Imagining Decentralized Financial Products
Blockchain technology is disrupting the financial sector. New financial instruments are being created and it is just a matter of time when Bitcoin ETFs will be approved. But could you imagine a decentralized ETF that consists of tokens? CryptoBaskets is a project that will offer such decentralized financial products.
WE SPECIFICALLY CHOSE A USE CASE WHERE THE CURRENT SCALABILITY OF THE BLOCKCHAIN IS AN ADVANTAGE RATHER THAN A DETERRENT
Blockchain technology is disrupting the financial sector. New financial instruments are being created and it is just a matter of time until Bitcoin ETFs will be approved. But could you imagine a decentralized ETF that consists of tokens? CryptoBaskets is a project that will offer such decentralized financial products. We had a chance to interview Carlo P. Las Marias, the COO, and co-founder of the project. He kindly answered our questions and shared his opinion on the decentralized ecosystem and its future. The project is currently in Beta (mainnet launch is coming soon), so today you’ll have the incredible opportunity to learn what the CryptoBaskets is all about. Without further ado, let’s jump into the interview.
Hi Carlos. Could you quickly introduce CryptoBaskets by telling us about how users can use it and what’s necessary to get started?
CryptoBaskets is a platform created by CoinAlpha, Inc. that makes it easy and fun for users to diversify their cryptocurrency portfolios. Instead of buying individual cryptocurrencies, a user can buy thematic baskets chosen by other users, or customize their own basket and share it with their network.
In order to buy a CryptoBasket, a user just needs Ethereum and a Metamask wallet. We currently have a live testnet DApp at https://ropsten.cryptobaskets.io which is available for anyone to try. We provide test Ether for anyone who wants to try our app and can provide additional amounts for users performing actions on the app, such as creating baskets and placing buy and sell orders. If anyone is interested, they can contact us on our telegram group at https://t.me/cryptobaskets or via email, [email protected]
How did you come up with such an idea?
We created CryptoBaskets to allow anyone to become a crypto fund manager. The best crypto analysts have specialized expertise in game theory, cybersecurity, and/or token economics, skills that traditional fund managers lack. Yet because starting a crypto fund requires access to wealthy investors as well as high setup costs to pay lawyers, custodians and administrators, many people with this specialized expertise cannot exercise it.
From managing our own crypto hedge fund, we realized that smart contracts could replace many of the traditional fund intermediaries. This technology allows individual experts to create their own fund-like products without all the intermediaries involved in a regular fund. Other market participants benefit from being able to choose from a wide range of expertly selected, diversified crypto baskets.
For a broader discussion of our overall vision for the technology, we have also written about it on our blog: https://medium.com/finance-3. While currently the DApp focuses on ERC-20 tokens, we think the underlying protocol can be applied more generally to create more efficient, smart contract-based versions of many products from the traditional finance world.
What makes this DApp unique, how does it differ from other DApps in the marketplace?
The difference between CryptoBaskets and traditional index-type and ETF type investments is that CryptoBaskets are non-custodial. A CryptoBasket itself is an ERC-20 token that can hold and control other tokens; this means that an owner of a CryptoBasket token also owns the underlying tokens and can exchange the CryptoBasket token for the underlying tokens at any time, automatically. In traditional funds, typically you need a fund manager, fund administrator, and a custodian to handle this, and these are the main reasons traditional funds charge high fees and incur high costs; you also have to trust the fund manager, administrator, and custodian.
Our DApp simplifies the process of creating and transacting in Baskets; users can easily create new Baskets, based on themes, sectors, any criteria a user has.
Compared to other protocols that similarly “tokenize tokens”, our DApp offers a comprehensive solution. We have developed market making trading bots that enable us to connect to cryptocurrency exchanges to automate the process of accumulating the underlying tokens to include in CryptoBaskets; therefore users can transact in baskets and do not have to worry about sourcing and accumulating all of the underlying tokens themselves, through various exchanges. We make it simple and efficient for users to gain access to a diversified set of tokens.
Your DApp only supports Ethereum tokens (ERC20 standard to be specific). Are you planning to add integrations with other Blockchains?
ERC-20 technology is relatively well-developed, which we felt was ready to allow us to deliver a functional product today. We are continuing to evaluate cross-chain projects and solutions as well as more centralized, custody solutions for including non-ERC20 tokens to the platform.
You already have over 30 tokens that can be used when creating a new basket. By what criteria were those tokens chosen and are there any plans to add more in the future?
The current tokens we have on our platform are some of the largest and major ERC-20 tokens by market cap. We audited each of the major ERC-20 token contracts and excluded tokens which varied the implementation of ERC-20 token standards; we found that even though some issuer’s claimed that tokens were “ERC-20”, their code may not have been standardized or could create potential problems (see our post: https://medium.com/finance-3/the-myth-of-the-erc-20-token-standard-ab0d76cf8532 where we discuss some of these problems).
Some of the listed tokens have already launched their own Blockchains (for instance, EOS, Tron), and some are planning to do this in the near future. Once these projects launch a mainnet, they will swap tokens and old ERC20 tokens become frozen and useless. What will happen with such tokens in your platform if, for example, these tokens were the part of a basket?
On our testnet DApp, we have created testnet versions of the ERC20 tokens; therefore the testnet DApp does still include testnet versions of some of these tokens mentioned. However, when we launch to mainnet, we would exclude any such tokens. Also if in the future any token were to migrate from ERC-20 tokens, then we would advise users to “debundle” any baskets they own (i.e. exchange the basket tokens for the underlying tokens); we would stop supporting any baskets containing such tokens and create new baskets to replace them.
What are the main benefits of creating a basket?
As mentioned above, a Basket is a “non-custodial” way of owning a diversified portfolio of tokens. Rather than transacting or transferring multiple tokens, merely transferring the Basket representing those tokens transfers control of all underlying tokens in a single transaction.
Baskets also ensure the composition of underlying tokens, as specified by the basket creator.
Are there any parts of these transactions stored off-chain?
The protocol data stored on-chain is comprehensive in terms of the objectives and functionality of the protocol; however, we store additional data off-chain which is intended to improve UX and usability, but it not essential for the protocol to function. Specifically, our DApp provides certain information such as price and performance histories as well as some qualitative descriptions provided by basket creators. These are stored off-chain and are made available for UX.
The functional parameters and data for CryptoBaskets are all stored on-chain, such as basket composition, name, holdings, historical activity (via blockchain “events”).
Could you tell more about the team behind the project? How many people are working on this project, what are their roles, etc?
CoinAlpha is a Mountain View / Silicon Valley based team. Our 4 co-founders are comprised of experienced finance professionals (former senior investment bankers at Goldman Sachs, JP Morgan), software engineers (former Senior Software Engineer at Apple and machine-learning expert, previously worked with Siri team), startup founders, and blockchain engineers (including a winner of ConsenSys Academy’s global blockchain engineering hackathon); more details can be found on our site: https://www.cryptobaskets.io/about. We are a highly technical team and we think that one of our advantages is the ability to combine our finance, technology, and machine learning expertise to create products that can make an impact today.
Currently, we see that Blockchain DApps do not have many users. What do you think is the main cause for low adoption rates? Do you think that this could change in the future and if yes, what factors could increase DApp popularity?
DApp popularity is currently held back by issues like blockchain scalability and the dearth of user-friendly crypto wallets. We specifically chose a use case where the current scalability of the blockchain is an advantage rather than a deterrent. Buying a customized fund product in the fiat world typically requires one business day. Ethereum’s one-minute settlement time is fast by comparison.
In addition, we’re starting to see more and more ways that people can access crypto natively, through browsers like Opera and Brave, HTC’s new crypto-friendly smartphone, and mobile wallets like IMToken, Status, and Toshi. As more people can access crypto natively, DApp adoption will increase.
Are there any future updates planned? What are your thoughts about the future of CryptoBaskets?
We only released our testnet DApp in July; we are lucky to have a responsive and active community of users who have tried out our DApp and provided comments and suggestions. We are working through user feedback and making improvements on the DApp, which we roll out on a continuous basis.
The next major step for CryptoBaskets is that we are currently (and have been) working through the legal and regulatory considerations for launching the DApp on mainnet, and are planning to release the DApp within the coming weeks.
What do you think about the future of Ethereum and Blockchain technology as a whole?
I think we have only begun to skim the surface of the applications of Ethereum and blockchain technology. In the near term, we see that the finance sector is one that immediately could benefit from blockchain technology, due to many inefficiencies resulting from legacy processes and intermediaries in finance; this is why we have focused on financial and asset management related protocols. It is an exciting time; the field is still relatively new, and we are optimistic about the developments and possibilities of the technology, and many applications and ideas that are yet to come.
How can I learn more about your company and project?
To learn more about CryptoBaskets, you can go to our site https://cryptobaskets.io or join our community on telegram at https://t.me/cryptobaskets. We have also released blog posts discussing the platform as well as discussing broader topics and longer-term vision at https://medium.com/finance-3.
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