This is an informal and short post to gauge sentiment and feedback about the creation of a new type of fleet (vault).
Now more that ever, the DeFi ecosystem is primed for institutional users to come on chain.
Though, it seems that while many are compelled by what DeFi has to offer, they are still on the fence from deploying capital in massive size within DeFi protocols.
Why is this?
Critical blockers seem to be:
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Regulation: Its not clear what is above and below board.
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Risk: DeFi is still seen as risky, even though it has weathered insane volatility, and even full blown fraud.
Where is the institutional demand?
Stablecoin’s have seen huge demand from institutions
Tokenized assets have seen significant demand from issuers and large allocators alike
Are DeFi protocols a bridge too far for institutional investors?
This question has recently emerged in my mind and I think the answer might, in the short term, be yes.
It is entirely possible that the financial product requirements for institutions who want to allocate capital onchain needs to be something a bit different than what most DeFi protocols offer today. Even though its highly likely that eventually they will come around to our DeFi native ways.
Specifically, it seems that these insituions want what they are used to but just the tokenized version.
Some examples:
- Securitze’s tokenized treasuries, private credit, and crypto.
- Ondo USDY
- Franklin Templton’s BENJI
- Morpho v2 push for fixed rates, an effective onchain yield curve.
The hybrid approach
One very inspiritng approach to this for me has been Maple Finance’s hybrid approach to combining TradFi needs and requirements with DeFi transparency and accessibility.
How might Lazy Summer Protocol attract initial institutional demand with its vaults?
RWA Vaults: Automated exposure to the worlds best tokenized assets
What if Lazy Summer could offer a vault that gave users exposure to world class tokenized yield from Securitize, Ondo, Franklin Templeton etc… continuously rebalancing, giving allocators diverisfied exposure to highly compliant sources of yield, fully onchain.
This vault would invest in a basket of tokenized real-world asset tokens, specifically tokenized U.S. Treasury and money-market funds – such as Ondo’s USDY, Superstate’s USTB, Franklin Templeton’s BENJI, etc. These assets represent onchain claims to safe, short-term instruments like Treasury bills or institutional money-market funds.
How it might work: Institutions or users deposit stablecoins (e.g. USDC) into the vault. The vault’s smart contract then allocates these funds across multiple RWA tokens. Allocation can be dynamic – for instance, rebalancing towards whichever RWA asset offers a slightly higher yield or better liquidity at the time.
Technical and regulatory constraints
Ofcourse the big blockers here are both technical and regulatory in nature:
Technical - How would the deposit asset be USDC given the underlying tokenized assets are all different?
Regulatory - Many tokenized assets require KYC or our only available to qualified purchasers, are there work arounds here for a DeFi protocol?
Both of these constraints are beyond me and this post, but as mentioned, it’s purpose is to gain feedback from many people within the community, but also hopefully from the teams mentioned to see if there might be way to partner on such a vault.
My basic question: Is this possible? is it valuable?