Tulip: An experiment with TokenSets and the Set Protocol

Tulip is an experiment with TokenSets and the Set Protocol to bundle tokens and simplify decentralized asset management.

Let’s take care of some important things first.

I am utilizing open source software and an application that utilizes that open source software. I am personally putting my own funds into a smart contract. Anyone else who puts funds in this smart contract is responsible for their own decisions, and has complete control over their funds at any time of their choosing. I am not anyone’s financial advisor and this is not an organized fund. These contracts may carry risks due to bad code, operator error, or other issues. No funds should be put into this smart contract with any expectation or hope for profit. It is an experiment with the Ethereum network, Set Protocol, and putting MY OWN money in a smart contract. This is all experimental and should NOT be construed as financial analysis, recommendations, money management, or anything else. Please, if you have any concerns, DO NOT put any funds into this or any smart contract where you are not ready and willing for those funds to be lost. Do your own research. Stay safe.

Token Sets, using Set Protocol, has created a bunch of smart contracts that enable multiple crypto assets to be bundled as a singular vehicle, and anyone can choose to add or remove their own assets from the same smart contract. It is the cutting edge of decentralized finance. I find it absolutely fascinating.

The Tulip Set

I have created a Set called The Tulip Fund. It is deployed on the Ethereum network and via Set contracts, others can choose to also deploy crypto assets that follow the same decisions for buying and selling that I use myself.

I am excited about this because I can choose to rebalance to many different crypto assets and within a singular transaction, Set takes care of all the underlying transactions to make that rebalance happen. Anyone who chooses to participate in the Set also receives the rebalance.

If you are not familiar with this concept, it is modeled after the DPI: DeFi Pulse Index. The DPI has several rulesets around what qualifies a token to be included: market cap, time in the market, and other things. TULIP (the ticker for the Set I’m using) does not have formal restrictions on how to deploy rebalances.

If Tulip works in a way that I am happy with, I will explore other Sets. I’m interested primarily in low-turnover Sets outside of Tulip:

  • Tulip: A wide spectrum and discretionary decision making
  • Blue Chip: Similar to DPI but slightly altered criteria to enable projects DPI doesn’t to be included
  • Macro: Mostly majors like WBTC, ETH, USDC playing the primary macro rotations in crypto, based on trend following and seasonal ideas. (Update: $tmac is now open).

Over time, if this is fun and people enjoy following along, I may introduce additional features Token Sets provides, such as governance, which would enable a more formal method for the Set to make decisions on what to do.

All Sets have the ability to include a “streaming fee”, which is used to help cover gas costs for the Set. There is no expectation that I, as the Set manager, will make a profit by being the Set manager. The streaming fee is designed to offset gas costs only. It may need to be adjusted over time to better manage that. The DPI fee is .95% and Tulip started at 0.5% currently. (Update: thousands of dollars in ETH were spent in the first week of trading on fees, so the streaming fee for the active fund has been updated to 5%).

How to use Token Sets?

Token Sets is cool. You can go to any set (like Tulip), and “issue” funds. There are several ways to do this. Soon, they’ll enable issuance where the underlying assets aren’t required, and it automatically takes ETH and converts them to the Set’s strategy. Currently, the issuer is required to hold the underlying assets in order to participate.

Click the three-buttons tab, then “Issue”, someone can particpate in a Set. The Tulip set is currently all WETH, so that it’s easy to issue into it. Once the Set manager chooses to rebalance, new issuers would be required to hold whatever underlying tokens are in the set in order to issue to it. In a couple weeks, that’ll be simpler and new issuers will be able to go from ETH directly to the deployed Set assets.

Note that Tulip and the DIP are on v2 of Token Sets, which is a little different than the V1 sets.

Participating in Sets

Anyone using the ETH network can choose to participate in any Set. I am not making a recommendation or requesting anyone join the Set I’ve created for myself. Anyone should consider the risks of smart contracts, or putting funds in a smart contract someone else can control.

I like the idea of Sets because I can allocate my own funds to contracts that have strategies I want exposure to. And I am always in control of my ability to issue or redeem my funds from the Set. Please use discretion when participating in any Set. This is an experimental product.

How to track Tulip

Tulip is deployed on the Ethereum network and can be viewed on Etherscan. The Set itself can be tracked in apps like Zerion, as it shows up in any wallet that holds the Set. Here’s the Zerion overview for the Set manager wallet, which issued 8 ETH to the Set.

The initial price of Tulip was $100. Any performance is reflection by the price relative to $100. The market cap represents the funds issued to Tulip plus or minus performance. As Tulip rebalances outside of WETH, they’d show up in Zerion under “Asset Price Distribution”.