The cryptocurrency market has shown to be a profitable industry for investors and entrepreneurs. In recent years, decentralized finance has emerged as one of the most intriguing interventions in the world of finance. It has fundamentally altered how people interact with financial services, with the aim of enabling financial inclusion for all.

DeFi (or "decentralized finance") refers to financial services provided on public blockchains, especially Ethereum. You can earn interest, borrow, lend, purchase insurance, trade derivatives, exchange assets, and more with DeFi, but it's faster and doesn't involve paperwork or a third party. DeFi, like crypto in general, is worldwide, peer-to-peer (meaning it is sent directly between two people rather than being routed through a centralized system), pseudonymous, and open to everybody.

Many potential investors are attracted to Defi because of the pretty decent return rate. However, the vastness of Defi, Defi 2.0, and its products make it difficult for investors to seek true gems.

The market is humongous and overly saturated with noise. It can be difficult to know which investments to make. That led to the invention of Asset Management Protocols.

I. The Importance of DeFi Asset Management Protocols

In the traditional financial market, you may be quite familiar with the "index baskets" such as S&P500, Dow Jones Industrial Average (DJIA), etc. These index baskets each include a lot of financial assets. Products designed by leading experts, help you diversify your portfolio risk and achieve investment performance in the simplest way.

On the other hand, DeFi protocols are unique, special automated programs created to tackle the concerns with the traditional finance space. Blockchain technology offers users increased financial transparency, security, and rich data analysis. In addition, anyone with a crypto wallet and an internet connection can participate, so there are no harsh, unyielding requirements, unlike traditional finance methods.

Decentralized finance allows more people to do more with their money and make more of it. But the space is full of noise.

You’re often met with confusing terminology and words that may leave you scratching your head. Multiple protocols and projects come at you from every direction; it’s a hard decision. Knowing which one to invest in can be confusing and daunting.

With innovative financial solutions, the number of projects based on DeFi protocols has increased dramatically in recent years. Different technologies are required for tracking, managing, and hedging exposure across a variety of DeFi projects. And, certainly, they have been successful in a variety of projects involving lending, derivatives, and decentralized exchanges.

Decentralized asset management solutions modify the traditional implications of asset management by providing benefits such as trustless environments, composability or interoperability, and transparency.

Covduk is a cryptocurrency writer that tweets DeFi tutorials and useful information. In a recent series of tweets, he emphasized the necessity of asset management protocols. Asset management protocols, according to Covduk, are one of the most closely guarded secrets of elite traders. Pros use these protocols to keep ahead of the DeFi industry. As a result, knowledge of the DeFi space gives some traders an advantage over others.

II. Asset Management Protocols Definition

Decentralized Finance is a concept that refers to financial services that use blockchain technology. There is no central authority in DeFi, which make it unique. Furthermore, DeFi merges traditional finance's key elements. Smart contracts, on the other hand, replace intermediaries. As a result, viewing DeFi as a combination of traditional banking and blockchain technology makes sense.

The expansion and popularity of the DeFi space made space for asset management protocols.

When considering DeFi asset management tools, the first thing that springs to mind is digital wallets. Furthermore, applications focusing on managing crypto-asset portfolios are among the top items that spring to mind when considering asset management tools.

Asset management is the process of gathering, conserving, and trading investments that have the potential to grow in value over time in order to enhance overall income. This is a service provided by asset management specialists to others.

Asset management protocols are the consistent management, planning, and controlling of the asset lifecycle. They are essential because they offer a unique alternative to traditional methods. For example, asset management products in decentralized finance don’t require users to share their private keys or transfer funds. They are also automated, so anything needing to occur, such as collateralization, liquidation, etc., will occur efficiently.

The DeFi world introduced exchanges, protocols, derivatives, and others to the blockchain space. So, this created the perfect climate for asset management professionals to practice their craft in the crypto market.

Some of the key characteristics of DeFi Asset Management Protocols include the following:

  • Composability

Notable asset management projects provide the ability to connect to a wide range of DeFi projects, allowing for a smooth DeFi experience.

  • Pseudo-anonymity

The asset management tools for DeFi can connect using a wallet address. Users can choose to share their identity or stay anonymous if they wish.

  • Non-custodial

The top DeFi asset management tools do not involve giving up control of underlying assets. The assets remain in the wallet while it is in use.

  • Worldwide accessibility

The most crucial feature of DeFi asset management tools is their ability to be accessed in a variety of ways, regardless of tax bracket or location.

  • Automation

The ever-increasing number of asset management tools feature automation. As a result, they can perform collateralization, liquidation, and rebalances without requiring user participation.

III. Top Asset Management Protocols to Watch

Asset management protocols are unique, meaning different protocols offer different solutions.

There are asset management protocols for private groups and users, meaning they assist private groups in specific actions or activities like investing, pooling, or managing funds. For example, they assist DAOs with treasury management.

And there are public asset management protocols that assist users in developing investment plans. They then make them available to the whole public. Furthermore, these platforms compensate experts for creating and sharing investment techniques.

Here are some top asset management protocols in the space.

Babylon Finance

Unfortunately, Babylon got shut down recently, but their concept is still worth noticing.

Babylon is a protocol for asset management that is driven by the community. It enables users to pool their finances in order to invest in DeFi. Here are some of the platform's features:

  • It is Ethereum-based
  • Transparent and permissionless
  • Non-custodial
  • Community-governed

To facilitate community voting, Babylon employs a DAO approach with the BABL token. As a result, it acts in the best interests of its users. Furthermore, the community wields enormous power. They have influence over the treasury, fees charged, and other important aspects. Furthermore, Babylon allows its users to create investing circles known as "Gardens." Members of these communities can deposit money, make suggestions, vote, and earn money.

In addition, each Garden has its own investing thesis, risk tolerance, and liquidity requirements. Members of the community can also offer strategies on which they can vote. Babylon employs a performance-based incentive scheme. This means that Babylon recognizes and compensates participants for their participation and contributions. Furthermore, by pooling their cash, community members share gas costs, boost capital efficiency, and reduce taxable transactions.

Set Protocol

Set Protocol is one of the major asset management platform on the market. It allows users to execute advanced trading methods by purchasing ERC20 tokens known as Sets. In addition, the software creates a comprehensive list of automatic trading methods that rebalance depending on technical indicators and trends.

Furthermore, because Sets quickly rebalance in reference to their target strategy, users may "set and forget." This allows passive investors to profit from market moves without having to trade. Streaming fees are also used by Set to reward and compensate managers. Creating a Set, on the other hand, entails making a proposal to the team.

Set's main characteristics are as follows:

  1. The managers manage Set; holders are unable to vote on its direction.
  2. There is no native token.
  3. Simple and easy-to-understand user interface.
  4. It uses fees to incentivize managers.
  5. It’s simple to invest in a strategy or index.

Balancer

Balancer, too, is a well-known asset management platform. It is a liquidity provider, an automated portfolio manager, and a price sensor all in one. Balancer also employs a novel approach to liquidity. It allows users to build and maintain their own portfolios without being coerced into a position that may result in a momentary loss. As a result, Balancer users can deposit any amount of a supported asset into their Balancer account at their choice.

Balancer allows its customers to tailor allocations to their specific needs. As a result, the platform is a fantastic solution for DeFi users.

dHEDGE

dHEDGE is another important addition to the top DeFi asset management tools. It is a decentralized asset management protocol that integrates with Synthetix. The platform enables investors to communicate with asset managers in real time. According to dHEDGE, it can connect investors with some of the world's top investment managers over the Ethereum blockchain.

The protocol and associated platforms emphasize transparency as a prospective benefit of decentralized asset management. Before investing in dHEDGE, investors could simply access the track records of asset managers with unparalleled transparency.

Most importantly, consumers could track an asset manager's performance using the dHEDGE platform leaderboard. It also has a 'Performance Mining' feature that rewards users who invest in productive pools on the platform. DHT token holders are responsible for addressing governance issues in dHEDGE.

Yearn.finance

Yearn.finance may potentially come up in your search for best DeFi asset management solutions. It is one of the most popular suites for decentralized financial products. Yearn.finance's notable asset management product is Vaults, which assists investors in investing their wealth.

Following that, the capital is invested using various unique tactics designed to maximize the yield from the asset deposits. At the same time, the solutions are intended to alleviate risk concerns in asset management. The primary benefit of Vaults is the elimination of transaction costs associated with individual trading, which is made possible by pooling the assets of participants.

IV. Conclusion

In conclusion, DeFi asset management protocols intend to focus on stability while addressing risks. As the DeFi area continues to grow, these protocols will surely become more popular as people look for new ways to get an advantage.

The comprehension of various entries among the top DeFi asset management solutions provides provided a clear picture of their potential. You can build your core understanding of DeFi asset management by reading basic guides and an overview of asset management on DeFi. As a consequence, you may obtain the greatest pointers to look for the top DeFi asset management tools based on your needs.

At the end of the day, the choice of a DeFi asset management tool depends a lot on your requirements and preferences. You can choose real asset managers through decentralized platforms or opt for completely automated tools.