Decentralized autonomous organization (DAO) known as Index Coop has taken on the task of improving the user experience concerning on-chain structured products in the digital asset industry. These products which are delivered via a blockchain without involvement of traditional financial institutions have found themselves mired with a slew of challenges.
In a recently published report, Index Coop spoke on these hurdles. The impediments include infrastructure limitations such as the lack of cross-chain asset support and expensive maintenance of these products caused by high issuance costs. Further complications arise due to the difficulty in rebalancing on-chain products because of slippage which is the disparity between the expected price of a trade and the final executed price.
Nonetheless, the engineers at Index Coop have been exploring avenues to tackle these issues. They are particularly keen on lessening NAV decay, that has been impacting the operational efficiency of these assets, and are looking at auction-based rebalancing as one such solution.
Structured products such as InterCoop’s wrapped ETH (wETH) and stETH vaults, are provided on a blockchain without the need of the traditional finance industry. Despite the current drawbacks, these products arguably demonstrate the increased sophistication of the crypto industry. Their growth could potentially attract mainstream investors, hinting at the maturation of the sector.
While the structured product sector remains relatively small, with a combined total value locked (TVL) of just under $2.5 billion, accounting for only 0.21% of the wider crypto market, its growth could be seen as a testament to the industry’s rapid development. If one were to make a comparison to the traditional finance world, structured products often combine several assets such as stocks and bonds into a single package. This kind of packaging could very well be what the crypto world needs to boost its mainstream appeal.
As the DAO continues to work on overcoming the current limitations, it will be interesting to see how these developments shape the future of the digital asset industry. The potential for growth is tangible, yet the road to there is fraught with technical complications and operational limitations, presenting a fascinating situation which is sure to keep crypto enthusiasts engaged.
Source: Coindesk
