What Are Crypto Baskets?
In the ‘regular’ world of investing with fiat currencies, so-called ‘basket trading’ lets people put their money into a variety of different stocks all at once. It’s a way to diversify investments without having to buy individual stocks one at a time, and it also allows investors to personalise where they put their money.
That concept has now come to the world of digital currencies with the emergence of ‘crypto baskets’.
Crypto baskets let investors buy or sell an assortment of cryptocurrencies more simply and easily than having to trade in each one individually. And with the total number of cryptocurrencies approaching 2,000, there’s a very large variety of ways to assemble a basket.
“With ICOs and the digitisation of assets, the world is being tokenised,” the basket-focused startup Set Protocol states on its website. “We may find that in the next two decades that we have millions or billions of tokens. However, there are pains with dealing with the complexity of more tokens.”
A basket approach, Set Protocol says, not only makes it easier to trade in multiple cryptocurrencies at once, but it reduces the high transaction fees that would normally accompany an assortment of trades involving many different types of tokens. Baskets also make life easier for clients, investors and developers, while eliminating the “cognitive overload” that comes from having to manage multiple cryptocurrency investments, Set Protocol CEO Felix Feng noted in a November 2017 whitepaper about his organisation’s specification.
“In the traditional financial industry, we have abstractions like the American stock market indices (e.g. S&P 500, Dow Jones Industrial Average (DJIA), etc.) that represent hundreds or thousands of stocks,” Feng wrote. “In the insurance industry, we think of an insurance plan as a set of services we expect to be covered for when paying insurance premiums. We do not worry about the specific services when purchasing the plan. For cryptocurrencies, we can envision an abstract token or meta token, a single token representing a basket or portfolio of its underlying tokens.”
So far, 2018 has seen a considerable rise in the number of crypto basket options available to investors. While some, such as the Coinbase Index Fund, are open only to those with deep pockets (the minimum investment is $250,000), Daily Crypto Basket allows much smaller investments, with a new basket and a limited number of spots available each day. Set Protocol expects to launch its consumer-focused basket trading platform, TokenSets, sometime soon.
Daily Crypto Basket explores a wide range of basket types and asks users to vote on the ones they’d like to see offered in the future. Options include everything from sub-$1 and quantum-resistant offerings to baskets that are “made in China” or based on influencer picks.
When it goes live, Set Protocol’s TokenSets will allow users to design and create their own Sets (baskets) of any ERC-20 (Ethereum-compliant) tokens.
“We want to allow the developers and creatives the ability to build Sets they think people will want,” Set Protocol said recently in an interview on Medium.
However, Bitcoin.com reported recently: “As a relatively new trading option, crypto baskets have yet to prove themselves or to gain mass adoption. They also face competition from tokenised projects that enable traders to follow the profile of experienced traders and to have their trades automatically emulated, with all profits paid back in the form of yet more tokens. For now, crypto baskets are still viewed as ‘starter packs’ best suited to new traders.”
