Henrik talks about decentralised asset management and how dHEDGE going to democratise investing and level the playing field.
Hello! What’s your background, and what are you working on?
My name is Henrik Andersson. I’ve a background in traditional finance and got into crypto in 2013 as I started learning about Bitcoin. I run a crypto fund called Apollo Capital based in Melbourne, Australia and co-founded dHEDGE late 2019.
dHEDGE is a decentralized protocol for asset management built on top of Ethereum. On dHEDGE, managers can trade synthetic crypto, fx, commodities, and even equities - both long and short. dHEDGE leverages the Synthetix protocol and their zero-slippage model. Our risk-adjusted ranking of managers makes it easy for investors to find really the really good managers.
As with most DeFi protocols, dHEDGE is non-custodial in nature, meaning that investors remain in control at all time and choose to enter or exit a pool at any time.
What’s dHEDGE backstory?
I had an idea for a decentralised hedge fund protocol quite some time ago but I wasn’t sure how to build it on Ethereum. For a decentralised asset management protocol to work you need to make sure funds are safe and can’t exit the pool while at the same time allow the manager a lot of freedom. When I understood Synthetix in 2019 I realised that it would be the perfect platform to build dHEDGE on.
In late 2019 I got together with co-founders Radek, and later Ermin, to start working on dHEDGE. We set up with the vision to democratise investing and level the playing field. We thought the permissionless nature of Ethereum was the perfect platform to build a software protocol to do just that.
After building a working demo on the Ropsten testnet we decided to test the system through a couple of testnet trading competitions. That was a great learning experience to figure out what could be improved on and to find any bugs in the code. It also meant we had a build a following ahead of mainnet launch.
What went into building the dHEDGE?
We started coding in early 2020, by mid year we were ready to run live testnet competitions on Ropsten. We ended up running two competitions that turned out to be quite popular. It also helped us identify any issues with the code and also tweak the UI with the feedback from the community.
After some changes to the contract we got the smart contract audits ready to mainnet launch. It did take us longer than expected to launch. As I think is often the case in software projects you will discover certain edge cases and the last 10% to get it right will end up taking the longest. We ended up launching towards the end of October 2020. Even though the community was anxious for us to launch we were happy that we took the time to fix potential issues.
We definitely had a lot of features in mind that we had hoped would be there from the start but that we ended up scaling back. Sometimes it’s more important to get something out there in the wild and iterate from that than to try to achieve everything from day 1 because you might never end up launching! Many of those features we left out will be launched in the coming months instead and being live also means you are able to prioritise things differently.
What’s your business model?
We think it’s important to say that we are NOT a business. Indeed there is no business entity behind dHEDGE. You can think of dHEDGE as an open-source software protocol. Through our DAO and DHT staking, we will enable decentralised governance of the protocol. The stakeholders have implemented at 10% admin fee on the protocol level. As the managers on dHEDGE earn a fee through their performance, so will the DAO which is controlled by DHT stakers.
We aiming to become the standard decentralized asset management protocol. However, the traditional asset management industry is gigantic at $100 trillion, so the potential target market is enormous.
What’s your position on the regulatory landscape today?
We are looking to create an unstoppable software protocol that has the capacity to outlive regulatory changes that might come. Most likely the regulatory landscape will continue to look significantly different in one part of the world to the other.
What are your goals for the future?
Next year we are looking to enable dHEDGE on L2 - Optimism which will be a huge accomplishment and great for the user experience of dHEDGE. That’s definitely very high on our list as a lot of the feedback we get and in DeFi in general is about the gas costs and the time it takes to transact.
We love the composability on Ethereum, moving to L2 might mean that some of the composability on Ethereum is lost. That’s a major concern, our hope is that the vast majority of the community will come together adopting interoperable technology.
In 2020 we have built a lot of the foundation to be able to continue the fast growth and ship at a rapid speed in the year ahead.
What are your future thoughts for the DeFi market?
With DeFi crypto and ‘blockchains’ have found a market fit. Smart contracts are incredibly well suited to finance. I’m incredibly bullish on DeFi, and it’s not just about making CeFi work in DeFi - DeFi can enable completely new primitives not possible in CeFi.