that is bigger than DeFi protocols indexing and makes the concept of an index much more extensive and deliberative.
Let’s meet the CLUSTER!
The extensively spread ecosystem of DeFi includes several layers of financial instruments. That is true even if we include only the Ethereum family of protocols, not even mentioning the newest ones that have come to BSC or Polygon. So, where is the place of DeHive in this majority of blockchain-based systems?
We have several fundamental protocols, which generate profit from the operations performed over them. These include Compound, Uniswap, CurveFi, Aave, Alpha Homora, etc. Each of them provides a specific financial instrument, which implements one of the stock-market cases. Lending, exchange, leverage trading — all of them charge fees for a particular service, thus allowing you to earn more while providing liquidity.
Staking pools and platforms
The next level is presented by staking platforms and pools — protocols that base the outcome on the minted and distributed liquidity. Projects from this level depend on the locked liquidity — governance tokens from the core protocols or even the LP tokens locked. And that gives space to more farms dedicated to the same-level protocols. Users can stake tokens to get more tokens from another project and repeat that several times. Closely connected staking pools are the actual foundation of the whole yield farming activity.
Yield farming vaults
Of course, there is the next level — the protocols that use all the underlyings we mentioned before and provide the infrastructure for convenient yield farming. These are vaults from major conglomerates like Yearn or Autofarm, the set of secure storages that lock your liquidity and make it work. So, if another protocol offers you “free” liquidity of its token — be sure, there will be a vault created which aggregates the deposits from individual farmers.
Asset management protocols and aggregators
Asset management dApps allow you to track and manage a bunch of your assets in one place with minimum interactions. They are often pretty easy to use and don’t require too much knowledge to start which makes them very convenient for new users. Zapper, Zerion, or DeFi Saver can be good examples of such. Just check our last article about portfolios and asset management dApps, and be sure that the appropriate aggregator will take it if there is a place for the aggregation.
So, where is the crypto index situated in all that complex layered system? Well, we see it as a uniting mechanism that connects several layers.
Let’s take a deeper look
What is the definition of the perfect financial instrument? First of all, it should be profitable, of course. Second, it should bring economic or functional value. And third, it should be convenient and simple.
If we perceive the crypto index as a financial instrument, we will see how it matches all these characteristics.
- The crypto index unites several assets under the hood and enables using a set of them at once — that is more convenient than working with separate assets.
- It has an understandable and straightforward interface that enables the use of several underlyings as one token has a definite advantage over the protocols from the core layer.
- Due to the balanced set of underlyings, the index grows together with the market, and in most cases, users don’t have that much loss as in the case of several different assets. Yet, the additional profit comes from the yield farming strategies connected to the locked liquidity. Such a combination provides the advantage over portfolios and single yield farming protocols.
- The crypto index defines a specific part of the DeFi market and provides value by itself. No LP token or a share in a pool can provide that.
Therefore, the authentic and truly decentralized crypto index can unite all the best from asset management protocols and yield farming vaults while combining features from core protocols and staking pools to maximize profit from your chosen set of underlyings.
How to strengthen and amplify the index?
Nevertheless, the current market suffers from high volatility, bearish activities, and an overall decrease. In such conditions, we can see that pure indexes may underperform.
There are more reasons, which may lead to a false interpretation of crypto indexes: incorrect construction (from non-synergy protocols, for example), unreasonably including protocol’s native token, unreasonably focusing on the single-token ecosystem (for instance, on Yearn products only), trading upon the locked underlying.
That is why one of DeHive’s missions is to show all the strengths of the index, use them at the maximum score, and keep its financial and economic value.
In order to strengthen the index, the DeHive team constructs them from an analytical perspective. Thus, every index represents a DeFi cluster, the set of protocols and assets with synergy in between. Even more, since the index is wrapped into the cluster, we can optimize the value and proportions of the underlyings with a specific rebalancing mechanism [do not confuse it for AMM rebalancing]. Such an approach allows us to keep all the features of the index within the flexible frame of the crypto cluster.
That is why the DeHive cluster performs better than the set of separate assets. Such a way of operating has higher characteristics than the standard portfolio management tools:
- the cluster allows you to use the synergy of the protocols to keep the portfolio stable in an automated way;
- the rebalancing mechanism optimizes the numbers of assets in your portfolio in order to achieve the weighted balance. On the opposite of underlyings trading, the optimization mechanism aligns the proportion to keep the value of the index stable;
- the cluster lock mechanism enables activating the profit accumulation strategies built upon yield farming protocols — it strengthens the portfolio of the user by the generated income;
- Join the cluster and assemble the underlyings to form the stable, organized assets’ portfolio within the single instrument;
- use cross-chain opportunities to assemble several clusters in different ecosystems, so you have the coverage of all the promising DeFi segments.
Thus, DeHive can amplify the value and performance of the index by turning it into the cluster — the financial instrument which keeps the economic value of the index, the optimization abilities of the asset management tool, and the profit generation of the yield farming strategies. In other words, the crypto cluster is a more powerful and evolutionary stage of the crypto index.
By clustering the DeFi market, we can achieve the set of highly performing instruments, covering several segments of the current ecosystem. Even more — following the cross-chain trends opens new abilities of the cluster’s usage, their assembling on several chains, amplification in several directions, and bringing more and more value into the wrapped index behind the cluster.
In such a way, DeHive becomes the multi-chain asset portfolio amplifier that creates, organizes, and optimizes reliable sets of tokenized assets with efficient yield farming strategies.
Guys, in DeHive our main aim is to build a better DeFi. We see a big potential in smart DeFi asset management and perceive the concept of a cluster (as the amplified form of crypto index) as a better representative for this. By this move, we want to lay the foundation for a new and more developed DeFi instrument and we rely on your support.