Hashdex Launches 1st Decentralized Finance ETF
Hashdex has just started funding the world’s first ETF with a focus on decentralized finance (DEFI) – a position still in its infancy but with the potential to change the financial market.
The manager wants to raise 500 million Brazilian riyals for Defi11.
The offer, which started today, is coordinated by Genial (Leader), XP and Itaú BBA. Hashdex expects a funding close in February when ETF begins trading on B3.
Basically, the term “decentralized finance” indicates a series of blockchain-based technologies and applications and thus “smart contracts” that enable the creation of a new infrastructure for traditional financial services.
Today, there are dozens of Defi protocols that focus on different markets. One such protocol, for example, is UNISWAP, which was created to enable decentralized exchange. When you trade crypto assets on uniswap, it is not the stock market that maintains the original, but the investor himself – who dispenses with the mediator and reduces costs and theoretically increases the security of the investor.
In this model, there are “smart contracts” stored in the blockchain that verify the authenticity of the process and ensure that the origin of the original belongs to the user and not to user Y.
The other Defi, Compound, allows peer-to-peer collateralized loans without the need to verify the authenticity of operations (everything is also made on the blockchain via smart contracts).
At least at present, compounds only allow limited leverage of 1:1 – i.e. a loan of 100,000 Brazilian riyals requires collateral of at least 100,000 riyals Brazilians in encrypted currencies.
The solution is perfect for those who already have baptized currencies – as these are the only acceptable collateral – the biggest advantage is the interest rate, which was hovering around 1% per annum, while the traditional personal loan costs at least 1 % per month.
Hashdex ETF will invest a large portion of its capital in Defi protocols, which are currently traded as symbols on major global exchanges (from Coinbase to Binance). ETF will track CF Compound’s CF Index – An index developed in partnership with the American CF Benchmark, is one of the world’s pioneering providers of cryptographic indicators.
The index will include 70% of Defi protocols (such as Compound and UISWAP), and 15% of SO support protocols – which are essentially non-financial services that support Defi protocols, such as data and verification providers – and 15% Thanks to the basic systems of registration, blockchain where the transactions are valid (in this case, ETF will only invest in Etareum).
The idea behind ETF is to capture the growth of the largest Defi protocols in the world, which is still in its cradle. Uiswap, for example, is worth $13 billion, Compound, $1.6 billion, and Maker (another protocol that will be part of the index), $2.8 billion. For comparison, the market value of Ethereum is $516 billion and bitcoin is around $2 trillion.
The investment thesis is that the market value of the Defi protocols tends to grow over time as it is repeatedly adopted – finally replacing the current financial market infrastructure.
Defi11 is the fourth ETF box for crypto assets from Hashdex. Hash11, launched by the company last April, overtook BOVA11 (the European Training Corporation that follows Ibovepa) in the number of investors.
