Asset management protocols

A space to discuss the ‘Asset management’ market sector available on Token Terminal.

What are asset management protocols?

Asset management protocols are smart contract-based ‘investment funds’, often referred to as vaults, that in a non-custodial manner invest user assets according to predefined investment strategies, with the goal of generating better yields than what the user could access on their own.

What problems do asset management protocols aim to solve?

It’s difficult to perform due diligence on onchain yield farming opportunities, and the participation tends to get costly, especially for investors that invest smaller sums.

How do asset management protocols solve those problems?

Asset management protocols give their users or liquidity providers access to onchain yield opportunities with one deposit function call. The protocols pool user funds and deploy them into different DEX and/or lending pools according to a predefined, open-source, investment strategy.

Why is now the right time to build and invest in asset management protocols?

The asset management protocols emerged after DeFi protocols started to run liquidity mining campaigns, where they offered yields that were boosted by the issuance of governance tokens as additional rewards (in addition to the usage-based fees earned from users). Given the relatively low threshold to launch a liquidity mining program, the yield optimization/aggregation market quickly grew in size and complexity. Lately, there’s been an increase in focus towards bringing offchain yields, e.g. treasury yields, onchain.

What is the business model of asset management protocols?

The primary business model for asset management protocols is to generate revenue by taking a cut of the yield earned on user capital. That is, the asset management protocol takes a portion of the liquidity providers’ revenue. Sometimes they also charge management fees, which are based on the assets under management.

Where can I view the current and historical (financial) performance of asset management protocols?

Asset management dashboard: Asset management | Markets | Token Terminal

Methodology for Asset management-specific metrics

Total value locked: liquidity deposited into the asset management protocol’s vaults.
Capital deployed: assets invested by the asset management protocol, i.e. the capital that is trying to earn a yield.
Fees: total yield earned by the asset management protocol.
Supply-side fees: share of the yield that goes to the liquidity providers.
Revenue: share of the yield that goes to the protocol (and its tokenholders).
Token incentives: value of governance tokens distributed to liquidity providers.
Daily active users: daily distinct addresses making deposits to the asset management protocol.

Example project documentation

Relevant links