4 Powerful Financial Products Possible with Set and bZx

Felix Feng
Jun 27, 2019 · 3 min read
Image for post
Image for post

One of the defining characteristics of DeFi is the interoperability, composability, and open collaboration that it enables. Some of the most exciting combinations lie in the intersection of Set, a protocol for tokenized asset management strategies, and bZx, a margin and lending protocol with tokenized positions. When combined, powerful financial products are possible. Here are some of our favorites:

Interest Bearing ETFs and Strategies

Set currently offers Buy and Hold and Range-bound Strategies for both ETH and BTC. Currently these strategies preclude traders from capitalizing on the time value of their holdings. By replacing the current assets underlying these strategy tokens with Fulcrum iTokens and Compound cTokens, it’s possible to no longer have to choose. Traders can capitalize on the time value of their money while executing trading strategies. This gives traders the best of both worlds with minimal downsides.

The Yield Seeker Basket: A DeFi Rebalancer

There are now numerous attempts in the industry to create a product that can automate the process of rebalancing funds to the DeFi lending opportunities with the highest yields. A Set Yield Seeker Basket can automatically allocate and rebalance among the available tokenized interest bearing assets. These are currently Fulcrum’s iTokens and Compounds cTokens. Here’s how it would work:

  1. A Dai Yield Seeking Set, for instance, reads on-chain interest lending rates of Dai iTokens and Compound cDai.

Inverse ETFs & Leveraged ETFs

In the traditional financial system ETFs are popular among actors seeking diversified exposure through a single instrument. By placing a variety of popular existing ERC20s together in a basket, a variety of ETFs could be constructed with Set Protocol. However, up until now, those baskets could only provide long exposure without leverage. Fulcrum’s tokenized short and leveraged tokens allows the construction of Inverse ETFs composed of short tokens or Leveraged ETFs composed of leverage long tokens. These sorts of token baskets could be useful for individuals as a simple directional trading strategy or to hedge existing exposure for tax purposes.

Structured Products

A structured product is a combination of two or more instruments that comprise a single asset. Structured products allow the creation of highly customized assets for any type of risk-return objectives, traditionally with the use of derivatives — and can range from simple to highly complex.

For example, an Ethereum enthusiast may want a structured product with long exposure to Ether and short exposure to Bitcoin. With wrapped Bitcoin, Fulcrum’s short tokens, and Set Protocol, the Ethereum enthusiast Set can be created which is made up of Ether and short Bitcoin. With Ethereum-base structured products, it becomes significantly easier for someone to get exposure to products that meet their specific needs.

Learn more about Set and join our community

TokenSets | Website | Medium | Twitter | Telegram | Slack |

Thanks to Kyle J Kistner and Richard Liang for helping to put together this post.

Set Labs

Grow your crypto using automated asset management…

Felix Feng

Written by

Founder of Set. Investor @TuringCap. Previously @Radius & @21.co. B.S. @UCBerkeley

Set Labs

Set Labs

Grow your crypto using automated asset management strategies

Felix Feng

Written by

Founder of Set. Investor @TuringCap. Previously @Radius & @21.co. B.S. @UCBerkeley

Set Labs

Set Labs

Grow your crypto using automated asset management strategies

Medium is an open platform where 170 million readers come to find insightful and dynamic thinking. Here, expert and undiscovered voices alike dive into the heart of any topic and bring new ideas to the surface. Learn more

Follow the writers, publications, and topics that matter to you, and you’ll see them on your homepage and in your inbox. Explore

If you have a story to tell, knowledge to share, or a perspective to offer — welcome home. It’s easy and free to post your thinking on any topic. Write on Medium

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store