People love passive investment because it outsources all the work. Traditionally, investors relied on centralized finance instruments, though they all have major shortcomings and risks. Stock ETFs and Hedge Funds soon found their way into crypto as Crypto ETFs (though that 2.5% fee is high for simply mirroring ETH/BTC with less than ideal accuracy and all the drawbacks of ETFs), Crypto Interest Accounts (like Celcius, which promised an 18.63% APY but ended up in bankruptcy), or even Crypto Telegram Funds (who promised major returns touting gains of 100x and the like while often delivering results closer to 2x while ETH grew 10x).
Needless to say, many investors grew restless seeing their money generating returns much lower than the market or having their funds lost to bankruptcy. What use is passive income via someone who manages your assets if you could just buy ETH and hodl it into 10x yourself? There must be a better way. And that way is…
DeFi asset management
A much better way to earn a passive crypto income is by decentralizing the whole system. That’s why DeFi is such a buzzword. Taking control away from centralized organizations prone to corruption and incompetence gives users more control and brings the best-performing funds to the surface. In fact, there are already a few decentralized platforms offering passive crypto income with various degrees of transparency and security.
DeFi passive income today
There are already on the market platforms that introduce basic elements of DeFi asset management like letting traders create token strategies, noncustodial interaction with investor funds, etc. These include TokenSets, Enzyme, and other projects. And it’s a good first step, yet some of these services have questionable fee structures, weak incentives for the trader/manager not to scam the investors, limited number of allowed token pairs, additional costs, and other questions.
There is a service on the horizon that’s still a few months from release but seems to have clear advantages over what’s on the market today. It’s called DeXe Investment, created by DeXe DAO. The advantages are very impressive:
For one, DeXe Investment requires traders to put skin in the game: the more they put up the exponentially more investor funds they can handle.
Second, managers can earn fees that properly reflect their talent, up to 70% in fact.
And they can create as many strategies/funds as they want to with the ability to trade any crypto asset (not just a handful of the most mainstream ones).
One benefit to investors is total transparency of both the managers and the entire platform.
There is also the complete impossibility for managers to touch investor’s deposits because everything is non-custodial via smart contracts. In fact, because the entire platform is decentralized and run by a DAO, there is no centralized authority to censor or rug the investors or fund managers.
The most mind-blowing innovation of DeXe Investment is the unprecedented trading loss insurance for the strategies/funds as decided by the DAO. Yes, the fund can lose money in a certain force majeure situation and the DAO will compensate those investors who got the insurance (without having to pay a single satoshi! Simply by staking some $DEXE).
In short, it’s a product that combines the best of DeFi: transparency, control of own funds, fair compensation, and protection of capital from unexpected losses and malicious actors. Looks like passive income is going to reach its true potential soon.