The Problem

We further believe that these requirements are all non-sufficient: we believe that a unified solution to all these problems is crucial.

We believe there is currently no integrated solution to support our needs.

Solving the rebalancing problem seems to come at the cost of having weak protection for custody, and having a real-time execution seems to come at the cost of pricing the structure incorrectly.

Hence, we started to review the conventional-assets management infrastructure, which is strained by many problems (efficiency, transparency, duplication, etc.) affecting both conventional and digital assets. Yet, our research found that most of the available solutions fit the conventional asset management infrastructures, which can't leverage the benefits of blockchain technology.

For example, conventional assets are registered by centralized trusted third parties (except for some outdated bearer certificates): if an unfavorable circumstance destroys or a malicious actor modifies the custodian’s database of an equity share ownership: the rightful owner can demonstrate his or her ownership (through past statements, proofs of payments, etc.) and have the company destroy the previous certificate and re-issue a new one. This is not possible for digital assets. If an adverse event destroys the keys or a malicious actor steals them, the underlying assets cannot be recovered. Most of the solutions proposed so far are akin to centralized exchanges where the private keys are held by third parties.

This also means that the most likely outcome is the loss of funds in case of failure or misbehavior of such third parties.

We believe that for digital assets, “first-party custodianship [is] the only responsible form of safeguarding client assets.” Another interesting point to note is that it is ironic that “despite all the new technology surfacing, crypto[-asset] funds can be even more expensive to set up and run than traditional funds. This can be seen in some of the fees they are charging, where it is not uncommon to see higher fee structures for crypto[-asset] funds than traditional asset funds”.