Introducing Strategy Enabled Tokens
Today, we’re excited to introduce Strategy Enabled Tokens (S.E.T.? What a coincidence!), tokenized trading strategies facilitated by Set Protocol’s smart contract system. This is a major step towards our mission of making wealth creation tools accessible for everyone.
Intelligent portfolio management is a tedious and painful process. It includes manually updating personal positions on spreadsheets and periodically performing trades across multiple exchanges. Even well-intentioned, savvy traders fail to properly oversee their portfolios due to greed, non-action, or cognitive biases.
Existing portfolio management tools such as Wealthfront cannot be used for crypto assets, and are only available to U.S. residents. Fund managers (e.g. Multicoin, Scalar) or trading firms (e.g. Circle, itBit, Cumberland) are available only to select, accredited investors, have high minimums, and high fees. Devising your own customized strategies requires technical knowledge and substantial time to program and maintain systems.
In an ideal world, wealth creation tools should be available for everyone no matter one’s age, geography or current financial situation. These tools should work for any asset — whether securities, commodities, or collectibles. They should be automatic and execute consistently for anyone’s strategy.
Strategy Enabled Tokens
With Strategy Enabled Tokens, setting up your portfolio to mechanize a trading strategy or utilizing best practices such as asset allocation and rebalancing is as simple as acquiring an ERC20 token. The process of realigning the weights based on a predefined strategy is performed via smart contracts with no required action from the holder.
With these Sets,
- Crypto enthusiasts can easily get exposure to passively managed index products that periodically rebalance
- Sophisticated traders can automate trading strategies like buy the dip, long/short, stop loss, or dollar cost averaging.
These Sets allow any customized strategy to be programmed into a smart contract from simple equal weighted index rebalances to complex quantitative strategies. Since Sets are ERC20 tokens, they can be exchanged on 0x, Kyber, or Uniswap, shorted using dYdX, lent out for interest on Compound / Dharma, or potentially used as collateral to borrow on MakerDAO.
How it works
Each Strategy Enabled Token is its own smart contract that conforms to the Rebalancing Set and ERC20 interfaces. Instead of a separate user deciding the next allocation, all the logic and conditions for when, what and how to trade is codified into smart contracts.
These conditions can be as straightforward as “if the price of ETH goes above $1,000, then sell everything into 100% DAI” or as complex as “if the Relative Strength Index (RSI) of BTC falls below 30 on $10B of volume, then convert everything into BTC.”
To determine condition validity, manager contracts can utilize on-chain data sources such as price feeds (e.g. Maker), blockchain state, oracles (e.g. Chainlink), token curated registries, or even prediction market outcomes (e.g. Augur).
Anyone can program their own customized strategy by writing a rebalancing manager smart contract. Therefore, manager contracts can be generated to capitalize on any market condition utilizing any strategy, any data source, and any ERC20 asset.
What we’ve outlined is not just a conceptualization. We are close to protocol code-completion and are at the tail end of code audits from top security firms including Trail of Bits and ChainSecurity. We’ll soon be sharing details about the technical underpinnings in a separate whitepaper and follow-up blog posts and also our plan for a MainNet launch.
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