AMA Highlights — dHEDGE
By Daniel Dal Bello, Director.
January 27, 2021–8 min read.
On Tuesday 26th January, we welcomed Henrik Andersson from dHEDGE into the Hillrise Group Telegram chat for an AMA. Henrik is a cofounder of dHEDGE and mStable.
dHEDGE is a one-stop-shop for decentralized, non-custodial managed investments on the Ethereum network. Users can put capital to work in different strategies based on a transparent track record on the dHEDGE app.
Managers make decisions on behalf of a pool of funds — and they compete for the top spot on the dHEDGE leaderboard.
Investors can enter and exit investment pools at any time by interacting with a smart contract, and thanks to dHEDGE’s analytics and the transparency of the Ethereum blockchain, investors can track exactly what trades a manager has made.
In this post, we have compiled key questions and answers from the event.
Daniel Dal Bello
Hi Henrik and thanks for joining us. With us both being in Australia, we have naturally taken an interest in Synthetix to some extent — you more so than me it seems.
Looking forward to getting to know the dHEDGE platform and vision more tonight.
Can you talk to us about your introduction to the industry, your past ventures in blockchain, and how you can to be working on dHEDGE?
My background is in traditional finance. I spent 15 years in quantitative equities and institutional equity sales. I discovered cryptocurrency through Bitcoin in 2013 — probably the first mainstream wave.
After setting up a crypto-venture in Singapore I moved to Australia where I co-founded a crypto-fund called Apollo Capital. Since then I’ve also cofounded two DeFi protocols, mStable, and dHEDGE, now I split my time between dHEDGE and Apollo.
We have been working on dHEDGE for around 1 year now and launched our public mainnet 3 months ago. dHEDGE, as you might know, is a decentralized asset management protocol, it’s built on Ethereum and leverages a protocol for synthetic assets — Synthetix.
Daniel Dal Bello
As dHEDGE gains further traction, no doubt a few objectively successful public fund managers will emerge, attracting significant AUM. We can imagine that getting to a point where they have to take it private for the sake of keeping their strategies effective, only allowing contribution by whitelisted addresses potentially.
If we keep extending that logic we could say that eventually there’s a possibility that the majority of public funds on dHEDGE may be underperformers, driving users away from the platform.
This is obviously quite an edge case but have you given this any thought and what mitigating actions could be taken to address this?
I think this is quite unlikely to happen. Since dHEDGE is an open platform, I believe you will always have a global competition to climb our leaderboard — the traffic is coming to the leaderboard and that's where managers want to be seen and rewarded for being great traders.
Having said that, we do support whitelisting. And as for ‘private’ pools, so far that option hasn’t been very popular.
I have been following dHedge for a couple of months and I find the idea of memetic trading to be very pragmatic. I think the next wave of retail investors who want exposure to DeFi blue chips or to hedge crypto-assets will definitely do it here.
I am new to the SNX protocol, but on a high-level would you say “dHedge is the eToro of cryptocurrency”?
I think it’s great if investors and managers can be empowered and operate on an open platform/protocol like dHEDGE where the most skilled managers will rise to the top. As an investor, it might be more important to do your own due diligence, but we are trying to provide the tools for that. Just today we started showing a downside risk metric for example.
As for dHEDGE being an eToro — I guess the big difference is that in cryptocurrency everything is open and collaborative. dHEDGE is not a company, it’s a software protocol that enables non-custodial trading.
In eToro, you can see what the fund manager is investing in. It’s open for everyone to judge and value.
Similarly for ConvexMonster to take positions you can see his portfolio online.
Yes, that’s true, I guess the openness is bigger than that in cryptocurrency, for example, anyone could build a user interface to dHEDGE, the source code is out there, that’s vastly different to something like eToro.
It’s also open in the sense that there is no sign-up, it’s all driven by software, anyone with access to the internet can access DeFi, anyone can build an app that plugs into dHEDGE etc.
Could you see the dHEDGE model working in the future in the context of securities (stocks, debt) once security tokens start to gain more traction?
We do hope to enable more asset classes, at least synthetic representations of them. Already today you have not just cryptocurrency but also commodities, FX and two equity indices available on Synthetix.
Daniel Dal Bello
As you say, currently you’re limited to the synthetic assets available within the Synthetix ecosystem. At the moment, there isn’t a hugely broad variety of assets and some managers have expressed these limitations.
For instance, many DeFi tokens are unavailable and managers are largely limited to trading the DEFI index token to gain exposure.
When, or how do you propose a wider variety of assets might become available and do you think this will prove to be a nexus for the platform’s success?
Yes, that is definitely a big request from our users. Synthetix will very shortly enable more assets, a bunch of the familiar DeFi names are coming. I think over time the universe will expand quite dramatically.
A year from now I believe it will look very different.
Similar to how dHEDGE is being built on top of Synthetix, do you see any possibilities or opportunity for other projects to build on top of dHEDGE in the future?
Yes, so an example of that openness is that we built dHEDGE ‘on top’ of Ethereum and Synthetix and we didn’t have to ask anyone for permission to do that. Synthetix in turn are using Chainlink oracles as an example.
I believe if we’re successful in building a protocol for non-custodial asset management, then you will see others integrating dHEDGE as well.
Daniel Dal Bello
You’ve recently launched your performance mining program to incentivize users to use the platform and managers for their good performance. With just over a month to go, can you tell us how successful the program has been so far? (e.g. number of stakers, growth rates, conversations of running another round of performance mining)
Yes, so how it works is that if you invest on the dHEDGE platform you get daily rewards in our governance token DHT.
5,000 DHT is distributed on a daily basis. The only requirement is that you invest in a pool that has been active and have a positive rating — they are marked with a little mining symbol on our app. I think it’s been quite successful in bringing interest to our platform. We are definitely already planning for V2 of performance mining.
For V2 what I think we would like to do is tie the token economics in a stronger way to the platform.
Last night we launched DHT staking for governance and rewards. I think what we will do for V2 is that if you’re a DHT staker you can actually earn a higher performance mining award — this way you get even more benefit to being a DHT staker on dHEDGE.
Also perhaps we should do it a bit more competitively. Today there are a lot of pools eligible for performance mining, maybe we give more benefit to only the very best managers.
One of your goals for 2021 is attracting more influential pool managers. We already took note that NGC Ventures are part of the platform — yet they aren’t very active in regards to either communication or trading just yet.
What kind of pool managers do you want to target? Funds, influencers, traders? Do you intend to create a more synergistic environment for both these pool managers and the traders on the platform, if so how?
Yes, so we are actually planning to start another manager attraction campaign. I think the last one we did was quite successful where we had major crypto-investors like DeFiance, Framework, Alameda, Divergence, Mechanism etc invest in these managers alongside the DAO.
We definitely want to bring more high profile but more importantly good managers to the platform, so we’re excited about that — hopefully, there can be an announcement in the next couple of weeks.
Daniel Dal Bello
Would also be curious to hear to what extent you’re exploring tools to not only incentivize pooling funds for pool managers but to also implement an educational aspect for the people who participate in pools. In some way that they themselves can improve their own perception of the blockchain space and trading?
That’s probably not something we have spent a lot of time on yet. What we do want to strengthen are the social aspects around the platform.
Today we have manager posts, which I think is a great feature. I think we can improve it though. Today it’s a one-way communication from the manager to their investors. In the future, we can make it more interactive. We have already seen managers create their own Telegram and Discord groups, but I think we can help create the tools to facilitate some of that
Daniel Dal Bello
As the industry is generally albeit slowly moving towards an interoperable ecosystem — are you planning to deploy dHEDGE on other blockchains as well?
We also noticed that you’re looking to enable Optimism in the future. Why did you decide to go with Optimism over other available layer-2 solutions, and how is development on this front coming along?
We are lucky that Synthetix has very advanced plans for Optimism and they already enabled staking on OR. We are currently communicating with Synthetix about the transition of trading to OR. We still don’t have a firm timeline for dHEDGE.
I think the experience for dHEDGE users will be amazing on OR, currently, gas costs are one of the main problems we are facing. Having said that, we will very shortly roll out gas optimization on layer-1 which will help our smaller investors a lot, the first phase will lower gas costs by over 50%.
As mentioned in the dHEDGE documentation, significant decentralization will be required to truly become unstoppable and censorship-resistant. In the meantime, do you foresee any regulatory challenges popping up for the platform and how do you plan to approach it?
Definitely dHEDGE needs to become more and more decentralized, and hopefully that can accelerate in 2021 in order to become an unstoppable protocol.
DHT staking is a first step in that direction where the holders of DHT will be able to make certain decisions. We are also planning to decentralize certain functions where you have voting on how funds are spent in terms of ecosystem growth etc.
I believe dHEDGE is in relatively good shape considering we only went live 3 months ago!
Daniel Dal Bello
Before we wrap up, what’s something you’re looking forward to in the next 6 months in the world of DeFi?
Many more projects moving to layer-2— and hopefully, there will be some concentration of projects on something like OR. I think gas costs are really holding the DeFi ecosystem back at the moment, if that can be solved, it will be amazing for users and the true potential of DeFi will be obvious.
Hillrise Group supports ambitious Web3 startups with early-stage venture capital and fundamental research.
dHEDGE is a non-custodial, decentralized, asset management platform for synthetic assets on Ethereum.