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Author: Nomos Labs Source: mirror
Introduction: How does DeFi do it from geeks to new favorites on Wall Street?
In the past few years, a hot word has been constantly mentioned in the financial circle – DeFi (decentralized finance).A few years ago, when geeks just started building some weird financial tools on Ethereum, no one expected that these “little toys” would eventually attract the attention of traditional Wall Street financial tycoons.
Looking back at 2020 to 2021, DeFi has risen rapidly at a shocking speed.At that time, the total market locked up position (TVL) soared from more than one billion US dollars, and at its peak it reached 178 billion US dollars.Protocols with strange names like Uniswap and Aave have become internet celebrity projects in the global crypto industry for a time.
However, for most average investors, DeFi is always like a trap-filled maze.Wallet operation is a headache, and smart contracts are difficult to understand like Mars, not to mention that you have to worry about preventing assets from being taken over by hackers every day.Data shows that even though DeFi is so popular, the proportion of investment institutions in traditional financial markets that actually enter the market is less than 5%.On the one hand, investors are eager to try; on the other hand, they are reluctant to take action due to various thresholds.
But capital’s sense of smell is always the sharpest.Starting from 2021, a new tool specifically designed to solve the problem of “how to easily invest in DeFi”, which is the Decentralized ETF (DeETF for short).It integrates the concept of ETF products in traditional finance and the transparency of blockchain, retaining the convenience and normativeness of traditional funds, and taking into account the high growth space of DeFi assets.
It can be understood that DeETF is like a bridge, with one end connected to the “difficult to enter” DeFi New World, and the other end connected to the vast number of investors who are familiar with traditional financial products.Traditional institutions can continue to invest with their familiar financial accounts, while blockchain enthusiasts can easily combine their investment strategies like playing games.
So, how did DeETF gradually emerge with the growth of DeFi?What kind of evolution has it gone through, and how can it become a new force in the field of on-chain asset management step by step?Next, we will start with the birth of DeFi and talk about the story behind this new financial species.
Part 1: From DeFi to DeETF: The History of the Rise of On-chain ETFs
(I) Early Exploration (2017-2019): Those initial attempts and the foreshadowing
If DeFi is a financial revolution, then its beginning must be inseparable from Ethereum.Between 2017 and 2018, several early projects on Ethereum, such as MakerDAO and Compound, showed the world the possibility of decentralized finance for the first time.Although the ecological scale at that time was still very limited, novel financial gameplay such as lending and stablecoins had already set off a small wave in the geek circle.
From the end of 2018 to the beginning of 2019, Uniswap emerged and provided an unprecedented “automated market maker (AMM)” model, allowing people to no longer be tortured by complex order books, and from then on “transactions” have become much easier.From 2017 to 2018, MakerDAO and Compound demonstrated the possibilities of decentralized loans and stablecoins.Subsequently, the automated market maker (AMM) model launched by Uniswap in late 2018 and early 2019 greatly simplified on-chain transactions.By the end of 2019, DeFi’s TVL was close to $600 million.
At the same time, the attention of traditional finance has also quietly begun.Some keen financial institutions have quietly deployed blockchain technology, but at this time, they are still troubled by complex technical problems and cannot truly participate.Although no one clearly proposed the concept of “DeETF” at that time, the urgent need for a bridge between traditional funds and DeFi has begun to emerge at this stage.
(II) Market explosion and concept formation (2020-2021): The night before DeETF debut
In 2020, a sudden outbreak of the epidemic changed the direction of the global economy and also prompted a large amount of capital to flow into the cryptocurrency market.DeFi exploded during this period, and TVL jumped rapidly at an astonishing speed, from $1 billion to $178 billion a year later.
Investors flocked in so much that the Ethereum network was blocked, and even an extreme situation of transaction fees exceeding US$100.A series of dazzling new models such as liquidity mining and income farms have made the market hot quickly, but it also exposed a huge threshold for user participation.Many ordinary users sighed: “It’s much harder to play DeFi than to trade stocks!”
At this time, some traditional financial companies began to keenly capture opportunities.Canadian listed company DeFi Technologies Inc. (stock code: DEFTF) is a typical example.This company was originally doing traditional business that had nothing to do with encryption, but it decisively transformed in 2020 and began to launch financial products that track mainstream DeFi protocols (such as Uniswap, Aave). Users can participate in the DeFi world as simple as buying and selling stocks on traditional exchanges.The emergence of this product is also a sign that the concept of “DeETF” has officially emerged.
At the same time, the decentralized track is also quietly taking action.Projects like DeETF.org have begun to try to directly use smart contracts to decentralize the management of ETF combinations, but the attempts during this period are still only in the early stages.
(III) Market reshuffle and model maturity (2022-2023): DeETF formalized
The popularity of DeFi has not lasted for too long.At the beginning of 2022, Terra collapsed and FTX went bankrupt. This series of black swan events almost destroyed investors’ confidence.DeFi market TVL fell directly from US$178 billion to US$40 billion.
But crises often come with opportunities.The violent market fluctuations have made people realize that the DeFi field urgently needs safer and more transparent investment tools, which has actually promoted the development and maturity of DeETFs.During this period, “DeETF” is no longer just a concept, but gradually develops into two clear models:
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Traditional financial channels are further strengthened: DeFi Technologies and other institutions take advantage of the opportunity to expand their product lines, launch more and more stable ETP (exchange-traded products), and list on traditional exchanges, such as the Toronto Stock Exchange in Canada.This model greatly lowers the participation threshold for retail investors and is also favored by traditional institutions.
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The rise of on-chain decentralized model: At the same time, on-chain platforms such as DeETF.org and Sosovalue were also officially launched, directly implementing asset management and portfolio transactions through smart contracts.This type of platform does not require centralized custody, and users can create, trade and adjust their investment portfolios themselves.This has attracted crypto native users and investors who pursue absolute transparency.
These two models have developed in parallel, making the DeETF track gradually clear: on the one hand, through traditional financial channels, and on the other hand, it emphasizes complete decentralization and on-chain transparency.
(IV) Advantages gradually emerge, and challenges cannot be ignored.
To this day, DeETF has gradually demonstrated its unique advantages:
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It is highly ease of use, and the participation threshold is greatly reduced: both the traditional model and the on-chain model have greatly reduced the participation threshold for retail investors.
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Investment is more transparent and flexible: on-chain mode trading 24 hours a day, and the asset portfolio can be adjusted at any time.
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Risk control and investment diversification: Investors can easily build multi-asset portfolios to reduce the risk of volatility of a single asset.
But at the same time, the challenges are gradually emerging:
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The regulatory environment is uncertain: The US SEC has very strict supervision of crypto ETFs, and the compliance costs remain high.
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Smart contract security risks: From 2022 to 2023, hacker attacks caused a loss of about US$1.4 billion in the DeFi protocol, which still made investors worry.
However, even with these challenges, DeETF is still regarded as one of the important innovations in the future financial markets.It gradually blurs the boundaries between traditional investors and the crypto market, and asset management becomes more democratic and intelligent.
Part 2: Emerging projects rise, DeETF track blooms
(I) From single model to multi-dimensional exploration: a new situation in DeETF
As the concept of DeETF is gradually accepted by the market, this emerging field has entered a stage of “a hundred flowers blooming” after 2023.Unlike the early ETP (exchange product) model, which had only a single model, DeETF is now rapidly evolving along two paths:
One is to continue to follow the traditional financial logic and issue ETPs through formal exchanges, such as DeFi Technologies, to continuously enrich DeFi asset classes, so that traditional investors can easily invest in assets on the chain like buying stocks;
The other is a more radical and closer to the spirit of encryption – a purely on-chain, decentralized DeETF platform.Users do not need a brokerage account or KYC. They only need a crypto wallet to create, trade and manage asset portfolios on the chain.
Especially in the past two years, platforms such as DeETF.org and Sosovalue have become pioneer explorers in the direction of on-chain native asset portfolios.Among them, Sosovalue supports multi-theme combination strategies (such as GameFi, blue chip combination), providing users with a “one-click buy + traceable” ETF product experience, trying to solve the threshold of portfolio management in a lighter way.
In terms of institutional paths, in addition to DeFi Technologies, the influence of RWA leader Securities cannot be ignored.It is tokenizing traditional financial assets such as private equity, corporate bonds, real estate, etc. in a compliant manner, and introducing primary market investors to the on-chain market.Although this strategy is not directly called DeETF, its combined asset custody structure and KYC mechanism have already possessed the core characteristics of DeETF.
They proposed the concept of “24/7 all-weather trading, no intermediary, and user-independent combination”, breaking the pattern of traditional ETFs being limited by trading time and custodial institutions.Data shows that as of the end of 2024, the number of active on-chain ETF combinations on DeETF.org has exceeded 1,200, and the total value of locked positions has reached the level of tens of millions of dollars, becoming an important tool for DeFi native users.
In the direction of professional asset management, organizations like Index Coop have also begun to standardize the packaging of DeFi assets, such as launching DeFi Pulse Index (DPI), providing users with a “out-of-the-box” DeFi blue-chip asset portfolio to reduce individual coin selection risks.
It can be said that since 2023, DeETF has changed from a single attempt to a diverse and competitive ecosystem, and projects with different routes and different positionings are blooming.
(2) New trends in smart asset portfolios: Who is making DeETFs “better”?
In the past few years, the DeETF track has experienced a phased evolution from “do-it-yourself free combination” to “preset combinations with one click to buy”.For example, DeETF.org advocates a combination mechanism of “users choose”, while Sosovalue is more inclined to the productization path of “theme-based strategy”, such as GameFi blue chip package, L2 narrative combination, etc. Most of these platforms are aimed at users who already have a foundation in investment and research.
However, it is rare to truly hand over the “combination strategy” to algorithm automation.
This is the entry point of YAMA (Yamaswap) that has won the first Hackathon competition of Juchain: it is not stacking combinations based on traditional DeFi, but trying to make DeETFs more “smart”.
Specifically, YAMA does not want users to bear all investment and research pressure, but builds an AI-powered asset allocation recommendation system.Users only need to enter requirements, such as “stable returns”, “focus on the Ethereum ecosystem”, and “prefer LST assets”, and the system will automatically generate a recommended combination based on the on-chain historical data, asset correlation and backtest models.
Similar concepts have also appeared in the world of TradFi, such as Betterment and Wealthfront, but YAMA moved it to the chain and completed the asset management logic at the contract level.
In terms of deployment, YAMA chose to run on Solana and Base, thereby significantly reducing usage costs.Compared with the GAS cost of tens of dollars on the Ethereum main network, this architecture is naturally suitable for more daily asset portfolio interactions, especially for retail users.
In terms of combination security, YAMA’s smart contract supports all links such as combination components, weights, and dynamic changes. Users can track the operation of policies at any time, avoiding the “black box configuration” of traditional DeFi aggregation tools.
Unlike other platforms, YAMA emphasizes the combined experience of users’ “self-service deployment” + “AI combination recommendation” – which not only solves the pain point of “not investing”, but also retains the transparency and autonomous management of “asset control”.
This type of product path may represent the next stage of the DeETF platform moving from a “structural tool” to a “intelligent investment research assistant”.
(III) The DeETF track is forming a bifurcated evolution path
As the crypto user structure shifts from transaction-oriented to “combination management” needs, the DeETF track has gradually differentiated into several different development routes.
For example, DeETF.org still emphasizes users’ independent configuration and free combination, which is suitable for users with a certain cognitive foundation; Sosovalue further productizes the asset portfolio and launches on-chain theme ETFs, such as “Solana Infrastructure Portfolio” and “Meme Ecological Basket”, similar to the style of traditional funds.Index Coop and others focus on standard index products, with the goal of long-term and stable market coverage.
In traditional DeFi projects, DeFi Technologies and Security are aimed at retail investors and institutions respectively, representing two different paths of compliance exploration – the latter has become the first RWA platforms to obtain SEC exemptions, providing an example for the on-chain asset portfolio compliance process.
But from the perspective of user interaction methods, a new trend has begun to turn across the track: a smarter and more automated asset allocation experience.
For example, some platforms have begun to try to introduce AI models or rules engines to dynamically generate configuration suggestions based on user goals and on-chain data, trying to lower the threshold and improve efficiency.This type of model also shows obvious advantages in the context of continuous expansion of DeFi users and increased investment and research demand.
YAMA is one of the representatives of this path: it integrates the AI portfolio recommendation and on-chain self-service deployment, and at the same time uses low-cost and high-performance public chains for deployment, allowing ordinary users to complete asset allocation without the need for complex operations.
Although each path is still in its early stages, more and more DeETF platforms have begun to shift from “pure tools” to “strategy service providers”, and behind it is also revealing the underlying evolution logic of the entire crypto asset management track: not only decentralization, but also a de-common and de-professional barrier-based financial experience.
Conclusion: From Trends to Practice: DeETF Reshapes the Future of On-chain Asset Management
The crypto industry has experienced too many fanaticisms and collapses in the past few years.Every new concept is born with the hustle and doubts of the market, and so is DeFi.And DeETF, an originally niche and edge-level cross-field, is quietly accumulating energy and becoming the next branch worth taking seriously on-chain finance.
Looking back at the development of DeFi, we can clearly see a main line:
From the initial smart contract experiments, to the construction of open transactions and lending agreements, to the initiation of large-scale capital flows, DeFi has completed the path that traditional finance has taken in decades in six or seven years.Now, DeETF, as the “User Experience Upgraded Version” of DeFi, is taking on the task of further popularizing and lowering the threshold.
Data shows that although the overall size of the DeETF track is still small, its growth potential is huge.According to a report by Precedence Research, the DeFi market is expected to grow from US$32.36 billion in 2025 to approximately US$1.558 trillion in 2034, with an annual compound growth rate (CAGR) of 53.8%.This means that in the next five years, with the rapid development of DeFi, DeETF will not only be a part of the DeFi ecosystem, but also may become one of the most important application scenarios for on-chain asset management.
Standing at today’s node, we can already see different types of explorers:
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There are companies like DeFi Technologies that try to start from traditional finance and issue more compliant and more familiar crypto ETP products;
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There are platforms like DeETF.org that adhere to on-chain autonomy, emphasize free combination and complete transparency;
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There are also emerging forces like YAMA, which not only continue the spirit of decentralization, but also introduce AI-assisted combination construction on this basis, trying to make on-chain asset management truly “intelligent and personalized”.
If the early DeFi solved the problem of “can decentralized finance be used”, today’s DeETF and projects like YAMA are solving the problem of “can decentralized finance be afforded and used well for more people”.
In the future, on-chain asset management should not be just an arbitrage tool for a few people, but should become a capability that any ordinary investor can master.And DeETF is the key.
From MakerDAO to Uniswap, from DeFi Technologies to YAMA, every advancement in decentralized finance is another refresh of the concept of financial freedom, transparency and inclusiveness.Today, DeETF is redefining the way of on-chain asset management, and projects like YAMA that dare to innovate are also injecting new imagination into this path.
The story is far from over.But the future is slowly taking shape.
