Since publishing the Set Protocol white paper in November ’17, we’ve received an overwhelming amount of requests from both consumers and developers seeking everything from diversified investment opportunities to trustless rebalancing. With similar community interests mounting for other bundling projects such as BSKT, CryptoBaskets, and ERC-998, it’s clear the ecosystem is seeking a canonical means for composition.
We launched Tokensets on MainNet a month ago along with three introductory Sets to showcase the idea of combining ERC20 assets into a higher order token. We believe that token cardinality will expand dramatically as securities, real world assets, and digital goods are tokenized, bringing about limitless Set compositions.
Our mission is to enable anyone to create and utilize asset abstractions that are more valuable than the underlying parts, and we wanted to take a moment to share with you a collection of ideas and features that we’re working on to support the next wave of tokenizations.
New Contract Architecture
The original implementation saw all Set functionality concentrated in a single contract. This limited our ability to scale and support new features as we grappled with unnecessary deployment gas costs, repeated approvals, and logic duplication.
Our new architecture includes a supporting cast of contracts designed to shift reusable logic out of SetToken which unlocks features such as:
- Issuance Orders: which allows anyone to easily acquire Sets by tapping into liquidity from exchanges
- Generalized Set Creation that enables creation of Sets with additional properties beyond simple batching of ERC20 tokens
- Rebalancing which empowers users to passively manage their Sets in a completely trustless manner
Acquiring required component tokens in valid quantities is a cumbersome prerequisite to bundling a Set. Users often own some of the components in their wallets, but have no clear path to obtaining the rest. With issuance orders, actors can tap liquidity from various decentralized exchanges to help users acquire missing components.
An order’s lifecycle consists of three steps:
- Users create an issuance order on an off chain Set relayer expressing the quantity of a Set they want to issue and which components they are missing in exchange for an asset such as WETH or Stablecoin.
- Arbitrageurs gather liquidity for the Set components from exchanges in the form of open 0x orders and Kyber swaps and submit them along with the issuance order to our contracts.
- The exchange orders and Set issuances are executed atomically. Arbitrageurs collect any WETH or Stablecoin that did not go towards exchanging for components while the relayers receive fees for facilitating the transaction, and users received the issued Sets.
We’re excited about creating an easier avenue for consumers to access Sets. This ultimately leads to greater liquidity across decentralized exchanges for Set component tokens that are otherwise challenging to acquire.
Generalized Set Creation
We believe that our protocol should be open and empower users to create any abstractions that they find meaningful. This started with allowing anyone to create basic Sets that tracked compositions of ERC20 tokens. We plan on supporting new enhanced classes of Sets such as:
- Regulatory Compliant Sets: securities baskets comprised of R-Token and Polymath tokens that adhere to securities regulations, KYC/AML policies, and tax laws
- Sets with Fees: Sets where issuances carry small fees that accrue to the creators, rewarding them for devising desirable compositions
- Sets of Non-fungibles: fractional ownership of collections of tokenized real-world assets such as art and title deeds
Think we’ve overlooked an interesting application? Let us know what abstractions you’d like to see Set Protocol support.
Casual investors seek exposure through baskets of crypto-assets that track movements of the market without needing to actively rebalance on a regular basis.
With Set Protocol, anyone will be able to create Rebalancing Sets and dictate the terms of redistribution — everything from rebalancing cadence to fees and redistribution method.
Investors can acquire stakes of these Rebalancing Sets as ERC20 tokens and instantly gain exposure to the underlying components that are periodically rebalanced trustlessly.
Investors can reap the benefits of traditional ETFs without having to trust any third parties with custody or rebalancing execution.
For a deeper look into the trading mechanics and management levers, take a look at our product teaser for rebalancing.
Stay tuned as we continue to share more details including a revised white paper and release road map. We’re excited to see what ideas the community has for Set Protocol. As always, we love hearing your thoughts and appreciate all feedback. Be sure to follow us on Twitter to get the newest updates. If you’re interested in collaborating, gives us a ping on Telegram!