Protecting investors by whitelisting assets a manager can trade
The upcoming Dexe Investment platform is not only the most complete and powerful in DeFi — it also comes with several layers of security. These include the trader having no physical custody of investor assets, the trader having to put up his own assets in proportion to how much in investor assets he can take on, the insurance against fund trading losses, and the whitelist to define which assets the fund managing trader can actually trade with. Let’s zoom in on that last one.
Every single standard fund on Dexe Investment can only operate with a set of cryptocurrencies approved by the DeXe DAO. Of course, DAO members can propose and vote to add or remove tokens to/from that list, just like they do with other DAO governance matters.
The tokens can be anything that’s traded on the blockchains supported by Dexe Investment (which aims to support all the main ones). Both stablecoins and unpegged ones. Naturally, DEXE, ETH, and USDC will be included, along with a number of other mainstream ones.
Criteria for inclusion
A great number of trusted assets will be included one way or another, with many of those who do not make it onto the whitelist being available via a Risk Proposal — see below). So the fund managing trader will have plenty of options for investment strategies.
How do the tokens make it into the whitelist? One of the main considerations for including or excluding a token is its liquidity. With ETH on the Ethereum network, for example, it is safe to assume that there will generally be plenty of liquidity. Same with BNB on the BNB Chain.
What we’re trying to prevent by excluding low-liquidity tokens is a number of well-known scams. As an example of a scam, imagine if a scammer made up a coin, let’s call it the SCAM token, that has very little liquidity. If he would want to rug pull using SCAM, he’d convince the fund’s manager to invest all of the fund into SCAM on an AMM like Uniswap or PancakeSwap. He’d then pull liquidity and run with the money. Or the fund manager herself could be running the scam. This would be disastrous for the investors and for our DAO. DeXe’s goal is always to protect investor funds first and then help them find strategies to trade with their capital profitably.
What if the fund manager wants to trade some other, more exotic coins to capture more alpha or seize on a sudden opportunity? Well, just because DeXe focuses on protecting the investors doesn’t mean it’s banning thoughtful risk-taking. For that, Dexe Investment has the Risk Proposal, where the fund manager can create a sub-fund with any assets allowed — no white list needed — for investors to join at their own risk. They should do very careful due diligence on Risk Proposals to make sure the proposed investments are safe.
But that’s a discussion for another time.