Длинный формат текста New Vision
Long Format English Master:
Introducing the New Vision for PowerPool
In this article we share the brand new PowerPool strategy and positioning in the market
TL;DR Executive Summary
PowerPool announces a comprehensive update to its vision, products, and strategy. The New Vision was originally proposed by Gordon Gekko with contributions from Vasily Sumanov and the core PowerPool team.
Within the broad framework of the New Vision, it is proposed to shift the PowerPool protocol concept from “portfolios provider” towards a DAO manager of a family of thematically structured investment products offering actively-managed, broadly-diversified, rewards-rich, gas-efficient, multi-chain tokens easily blended and hedged by average investors. The product strategy will eventually include three types of products — bullish products, bearish products, and market-neutral, pure yield-oriented products.
Hedging and the possibility to easily create and manage market-neutral/hedged positions on diversified pools while still receiving rewards is the key idea...
Currently, investing in diversified thematic pools with the possibility to hedge the position (partly or entirely) is very complicated/almost impossible.
The new PowerPool vision explains how such products would be developed, managed, and kept relevant to the market. In this article, we explain the foundations for the new vision, the product strategy, and outline some examples of upcoming products in the pipeline and their properties.
The first product entirely aligned with a new vision has already been approved by PowerPool DAO. It is BSCDEFI, a BSC-focused pool that will provide diversified exposure to the BSC DeFi ecosystem, generate rewards from constituents projects, and be easily hedged by means of derivative tokens provided by Linear Finance.
Why Invest via Diversified (Hedged) Pools?
It is long accepted in traditional finance that the average, and even 'High Net Worth' professional investors should not try to pick just a few potential ‘winners’ whose values might (or might not) steadily rise. Instead, everyone (except arbitrageurs and professional traders) should invest primarily in broadly-diversified, thematically-curated pools of likely prospects, to gain diversification in returns and increase the chances of holding a winner, even with only modest levels of investment. This is especially true for early-stage venture capital investments, which productive, fee-earning crypto tokens strongly resemble. Arguably, revenue-focussed crypto tokens are even riskier than previous forms of software-based venture investment, because open-source software and the threat of 'forks' reduces first-mover advantage and tempers extrapolations of initial revenues. Even the most successful technology venture capitalists obtain a positive return on at most 10% of the money they invest, and so they actively follow each other into deals so as to spread their bets as far as possible.
Even the far less volatile/risky traditional stock market (TradFi) has come to be dominated by both actively and passively (index-based) managed pooled investment vehicles traded on exchanges (Exchange Traded Funds-ETFs). Some ‘bullish’ or ‘long’ funds/pools are run optimistically, hoping the value of their holdings goes up, but the most professional investors also make ‘hedging’ investments in ‘bearish’ or ‘short pools’, which are structured and managed such that the value of at least some of the pool tokens goes up if the value of the targeted holdings goes down. In TradFi equity markets, mandated separate custodians make it very easy for short-minded fund managers to borrow shares and sell them, investing the proceeds in low-risk, high-yield vehicles to pay for the borrowing while waiting for the value of the borrowed shares to go down for re-purchased/repaid for pennies on the original dollar. The fund's gain is seen in the rising Net Asset Value (NAV) of the 'hedged' fund and the value of the investors’ stakes rise, even though the targeted borrowed securities actually fell in value. This common borrow/hedge paradigm in TradFi does not generally extend to unlisted, early-stage venture capital investments like those currently prevalent in crypto. But hedge fund style investing is soon coming to crypto. DeFi venture capitalists are busy incubating crypto projects like Beta Finance, the first permissionless money market protocol for lending, borrowing, and shorting ANY crypto asset, especially so-called long-tail tokens hitherto not subject to market discipline via shorting.
A Collective Cost-sharing Hedge Fund
The old joke that the largest yachts in the harbour belong to the fund managers, not their investors, has proven very true. As a group, the richest investors in the world own investment management partnerships called ‘hedge funds’, so called because they usually manage to make good returns (and fees) whether overall markets go up, or down. Traditional hedge fund managers are typically private partnerships generating stabilised profits not accessible to the average investor. PowerPool aims to apply these proven strategies to a flexible and adaptive family of digital asset pooled investment tokens, collectively known as the Power Universe, by adapting hedge fund success formulas such as 'active beta' for sustained, long-term returns to the evolving and still highly-volatile world of crypto investment. PowerPool is a crypto-native cooperative, known as a Decentralised Autonomous Organisation (DAO). It is akin to an online investment club, where anyone who buys CVP (and stakes it as xCVP) can participate in the Net Asset Value (NAV) of the DAO. This permits average crypto investors to achieve gas fee and tax-efficient risk/return results through both bull and bear markets not otherwise achievable without a dynamic, group-curated and highly-automated, fundamentals-based hedged investment manager like PowerPool. Each individual investor can tailor/modify their personal portfolio holdings across an expanding, multi-chain/multilayer Power Universe ‘family’ of funds, further ‘blending’ their individual portfolio holdings according to their unique situation and outlook. Furthermore, for those staking their CVP as xCVP, it is an objective of the DAO to maintain some internal downside hedging (via non-taxable events) to reduce the downside volatility of the xCVP token, enabling CVP holders to use their staked xCVP as relatively stable collateral, borrowing against it across a variety of lending sites without constantly worrying about liquidation.
Investment management is basically managing categorized, thematic shortlists of potential investments, and taking weighted positions for/against them as appropriate. From a ‘macro’ viewpoint, we are currently in the cycle of adoption for crypto assets where proven innovations are proliferating across an ever-growing number of competing chains, and existing leaders on Ethereum are scrambling to avoid fees too high for average investors and scale faster and larger by moving to second-level scalability chains. Cross-chain bridges are soon to introduce ever more competition for liquidity, the lifeblood of crypto DeFi investment. In this coming multi-chain bridged era, no individual investor working part-time on their own can even hope to understand the proliferating options enough to invest intelligently. Even if they could, permanently high/surging gas fees (driven by transactions spam from arbitrage bots) on the most popular chains will erode the returns/rewards for average size investors. As the recent Bitcoin eco-threat/Chinese miner exodus inspired crypto de-leveraging illustrated, Ethereum transactions fees can seem low, until the moment you (and everyone else) really need to pay them. Volatility in gas prices has historically reached and sustained very high levels, and likely will continue to do so. Peak hour traffic jams are a fact of life, no matter how many lanes the freeways have. Like using Uber on real world congested freeways, surge-pricing of Ethereum gas is always going to be most unaffordable just when you need it most!
Participating in pooled investment vehicles like PowerPool is the only way for average-sized investors to manage rapidly proliferating invesment options in this likely-permanent situation of surging gas costs due to 'traffic jams' on Ethereum. In this sense, investing in pools managed by PowerPool can be thought of as 'Ethereum scaling technology' for the average investor.
Become a Partner-Who can Invest, on What Terms?
Membership as a limited partner in the PowerPool DAO with profit-sharing is available by buying CVP and staking it as xCVP. Member-curated shortlists classifying tokens of thematic interest across the realm of digital assets weighted towards factors best applied to each individual thematic pool is 'smart-beta' investing based on the collective wisdom of all the xCVP voting members, all with significant ‘skin in the game’. Like all investment managers, PowerPool charges 2% of AUM annual management fees (daily equivalent) on public pooled investment tokens, and also 1% for staking/redeeming CVP/xCVP. But unlike privately-managed off-chain crypto (and TradFi) hedge funds, there is no minimum investment and no 20% performance fee, since the funds are managed by the DAO itself. Private, off-chain hedge funds generally require a minimum investment of $300-500,000 and typically include less than 30 (rich) investors. This is hardly inclusive. Thanks to PowerPool's gas-saving ZAP integration, anyone could feasibly invest just a few dollars in Power Universe thematic pooled vehicles.
PowerPool does not apply KYC nor the notoriously non-inclusive, discriminatory Accredited Investor barriers prevalent in TradFi to stop average investors from accessing lucrative exposure to responsible, diversified early-stage investing. Why should a transparent, collectively-managed, broadly-diversified defensive/hedge-minded on-chain portfolio manager buying tokens on the same terms as the 'big boys' be 'off-limits' to the average investor? Casino gambling and lotteries are state-sponsored and taxed, but technology venture capital and private equity with tax breaks? "Oh no, sorry, not for you!...people like you must wait until these ventures have been floated on the (rigged) public markets..."
Enter DAO-managed PowerPool Power Universe investment tokens with no minimums accessible to anyone. The 2% management fee income accrues to the PowerPool DAO Treasury/xCVP ‘staking’ tokens used for governance votes. Your total return as an active member of the DAO ‘cooperative’ with xCVP in your wallet includes not only your market-related returns on the various individually-traded Power Universe tokens, but also your share of the overall PowerPool DAO Treasury xCVP returns via the steady appreciation of your staked xCVP. By buying CVP and staking/holding as xCVP, anyone can become a (part) ‘owner’ of a (crypto) hedge fund! And since everything is 'on-chain' the levels of transparency are much higher than in TradFi. Big-time TradFi Ponzi-schemer Bernie Madoff could not have operated for decades as an on-chain crypto fund manager.
Passive Fund Management in Crypto
Other crypto ‘fund managers’ with tradeable pool tokens generally only offer ‘passively’ managed bull/long-only ‘index’ weighted pools using some variant of ‘Top-10 equally’’ or ‘market cap’ weighting criteria, i.e. some with equal weightings or ‘methodologist capped’ weightings manually adjusted once in a while, or never. These pools offer diversification, but DO NOT gather the rewards for token-holders! This is shocking given that liquidity rewards are the primary near-term benefit of investing in DeFi! Because DeFi protocols pay highly variable rewards that are not really similar to equity share cash dividends, and because unregulated crypto markets are not nearly as efficient as listed TradFi, active management of investment pools (WITH rewards and shared gas fees) will almost always beat passive or individual (non-whale) management, especially on a volatility/risk/fee adjusted basis. An individual investor managing a handful of reward farming positions over the course of a month can incur total gas costs for deposits and withdrawals easily reaching hundreds of dollars. For many individual DeFi investors, gas costs from entering and exiting pools and staking positions is often the largest expense.
Off-chain private hedge funds have discriminatory $300-500,000 investment minimums and generally accept only about 30 investors who are typically locked in for 5 years. On-chain crypto-native structured investment competitors generally offer only too-broad, non-thematic crypto vehicles with overly-mechanistic passive weighting schemes...WITHOUT the rewards... at too high fees! 'Top 10’ (misleading MCAP) fixed-weight ‘index’ operators that do NOT harvest rewards are not worth their fees. Even a 1% management fee to a MCAP/TVL-transfixed fund manager who does not gather and distribute rewards to their token holders seems like a lot. As for their 'research', relatively simplistic 'market capitalisation' calculations un-informed by liquidity and other (shorting options) considerations are easily ‘gamed’ and can be tragically flawed when applied injudiciously in the crypto space.
Does anyone (other than the original DAO hackers) truly believe that Ethereum Classic (ETC) should have a market cap around $5 billion? Why did Dfinity's Internet Computer (ITC) lose about 80% of its market cap over less then a year, despite no adverse change in the (admittedly ambitious) outlook for the project? Market cap weights unnuanced by liquidity depth and other sentiment measures, together with highly-incentivated temporary TVL metrics taken on their own are just misleading... ease of calculation is their only virtue. Although any randomly-chosen pool of about 10 tokens will offer some diversification to the average investor during sustained bull markets, passively-managed 'index' lists without rewards are not as efficient or agile throughout all market conditions as DAO-guided often hedge-able PowerPool Power Universe thematic tokens. Rewards-driven liquidity flows/incentivated TVL is too volatile and combined with inflationary tokenomics, vesting schedules/founder/VC 'overhang' and uncertain and potentially unsustainable revenue shares can result in wildly inaccurate pricing of tokens. 'APY' calculations are too volatile, changing constantly and must be tempered with the risks of impermanent loss in 2-sided pools. In summary, 'passive' crypto fund management (without rewards) based on freely-available but potentially misleading metrics like market capitalization, (incentivated) TVL and APY≠ROI are generally thematically sub-optimal, not worth the fees, and mechanistically-driven by imperfect indicators of value, volatility, and sustainability in the crypto space. Above all, they lack efficient, timely automated harvesting and distribution of rewards that rightfully belong to the token holders sharing the costs of the pool!
Data-Driven Active Fund Management
PowerPool continuously monitors numerous meaningful fundamental metrics for all shortlisted tokens to guide the trading protocol’s actions. For example, in crypto it is critical to realise that simplistic ‘headline’ calculations of ‘APY yields’ exist because protocol founders are giving away their own tokens (i.e. ~future equity option rights - not cash!) as ‘rewards’ in the hopes of attracting a ‘sticky’ community and thereby aggregating pools of sufficient staked liquid savings. Therefore, one key fundamental metric in the crypto DeFi space is the (projected) rate at which a given project’s fees/revenue is increasing relative to the rate at which the number of tokens in circulation/fully-diluted market capitalisation is increasing via (sustainable?) rewards. This and many other on-chain and oracle-based metrics are continuously tracked by PowerPool for short-listed tokens of interest and incorporated into changing weightings and the daily buy/sell/borrow/repay decisions executed by the PowerPool protocol algorithms. Each thematic pool has its own metrics, and they are not the same. Metrics appropriate for a thematic pool of Alternative Layer 1 chains ($ALTL1POOL) would not be the same as metrics for the Wallets, Identity and Security ($WISPOOL) thematic pool. Choosing which metrics to follow and automating the process for each pool as a guide to periodic re-weighting is integral to active management of a broad range of thematic pools by the DAO. Everyone knows that in a very dangerous neighborhood (and crypto is), there is safety in numbers. Don't try to go it alone!
PowerPool DAO uses (quadratic) xCVP stake-weighted voting not only to nominate and (re-)classify shortlisted tokens of interest, but also to continuously re-weight investments in pooled tokens being tracked. In contrast to professional and pure algorithmic fund managers, PowerPool attracts primarily crypto-savvy investors with 'skin in the game' incentivised to participate via flash polling and the internal voting based on data-driven debate that drives changes to token weightings over time. No individual investor (or fund manager) could do this as effectively, but even if they could, their information costs, gas fees and potential tax complexities relative to the amounts invested would be prohibitive for all but the largest ‘whales’. Hence, thematic but broadly-diversified, self-custodied, actively-managed, fee-minimising, no minimum, tradeable Power Universe tokens are the best option for almost everyone.
PowerPool leverages the collective ‘wisdom of (data-driven) crowds’ among its relatively sophisticated xCVP staker 'owners' to develop and maintain not only a ‘whitelist’ of nominated tokens that the membership overwhelming agree have good prospects (and should be managed ‘long’ i.e. optimistically), but also a ‘grey-list’ of tokens to be managed ‘bear’ i.e. pessimistically by means of some combination of borrowing, inverse synthetic tokens and derivatives positions. In many cases, DAO community sentiment will be divided, and most tokens may not immediately achieve a clear majority for either optimistic/long or pessimistic/ short postures in the periodic flash poll voting by xCVP stakers. These ‘non-consensus' tokens are parked on the ‘blacklist’ of tokens not actively tracked/managed by the PowerPool protocol, not because they are bad long-term investments, but because there is insufficient community consensus long/short on the token at any given time. If/when collective sentiment changes enough to move the nominated token off the blacklist and onto either the white/long or grey/short list, the PowerPool protocol will begin to actively manage that token appropriately until DAO sentiment voting again decides to move the token of interest to a different shortlist.
PowerPool DAO members (xCVP) stakers who successfully nominate tokens and continue voting to support their nominated tokens, and also other top-performing tokens are eligible for periodic CVP rewards and MVP NFT badges. To reduce the influence of prospective major xCVP stakers, the formal DAO voting is quadratic, and the quorums and threshold majorities required to place a token on shortlists are set conservatively. The shortlists are dynamic and not public, the announcements are time-delayed, the magnitude/direction of the weightings not disclosed, and the timing of transactions is slightly randomized. Results of votes/flash polls are announced in the (restricted access) DAO Forum only token by token, and with a one-week time delay.
Knowledgeable and spirited debate regarding specific candidate tokens takes place in our lively Forum for xCVP stakers, known as 'Illuminati'. The PowerPool Forum is open to virtual ‘roadshows’ are presented by protocols/teams attempting to influence categorisation/weightings of their tokens. If their token is zero-weighted, the team can launch an appeal by staking sufficient xCVP and staging a virtual roadshow. As an xCVP staker, a member of the 'Illuminati', anyone can learn a great deal quickly from these internal discussions. More importantly, even without buying and staking xCVP, anyone can benefit from the gas fee spreading scale, expertise, diversification, rewards harvesting and automation available from the PowerPool DAO/protocol just by buying and holding any mix of the expanding Power Universe family of actively-managed, rewards-rich pooled investment token(s).
What about Meta-Governance?
The PowerPool DAO governance/stakeable CVP token is named for the concept of Concentrated Voting Power. Activist governance is an important part of operating a pooled investment hedge fund in the crypto space. Many traditional hedge funds are also ‘activist’ funds that take large stakes in companies in order to influence the management. PowerPool operates a special opportunities ‘red-list’ of tokens identified and analyzed by the community where activist management and large-scale strategic voting may affect the value of tokens of interest. For (U.S.) regulatory reasons, many interesting tokens in the crypto space (for example Uniswap) have been distributed with no clear claim on future revenues, deferring that option for future community decisions. Once nominated and accepted by the PowerPool DAO voting, red-listed governance opportunity tokens can be accumulated in the (front-running) Treasury, and depending on evolution of events, eventually moved to another shortlist; white/bull/long, grey/bear/short, or black/non consensus/ignore depending on governance voting and periodic soundings of xCVP stakeholder sentiment via informal off-chain ‘flash polls’.
As the number of L1 blockchains, L2 layers, cross-chain bridges and ‘wrapped’ tokens proliferate, the number of DeFi exchanges, lending sites, synthetics sites and perpetual derivative sites is increasing even faster. Substantial value can be added by actively influencing coordinated governance voting on listing decisions across these protocols to drive more composability value to tokens of interest to PowerPool investors. Starting with creating deep pools of token liquidity for PowerPool’s own investment pool tokens listed on (multiple) DEX exchanges, the activism continues to focus on listing target tokens on lending sites to facilitate lending/borrowing white/grey-listed tokens, then listing the tokens of interest on synthetics sites to facilitate large, low-slippage trades and create inverse tokens facilitating short positions, and finally listing target tokens on perpetual derivatives sites to enable perpetual puts & calls. Beginning with the CVP token itself, coordinating the foregoing governance actions not only attracts liquidity to enable future efficient management of both long/bull and short/bear vehicles, but can culminate in accelerating listings for PowerPool tokens on large centralised exchanges (CEXs), the on-ramps for large scale access to the fiat-investing average investors who desperately need the actively-managed pooled investment vehicles PowerPool offers.
PowerPool’s size as a collective investment scheme will give it a disproportionate say in the seemingly mundane but cumulatively important DeFi site governance decisions regarding listings in exchanges, synthetics platforms and derivatives sites. State-of-the-art governance tools adapted for hedge fund management help PowerPool mobilise motivated, crypto-savvy co-investors in coordinated governance actions throughout the digital asset space. PowerPool community members and investors, known collectively as ‘Sparkies’, add influential, thoughtful social media ‘meme’ presence to the listing discussions. This style of targeted, coordinated crypto-activist investment management can be very lucrative, enabling long-term effective counter-cyclical management of both long/bull and short/bear vehicles. However, this investment style is far too time-consuming for individual investors to pursue on their own. Even if they could, for all but the largest whales, the number of votes they could cast would be of no consequence.
Future Pipeline of Thematic Pools
PowerPool has already launched various Ethereum DeFi trial/prototype bull-only long vehicles, with circulating tokens such as PIPT, ASSY and YETI. Going forward, the composition and relative weights in these pools (now based on Balancer v2) will become dynamic, with weightings continuously managed by DAO governance, sometimes hedged via internal holdings of the DAO Treasury. Together with Synthetix, PowerPool is launching PPDEFI, a 20-token Ethereum DEFI pool with full rewards harvesting, mirrored by long/short synthetic tokens on the Synthetix platform. PowerPool is multi-chain in outlook, and together with Binance Smart Chain (BSC) and Linear BSC-native synthetics platform have already launched an initially 14-token BSCDEFI pooled token, also with synthetic long/short trackers on BSC.
As the number of alternative ‘pretender’ Layer 1 chains and Ethereum-based L2 ‘scaling’ layers multiply, the number of competing cut-paste-fork 'copycat' DeFi protocols running on each chain/layer multiplies, resulting in the numbers of potentially interesting DeFi tokens increasing exponentially. Given the uncertainties underlying the future distribution of value across proliferating L1 chains, PowerPool will launch a continuously adaptive-weighted pool of alternative Layer 1 POS tokens (ALTL1POOL) excluding Bitcoin (and clones), Ethereum, and possibly Cosmos Hub (which will have its own pool). These are risky VC-type investments, and all VCs know that they must spread their bets widely. Even the best VCs do not achieve a positive result on more than 10% of their investments, so pooling is the only responsible way to gain exposure. Indeed, VCs are usually playing with already-pooled fat-cat money. As was the case with the previous ‘dot-com’ and ICO investment bubbles, the majority (but not all) of cut-paste-fork copycat ventures on so-called 'Alt-L1s' will eventually fail, flaming out in the rewards battle with incumbents, their aggressive APY calculations just a mirage and the ultimate long run value of most of their tokens falling to derisory levels. As the (Mandalorian) saying goes: “This is the way…”
But not all investors are interested only in long term bull/bear growth pools to harvest rewards. Some are more interested in harvesting current yield, and therefore PowerPool also offers successful ‘neutral’ high-yield strategies via relatively lower-risk/higher-yield pools such as YLA. Indeed, operating neutral yield-oriented pools is an integral part of operating defensive and bear-oriented funds that borrow/short grey-listed tokens. Bear/short vehicles borrow tokens, sell them and invest the proceeds in low-volatility, high-yielding pools to pay the interest on their borrowings. They augment this income by reaping rewards on synthetics platforms for staking contrarian ‘inverse’ price-tracking tokens, and then further augment their income via perpetual derivatives positions such that during downturns, the ‘longs’ pay funding adjustment fees to the ‘shorts’. The ultimate gain of a short/bear vehicle depends on the value of the borrowed tokens eventually falling so much that the fund’s debt can be repaid at a deep discount. During prolonged market downturns, the returns on defensive and short/bear vehicles usually shoot to the top of the leaderboard, cushioning the fall in value of investors’ overall portfolios.
Protocol abuse/hack insurance from Nexus Mutual/Armor will soon be available at attractive rates covering individual investments, and the project/protocol security will soon be continuously monitored by Mixbytes and Certik.
What can I do to join?
Questions? Please see our FAQs and join our Discord chats with links to the DAO coordination Wiki. If the roadmap outlined in this article seems interesting, please join the DAO. If you know someone keen to get involved in crypto investment management, going behind the hype, memes and schills to get at the data, then please forward this article to them. Our DAO has plenty of roles for amateur and professional investors alike. Buy and stake your CVP to propose your ideas for thematic pool vehicles you would like to see, and earn rewards if your proposals are adopted. Consistently voting your staked xCVP and consistently supporting the best holdings over time can win extra rewards (and MVP NFTs). The synergies between PowerPool DAO's community-driven activist investment management and the technology platform combining automated fundamentals-driven Balancer v2-based PowerIndex Protocol with the autonomous PowerAgent's active rewards harvesting results in sustainable, non-forkable, and potentially counter-cyclically hedged defensive value accruing to xCVP stakers.
If you are a TradFi hedge fund looking to offer your clients a range of crypto exposure vehicles operating with battle-tested, leading-edge protocols, sophisticated risk management, and advanced NAV reporting capabilities, please get in touch. We welcome external professional investment managers on both a pooled and segregated basis.