Who is quietly rewriting the underlying logic of DeFi asset allocation?

Author: Nomos Labs Source: mirror

Introduction: How did DeFi go from a geek's toy to Wall Street's new darling?

In the past few years, a buzzword in the financial world has been frequently mentioned - DeFi (Decentralized Finance). A few years ago, when geeks first started building some quirky financial tools on Ethereum, no one expected that these "toys" would eventually attract the attention of traditional financial giants on Wall Street.

Looking back from 2020 to 2021, DeFi rose at an astonishing pace. At that time, the total value locked (TVL) in the entire market skyrocketed from a few billion dollars to a peak of 178 billion dollars. Protocols with strange names like Uniswap and Aave suddenly became the internet celebrities of the global crypto world.

However, for most ordinary investors, DeFi has always felt like a labyrinth filled with traps. Wallet operations are headache-inducing, and smart contracts are as incomprehensible as Martian. Not to mention, investors also have to worry daily about preventing their assets from being hacked and wiped out. Data shows that even though DeFi is so popular, the proportion of investment institutions from traditional financial markets that actually enter is less than 5%. On one hand, investors are eager to try; on the other hand, they hesitate to take action due to various barriers.

But the scent of capital is always the sharpest. Starting in 2021, a new tool specifically designed to address "how to easily invest in DeFi" has emerged, which is the Decentralized ETF (DeETF). It combines the concept of ETF products in traditional finance with the transparency of blockchain, retaining the convenience and regulation of traditional funds while accommodating the high growth potential of DeFi assets.

It can be understood like this: DeETF is like a bridge, one end connected to the "hard-to-enter" new world of DeFi, and the other end connected to a wide range of investors familiar with traditional financial products. Traditional institutions can continue to invest using their familiar financial accounts, while blockchain enthusiasts can easily combine their investment strategies like playing a game.

So, how has DeETF gradually emerged alongside the growth of DeFi? What evolution has it undergone, and how has it become a new force in the field of on-chain asset management step by step? Next, we will start from the birth of DeFi and talk about the story behind this new financial species.

Part One: From DeFi to DeETF: The Development History of On-Chain ETFs

(1) Early Exploration (2017-2019): Those initial attempts and the seeds that were sown

If DeFi is a financial revolution, then its beginning must be closely related to Ethereum. Between 2017 and 2018, several early projects on Ethereum, such as MakerDAO and Compound, first showcased the possibilities of decentralized finance to the world. Although the scale of the ecosystem was still very limited at that time, novel financial plays such as lending and stablecoins had already sparked a small wave in the geek community.

At the end of 2018 and the beginning of 2019, Uniswap emerged, providing an unprecedented "Automated Market Maker (AMM)" model, allowing people to trade without the torment of complicated order books, making "trading" much easier. From 2017 to 2018, MakerDAO and Compound showcased the possibilities of decentralized lending and stablecoins. Subsequently, the automated market maker (AMM) model launched by Uniswap at the end of 2018 and the beginning of 2019 greatly simplified on-chain trading. By the end of 2019, the TVL of DeFi had approached 600 million dollars.

At the same time, traditional finance has also quietly begun to take notice. Some astute financial institutions are subtly laying out blockchain technology; however, they are still troubled by complex technical issues and cannot truly participate. Although no one explicitly proposed the concept of "DeETF" at that time, the need for a bridge between traditional capital and DeFi has already begun to emerge at this stage.

(2) Market Explosion and Concept Formation (2020-2021): The Eve of DeETF's Debut

In 2020, a sudden pandemic changed the trajectory of the global economy and prompted a massive influx of capital into the cryptocurrency market. DeFi exploded during this period, with TVL skyrocketing at an astonishing rate, increasing from 1 billion dollars to 178 billion dollars a year later.

Investors rushed in so much that the Ethereum network became clogged, even leading to an extreme situation where transaction fees exceeded 100 dollars. A series of dazzling new models like liquidity mining and yield farming made the market heat up quickly, but at the same time revealed a huge barrier to user participation. Many ordinary users lamented: "Playing DeFi is truly much harder than stock trading!"

At this moment, some traditional financial companies began to keenly capture the opportunity. The Canadian publicly traded company DeFi Technologies Inc. (stock code: DEFTF) is a typical representative. This company originally engaged in traditional business unrelated to crypto, but decisively transformed in 2020, starting to launch financial products that track mainstream DeFi protocols (such as Uniswap, Aave). Users can participate in the DeFi world as simply as buying and selling stocks on traditional exchanges. The emergence of such products is also a sign of the formal germination of the "DeETF" concept.

At the same time, the decentralized sector is also quietly taking action. Projects like DeETF.org are starting to attempt to manage ETF portfolios in a decentralized manner directly with smart contracts, but these attempts are still in the early stages.

(3) Market Restructuring and Model Maturity (2022-2023): DeETF Formalization

The boom of DeFi did not last long. In early 2022, the collapse of Terra and the bankruptcy of FTX, a series of black swan events, almost destroyed investors' confidence. The TVL of the DeFi market plummeted from 178 billion dollars to 40 billion dollars.

But crises are often accompanied by opportunities. The severe fluctuations in the market have made people realize that the DeFi space urgently needs safer and more transparent investment tools, which in turn has promoted the development and maturation of DeETF. During this period, "DeETF" is no longer just a concept, but has gradually developed into two clear models:

• Traditional financial channels are further strengthened: Institutions like DeFi Technologies are taking advantage of the trend to expand their product lines, launching more robust ETPs (Exchange-Traded Products) and listing them on traditional exchanges, such as the Toronto Stock Exchange in Canada. This model significantly lowers the participation threshold for retail investors and is also favored by traditional institutions.
• The rise of on-chain decentralized models: During the same period, on-chain platforms such as DeETF.org and Sosovalue were officially launched, enabling asset management and portfolio trading directly through smart contracts. These platforms do not require centralized custody; users can create, trade, and adjust their portfolios on their own. This has especially attracted crypto-native users and investors seeking absolute transparency.

These two models develop in parallel, making the DeETF track gradually clearer: on one hand through traditional financial channels, and on the other hand emphasizing complete decentralization and on-chain transparency.

(4) Advantages are gradually emerging, while challenges cannot be ignored.

As of today, DeETF has gradually demonstrated its unique advantages:

• Strong usability, significantly lowered participation threshold: Whether it is the traditional model or the on-chain model, the participation threshold for retail investors has been greatly reduced.
• More transparent and flexible investment: On-chain model allows for 24/7 trading, and asset portfolios can be adjusted at any time.
• Risk control and investment diversification: Investors can easily build multi-asset portfolios to reduce the volatility risk of a single asset.

However, at the same time, challenges are gradually emerging:

• Uncertain regulatory environment: The U.S. SEC has very strict regulations on cryptocurrency ETFs, and compliance costs remain high.
• Smart contract security risks: Between 2022 and 2023, hacker attacks caused approximately 1.4 billion dollars in losses to DeFi protocols, leaving investors still concerned.

However, despite these challenges, DeETF is still regarded as one of the important innovations in the future financial market. It gradually blurs the boundaries between traditional investors and the crypto market, making asset management more democratic and intelligent.

Part Two: The Rise of Emerging Projects, a Flourishing Landscape for DeETF

(1) From a Single Model to Diverse Exploration: A New Landscape for DeETF

As the DeETF concept gradually gains acceptance in the market, this emerging field has entered a stage of "blossoming" after 2023. Unlike the early days when there was only a single ETP (exchange-traded product) model, DeETF is now rapidly evolving along two paths:

One approach is to continue using traditional financial logic by issuing ETPs through formal exchanges, such as DeFi Technologies, continually enriching the categories of DeFi assets, allowing traditional investors to easily invest in on-chain assets just like buying stocks;

Another path is a more radical one that is closer to the spirit of cryptocurrency—a purely on-chain, decentralized DeETF platform. Users do not need a brokerage account, do not need KYC, and only need a crypto wallet to create, trade, and manage asset portfolios on-chain by themselves.

Especially in the past two years, platforms like DeETF.org and Sosovalue have become pioneering explorers in the direction of on-chain native asset portfolios. Sosovalue supports multi-theme portfolio strategies (such as GameFi, blue-chip portfolios), providing users with a "one-click purchase + traceable" ETF product experience, attempting to address the threshold problem of portfolio management in a lighter way.

In terms of institutional pathways, in addition to DeFi Technologies, the influence of RWA leader Securitize cannot be ignored. It is tokenizing traditional financial assets such as U.S. private equity, corporate bonds, and real estate in a compliant manner, and introducing primary market investors into the on-chain market. Although this approach is not directly referred to as DeETF, its composite asset custody structure and KYC mechanisms already exhibit the core characteristics of DeETF.

They proposed the concept of "24/7 trading, no intermediaries, and user self-assembly," breaking the limitations of traditional ETFs constrained by trading hours and custodial institutions. Data shows that by the end of 2024, the number of active on-chain ETF portfolios on DeETF.org has exceeded 1,200, with a total locked value reaching tens of millions of dollars, becoming an important tool for DeFi native users.

In the direction of specialized asset management, organizations like Index Coop have also begun to standardize and package DeFi assets, such as the launch of the DeFi Pulse Index (DPI), providing users with a "ready-to-use" portfolio of blue-chip DeFi assets, reducing the risk of individual coin selection.

It can be said that starting from 2023, DeETF has transformed from a single attempt into a diverse competitive ecosystem, with projects of different routes and different positions flourishing.

(2) New Trends in Smart Asset Portfolios: Who is Making DeETF More Usable?

In the past few years, the DeETF sector has experienced a phased evolution from "do-it-yourself free combination" to "preset combination one-click purchase." Platforms like DeETF.org advocate for a "user-selected" combination mechanism, while Sosovalue leans more towards a productized path of "thematic strategy," such as GameFi blue-chip packages and L2 narrative combinations. These platforms mostly target users who already have a foundation in investment research.

However, it is still rare to see the "combination strategy" being handled automatically by algorithms.

This is exactly the entry point for YAMA (Yamaswap), which has won the first Juchain Hackathon: it is not stacking combinations on traditional DeFi, but trying to make DeETF more "intelligent."

Specifically, YAMA does not want users to bear all the research and investment pressure, but instead has built an AI-driven asset allocation recommendation system. Users only need to input their needs, such as "stable returns", "focus on the Ethereum ecosystem", and "preference for LST assets", and the system will automatically generate recommended portfolios based on on-chain historical data, asset correlations, and backtesting models.

Similar concepts have also appeared in the TradFi world in Robo-advisor services, such as Betterment and Wealthfront, but YAMA has moved this onto the blockchain and completed asset management logic at the contract level.

In terms of deployment, YAMA chooses to run on Solana and Base, significantly reducing usage costs. Compared to the GAS costs of several tens of dollars on the Ethereum mainnet, this architecture is naturally more suitable for everyday asset portfolio interactions, especially for retail users.

In terms of portfolio security, YAMA's smart contracts support all on-chain disclosures of portfolio components, weights, dynamic changes, etc. Users can track strategy operation at any time, avoiding the "black-box configuration" of traditional DeFi aggregation tools.

Unlike other platforms, YAMA emphasizes a combination experience of "self-deployment" + "AI portfolio recommendations" — addressing the pain point of "not knowing how to invest" while maintaining the transparency and self-management of "asset control."

This type of product path may represent the direction in which the DeETF platform is moving from "structural tools" to "intelligent investment research assistants."

! Yamaswap Technical Architecture

Yamaswap Technical Architecture

(3) The DeETF track is forming a forked evolution path.

As the structure of cryptocurrency users shifts from transaction-oriented to a demand for "portfolio management", the DeETF track is gradually differentiating into several distinct development paths.

For example, DeETF.org still emphasizes user autonomy in configuration and free combination, suitable for users with a certain level of understanding; Sosovalue further productizes asset portfolios, launching on-chain thematic ETFs, such as "Solana Infrastructure Portfolio" and "Meme Ecosystem Basket", similar to the style of traditional funds. Index Coop and others focus on standard index products, aiming for long-term stable market coverage.

In traditional DeFi projects, DeFi Technologies and Securitize target retail and institutional investors respectively, representing two different paths of compliance exploration — the latter has become one of the first platforms to obtain SEC exemptions for RWA, providing a model for the compliance process of on-chain asset portfolios.

However, from the perspective of user interaction, the entire sector is beginning to show a new trend shift: a smarter and more automated asset allocation experience.

For example, some platforms have started to introduce AI models or rule engines to dynamically generate configuration suggestions based on user goals and on-chain data, attempting to lower barriers and improve efficiency. This type of model has also shown significant advantages against the backdrop of expanding DeFi user bases and increasing research and investment demands.

YAMA is one of the representatives on this path: it has made a structural integration between AI combination recommendations and on-chain self-deployment, while using a low-cost high-performance public chain for deployment, allowing ordinary users to complete asset allocation under the premise of "no complex operations required."

Although each path is still in its early stages, more and more DeETF platforms are beginning to shift from "pure tools" to "strategy providers," revealing the underlying evolutionary logic of the entire crypto asset management sector: it's not just about decentralization, but also about simplifying and breaking down professional barriers in the financial experience.

Conclusion: From Trends to Practice: DeETF Reshaping the Future of On-Chain Asset Management

In the past few years, the cryptocurrency industry has experienced numerous booms and collapses. With the birth of each new concept, there are always market uproars and doubts, and DeFi is no exception. Meanwhile, DeETF, a previously niche and marginal cross-field, is quietly accumulating energy and is becoming the next branch of on-chain finance that deserves serious attention.

Looking back at the development of DeFi, a clear main line can be seen:

From the initial experiments with smart contracts to the construction of open trading and lending protocols, and then to triggering large-scale capital flows, DeFi has completed in six to seven years what traditional finance took decades to achieve. Now, DeETF, as the "upgraded version of user experience" in DeFi, is taking on the task of further popularization and lowering barriers.

Data shows that although the overall scale of the DeETF sector is still small, its growth potential is enormous. According to a report by Precedence Research, the DeFi market is expected to grow from $32.36 billion in 2025 to approximately $1.558 trillion by 2034, with a compound annual growth rate (CAGR) of 53.8%. This means that in the next 5 years, with the rapid development of DeFi, DeETF will not only be a part of the DeFi ecosystem but is also likely to become one of the most important application scenarios for on-chain asset management.

Standing at this point today, we can already see different types of explorers:

• There are companies like DeFi Technologies that are trying to enter traditional finance by issuing more compliant and familiar crypto ETP products;
• There are platforms like DeETF.org that adhere to on-chain governance, emphasizing free composition and complete transparency;
• There are also emerging forces like YAMA, which not only continue the spirit of decentralization but also introduce AI-assisted portfolio construction based on this, attempting to make on-chain asset management truly "smart and personalized."

If the early DeFi solved the question of "can we decentralize finance," today's DeETF and projects like YAMA are addressing the question of "can decentralized finance make it affordable and usable for more people."

Future on-chain asset management should not just be an arbitrage tool for a select few, but should become a capability that any ordinary investor can master. And DeETF is exactly that key.

From MakerDAO to Uniswap, from DeFi Technologies to YAMA, every advancement in decentralized finance is a refresh of the ideals of financial freedom, transparency, and inclusivity. Today, DeETF is redefining the way on-chain asset management works, and innovative projects like YAMA are injecting new imagination into this path.

The story is far from over. But the future is slowly taking shape.