What To Expect With Set V2

This post was originally published on Set Protocol

With the upcoming launch of Set V2 bringing a host of new features, we wanted to highlight some of the exciting things that will be able to be built using this new infrastructure.

The building block features of Set V2 are:

  • Yield Farming — Generate yield by depositing assets into yield generating positions.
  • Multi Asset Support — Hold 2+ assets in your Set, allowing for broader crypto exposure and enabling index products.
  • Flexible Trade Execution — Portfolios can easily trade tokens using DEXs and dutch auctions. Tokens in the portfolio can also be completely removed or added in unlike V1 Sets where the trading pair is immutable.

In this article, we will go through some of the possibilities Set portfolio creators can create, and users can benefit from. As a note, the product ideas below are listed to illustrate the potential of Set V2, and isn’t a definitive list of Set V2 product releases.

Yield Farming

In this section

  • Hold a Set, Automatically Farm — V2 Set Portfolios allow people to automatically farm yield simply by joining a portfolio.
  • Big Gas Savings — Users don’t need to spend double to quadruple digit gas fees on multiple transactions since joining a yield farming portfolio is just one transaction.
  • Different levels of risk for different users — Users can have their pick of high risk, high reward yield farming opportunities, or stick to lower risk yield farms.

Yield farming is really hot in Ethereum/DeFi today, but is unfortunately complex, expensive, and time-consuming for people to capture the best opportunities available in the market. With Set V2, there will be a range of tokenized yield farming portfolios (aka Sets) that will seek to capture the best yield farming opportunities.

These yield farming portfolios will be managed either automatically (like our Robo Sets) or by a human. Similar to our current implementation of human-managed Social Trading Sets, there will be portfolios that act as pools of capital that a manager can use to chase the best yield farming opportunities that users can automatically benefit from simply by holding the Set portfolio token.

There will be all types of managers that have different risk appetites and farming strategies. Some may prefer to always chase the highest and riskiest yield in DeFi while others may play it safe by settling for lower yields in more battle-tested protocols. As a Set user, you’ll be able to choose which manager you’d like to delegate your capital to farm for you based on your own risk appetite.

Have a yield farming strategy you’d like to see on Set? Let us know in the comments.

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Index Portfolios

In this section

  • More Asset Support — Set V2 will support more assets than V1 currently supports giving people access to the broader DeFi ecosystem.
  • Buy the DeFi Market — Index strategies will allow users to buy into a portfolio that tracks the DeFi market using a custom index strategy.
  • More Exciting Portfolio Strategy Opportunities — V2 Sets will most likely have versions of thematic portfolios and other strategies that automate what cutting edge DeFi users are already doing.

We’re adding support for many more coins/tokens to the protocol in V2 which will enable the creation of an exciting new product — Index Portfolios. These portfolios would be composed of 2 or more tokens and can be programmed to automatically rebalance based on a predefined weighting or strategy. For example, an “Oracle Index Set” could contain tokens that are associated with oracle protocols such as LINK, BAND, and TRB which means instead of users having to buy into each of these tokens individually, spend gas on 3 separate transactions, and manage when to trade in and out, they can simply buy the “Oracle Index Set” in one transaction and enjoy automated rebalances to realign the weights in their portfolio.

Bundling these multiple transactions into one transaction also has the added benefit of reducing the amount of transactions that clog the network, potentially reducing the amount of fees all people using Ethereum would pay if these products are widely used.

The possibilities of Index Portfolios are endless, and managers will be able to configure them in any which way that they so choose. We hope to see a vibrant ecosystem of Index Portfolios that attract all sorts of users both from the crypto world and the traditional finance world. Below are some examples of different types of Index Portfolios that users can create.

Example Index Set Portfolios

Index Portfolios

Hypothetical example of a DeFi portfolio Set.
  • DeFi Portfolio — A basket of the top tokens by market cap, TVL, fees generated, or any other metric.

Thematic Index Portfolios

Hypothetical examples of thematic portfolio Sets.
  • Oracle Index Set — (LINK, BAND, TRB) A portfolio of different oracle tokens in one tokenized portfolio.
  • Lending Index Set — (COMP, MKR, AAVE) A portfolio of different lending protocol tokens.
  • DEX Index Set — (BAL, CRV, KNC, LRC, BNT, ZRX) A portfolio of different DEX tokens.
  • Derivatives Index Set — (SNX, UMA, NMR, REP) A portfolio of different derivative tokens.

Other Index Strategies

  • Pre-Exchange Listing Set — A Set that holds crypto assets that are slated for exchange listing, assuming a rise in asset value after being officially listed.

Let us know which strategies excite you the most, and if you want to create one of these Sets yourself!

Flexible Trade Execution

In this section

  • V2 Uses DEX Trades — V2 portfolios allow for instant trading just like you’d experience on Uniswap, Balancer, or 1Inch.
  • Flexible Holdings — Set can now add or remove tokens without needing to redeploy a new Set.
  • Synthetic Assets — V2 will have the ability to hold synthetic assets to expose users to assets beyond crypto.

Currently, V1 Sets are limited in how they can perform rebalances (trades). With V2, managers will be able to rebalance or trade the underlying assets in Sets by using DEXs such as Uniswap, Balancer or aggregators such as 1inch. This would enable managers to trade newer assets that are not yet available on centralized exchanges or to a market maker network, but are available on permissionless platforms such as DEXs.

Sets can also add or remove assets from the holdings, giving portfolios the flexibility to trade in and out of different assets based on the strategy or new opportunities that present themselves in the wild.

Additionally, Sets will be able to take full advantage of synthetic trading in V2 which means that managers can trade between positions with 0 slippage and potentially include assets like synthetic gold in their strategies. Managers will also be able to be more flexible in their strategies as they will have the ability to add margin to their trading style so they can more effectively capture market movements.

Summary

These features will come in different batches as we prepare each feature and product line for release.

All in all, Set Protocol V2 will allow for a number of different integrations with popular DeFi protocols such as Balancer, Curve, Synthetix, AAVE, and Compound. This enables a wide range of new use-cases that weren’t possible with Set before.

It allows Set Portfolios to have:

  • Flexible Trades — Execute trades for a wide range of assets on Balancer or Uniswap including those that are newer and only exist on DEXs (such as the latest hot new DeFi token)
  • Flexible Stablecoin Trades — Move between different stablecoins using Curve instead of just being limited to only trading with one like it is for Set V1. You can earn a yield on those stablecoins while also farming CRV!
  • Wide Array of Strategies — The flexibility of composing your portfolio in any way that you want will open up the door for different index strategies, discretionary strategies, yield farming strategies, and more.
  • Synthetic Assets — Enable a host of new assets for managers using Synthetix to trade non-native assets on Ethereum such as gold and stocks. These assets can also be traded at 0 slippage and are only limited in size by the capital pool of the Synthetix protocol!
  • Earn Yield — Use Aave, Compound and Yearn to earn yield and/or deposit tokens into Balancer and Uniswap pools to further increase gains from yield/airdropped tokens.

If you have any ideas on the types of portfolios you want to see on Set V2 or want to create your own V2 Set, reach out to us at [email protected], or ping us on our Discord at https://discord.gg/kNsYA6A.

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What To Expect With Set V2 was originally published in Set Labs on Medium, where people are continuing the conversation by highlighting and responding to this story.

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