SDT Model

A decentralized way in crypto asset management

Over the past few years, the collapses in centralized asset management shocked everyone in the industry. Thousands of people lost billions of dollars because asset managers are not doing things which they are supposed to do: manage clients’ money in a trustful way. Instead, they either managed the money in a way which was not agreed based on a legal contract or simply took clients’ money away.

Since hundreds of years ago, when the first asset manager came out, so many things changed in asset management business including technology, service, and investment strategy, but there has been one thing which has never been changed: it is based on trust. Could investors trust portfolio managers? Will portfolio managers always act on the agreements and on behalf of clients’ interests? Could portfolio managers trust investors? Will investors keep the promises to support portfolio managers according to the agreements? For many great asset management companies, they could survive through cycles primarily because they have always lived up to the trust.

Unfortunately, there perhaps has been a loss in crypto asset management.

Perhaps it was because it was a crazy industry at a crazy time, or because It was all offshore entities and less regulated, or because it was greed and fear…

But it is not what it is supposed to be. We can make a different future.

When the crypto industry developed from day one, what attracted people including myself was its spirit: open, transparent, and trustworthy. Then countless technologies and products have been developed to deliver those. Could we apply those and combine them, further developing asset management business? Could the future crypto asset management become more open, transparent and trustworthy, a brighter and better future for everyone?

Solutions: SDT Model

Here we like to propose a new decentralized way in asset management: SDT Model, ( S: self-custodian on-chain, D: decentralized portfolio management, T: transaction/strategy on-chain). In the spirit of open, transparent and trustless, we applied smart-contract-based technology into the life cycle of the crypto asset management business. It includes three important elements,

1. self custodian on-chain:

Specifically,

1) Self-custodian service needs to be based on smart contract

2) Separation between ownership and management

3) Only investors can withdraw assets with private keys While portfolio managers can only manage assets

What happened before in centralized asset management, portfolio managers can move the clients’ money away no matter how great custodian service they use.

2. decentralized portfolio management

Specifically,

1) Terms for the Life cycle of portfolio management are written in smart contract

2) Portfolio management can only be based on smart contract

3) Every operation by portfolio managers is open and transparent on-chain

Many portfolio managers cannot live up to the promises and legal contracts signed by themselves and often conduct improper or illegal actions. So decentralized portfolio management converts all legal contracts into smart-based operations and runs automatically.

3. on-chain transaction/strategy

Specifically,

1) Only trade on-chain assets

2) Only interact with secure and reliable decentralized protocols

3) Only interact with those protocols via smart contract and based on terms of portfolio management.

To truly live up to 2, 3 becomes very important. Otherwise, it is impossible to make it happen.

The benefits of SDT Model shall be clear for everyone: open, transparent, and trustless. It is on-chain, it is based on smart contracts. Most importantly everything is real! If asset management can work in this way, investors do not need to worry about portfolio managers deceiving them, portfolio managers do not need to worry about winning money from investors due to trust reason or building trust, even many third parties in asset management do not need to worry about whether portfolio managers track record is real or whether people will pay the fees to their services.

So the cost of establishing trust and building trust becomes much easier than ever before.

But there are also many important limitations to this model, here I would like to point out:

1 on-chain assets and on-chain protocol are chosen by the team, by people. They can be wrong and they can have self-interests. The way to solve it is to use a decentralized government model to gradually open to the community to make a decision.

2 a reliable protocol could also change and become a non-reliable one in the future. The way to solve it to monitor changes and make proper adjustments.

3 risk management in protocol themselves. There are many hackers with bad intentions. around the world. The way to solve it is to maintain the highest standard on risk management and operation every day.

Future

What shall be the future in crypto asset management? Open, transparent, trustworthy? Or it is the opposite. It is in our hands now.

Sincerely,

DeSyn Team