On-chain structured products are making a significant impact in the digital asset market, offering a range of benefits including transparency, security, accessibility, automation, and liquidity. These innovative products, which encompass index tokens and strategy tokens, are drawing attention despite the challenges posed by regulatory uncertainty and the developing nature of the technology. The sector’s potential is evident, with a steady increase in the number of projects and the value they capture.
Emergence of On-chain Structured Products
Since 2016, the digital asset market has witnessed the launch of 47 on-chain structured product projects. Most of these focus on providing index or yield-earning opportunities. Impressively, 37 of these projects remain active, suggesting a robust and growing interest in this area. The 2021 bull market saw Index Coop’s on-chain structured products amass over $550 million in Total Value Locked (TVL), highlighting the substantial interest from investors.
Growth Trajectory
The growth trajectory of on-chain structured products is remarkable, with 20 new projects emerging in 2020 alone. Prominent players such as Yearn, Compound, and Index Coop have contributed to this expansion. Despite this progress, on-chain structured products still represent a small fraction of the crypto market, with a 0.07% share and a combined TVL of $2.46 billion across various protocols.
Future Prospects
As the digital asset markets continue to evolve, on-chain structured products are poised for further growth. A key factor in this expansion will be the decreasing correlation between digital assets, which will make diversification strategies more compelling. Enhancements in user experience and the development of cross-chain infrastructure are also expected to fuel the growth of these products.
On-chain structured products are uniquely positioned to bring underlying tokens to a broader audience. This is due to their inherent advantages, which align with the needs of modern investors. As digital assets become increasingly uncorrelated and market infrastructure sees improvements, on-chain structured products are anticipated to thrive.
Industry Outlook
The long-term outlook for on-chain structured products is promising. They stand out for their ability to offer a diversified investment approach in the digital asset space. As the market matures and the technology advances, these products are likely to become a staple for investors seeking innovative and secure investment vehicles.
In conclusion, on-chain structured products are a burgeoning sector within the digital asset market. Their growth is supported by the unique benefits they provide and the increasing sophistication of the market. As the industry continues to develop, on-chain structured products are expected to play a pivotal role in the evolution of digital asset investment strategies. To delve deeper into the on-chain structured product space, one can explore the annual industry report, which offers comprehensive insights into the state of the market.
