Plouto, as a rising star, is setting off a new climax for DeFi field.
Since July this year, projects represented by Yearn.finance has been absorbing the liquidity bonus of the DeFi ecosystem. By helping users calculate and maximize the income of decentralized lending agreements in the market such as Compound, Avae, dYdX, etc., it has been sought after by users. At the same time, as its governance token YFI‘s price surpassed Bitcoin, it successfully detonated a DeFi climax. Looking back at the development path of DeFi in the first half year, from Compound to Uniswap and to Yearn, both the innovation model and the wealth effect refreshed the industry’s understanding of DeFi, which to a certain extent indicates that the industry will enter into a new stage.
According to the data from DeFipluse, the total lock-up amount of Yearn is 948 million dollars. As the first practical asset management agreement in the DeFi field, it has aroused the industry’s thinking and attention about decentralized asset management. Fundamentally speaking, the role of asset management is to realize asset appreciation through efficient capital flow on the premise of ensuring the safety of funds. Its value and function have been verified in the long-term operation of traditional asset management.
If compared with the asset custody business in the traditional financial field, decentralized asset management makes the threshold lower for investors to participate. Not only can it attract the stock funds in the cryptocurrency market now, but attract funds outside the cryptocurrency industry in the future. it has great potential to become an asset flow entrance and capital precipitation platform.
However, compared with the customization and diversification of asset custody institutions in traditional finance, the existing decentralized asset management agreement represented by Yearn still has some shortcomings.
First of all, in terms of investment strategy, taking Yearn as an example, its portfolio is more like a decentralized lending agreements such as Compound, which can hardly satisfy investors with different risk preferences and provide customized services at the same time. However, a single investment strategy itself is a risk. If a drop in the yield of the lending agreement or loss will hurt Yearn’s users directly and reduce its attractiveness to investors.
Secondly, Since the current decentralized lending agreement is mainly for stable coins, Yearn’s investors can only invest in stable coins to get YFI. But the size of stable coins is only 1/40 of the overall cryptocurrency asset, which means the type of asset is relatively single and the market share is low.
Last but not the least, security is always the most concerned issue for investors.Whether the incident of PlusToken causing investors to lose 95,228 bitcoins in 2019 or the news that YAM crashed due to a code vulnerability, each security incident directly affects the interests of investment.In the DeFi space, the artificial factors that cause these results are relatively few, but the Yearn’s management team still own lots of authority. Once they wanna do something bad, they will also bring huge losses to investors.
In view of the above three points, the industry urgently needs to clearly define the limitations and risks of asset management agreements, stimulate existing projects to upgrade and at the same time provide innovation space for new projects.
It is worth mentioning that Plouto, which has recently become more popular, is one of the emerging decentralized asset management protocols that focus on the above-mentioned pain points and seize opportunities for development. The project is based on the open asset management protocol of Ethereum. The main function is to connect cryptocurrency investors and asset managers, and help investors choose their own investment strategies based on their own risk preferences in a decentralized manner. At the same time, asset managers can gain rewards by providing investors with investment strategies and helping investors to realize asset appreciation through Plouto.
According to the information disclosed by Plouto in media, it has introduced the innovative concepts of “vault”and “open vault” in its product structure to better support the isolation between assets, asset managers and execution strategies, and to ensure funds under the premise of safety. It meets the needs of investors to choose different investment targets and strategies according to personal risk preferences.
At present, the Plouto protocol is composed of six components: vault, open vault, controller, validator, strategy and governance.
The funds of the vault are allocated by the controller, and the controller can only execute the strategies verified by the validator. The risks of these investment targets under the strategies are controllable. The contract is audited and needs to be managed by Plouto DAO during the execution phase of the strategy. The open vault is created by a third party and the strategy is not managed by Plouto DAO, it can better respond to market changes and quickly realize the demands of users in multi-protocol arbitrage, airdrop bounties, and liquidity mining.
In terms of fund security, Plouto implements an isolation mechanism between strategies and administrators. Administrators cannot directly use the assets in the vault. The administrators of the vault can only authorize the controller to execute the strategies that have been passed by the DAO. The administrators are all elected by the DAO. Only after elections and multiple administrators sign at the same time can the controller execute the new strategies passed by the DAO.
In addition, as the Plouto protocol governance token, PLU has no private placement, no pre-mining, and no reservation. It must all be generated through stake and liquidity mining. Users can get PToken from Plouto’s vault and then participate in mining to obtain PLU. At the same time, in Plouto’s model, investors will pay 0.5% of management fees and 5% of profits to the administrator’s contract when withdrawing. These funds will be used for Plouto’s research and development and team rewards. PLU holders will participate the election of administrators and vote for investment strategy, Plouto’s development direction in the future and other proposals.
Reportedly, Plouto Protocol V1 will be launched this month and will support the vault asset management function. In addition, Plouto Protocol V2 is planned to be launched in November and will support third parties to create open vault functions. Plouto Protocol V3 is expected to be launched in January 2021, then Plouto will implement functions such as cross-chain asset management.
In fact, as DeFi gradually accepted by market, more and more cryptocurrency investors will deposit their assets in decentralized asset management agreements. The demands of market will also promote the emergence of more cryptocurrency asset management service providers. The decentralized asset management of non-ERC20 stable coins perhaps be the core issue of the cryptocurrency market.While Plouto will actively explore the filed of decentralized asset management and promote the further development of DeFi.
