MEXC Research: Solana Cross-chain ETF Project, MatrixETF

6 min readAug 17, 2021

MatrixETF

MatrixETF is a decentralized ETF platform that supports cross-chain capabilities. The goal is to establish a decentralized, automated, and diversified ETF portfolio and simplify the threshold for investors to enter the crypto market.

In the future, MatrixETF will launch MatrixETF Components, allowing users to create customized ETFs freely. Users can set up a custom ETF fund and then use the tools provided by the platform (including DEX trading, lending, cultivation, governance, insurance, strategy, etc.) to add value to the fund, attract platform users to buy them, obtain commissions, premiums, and other income.

ETF

ETF (Exchange Traded Funds, “ETF” in short) is an open-ended fund that tracks the change of “target index” and is listed and traded on the exchange with variable fund units. It has the advantages of low cost, convenient and fast transaction, transparent portfolio, and special subscription and redemption mechanism.

Main differences between MatrixETF and Traditional ETF:

Calculation of net fund value of MatrixETF:

Net fund value is the net asset value of each fund unit. Net fund value = total net asset value of the fund/total number of fund units

Among them, the total net asset value of the fund refers to the total value of all assets owned by the fund; The total number of fund units refers to the total circulation of the fund on the market (or on the chain). The initial value of the general net fund value is 1.

ETF Arbitrage

The trading price of ETF is “market price”, which is determined by all market participants;

Subscription/redemption mechanism: Like the general fund, the trading price is “net value”, which is the actual value of ETF through subscription and exchange with a basket of tokens.

Since there may be a difference between the secondary market transaction and the subscription and redemption mechanism, arbitrage transactions can be carried out when there is a difference between the secondary market transaction price and the net value of fund units.

MatrixDAO

The MatrixETF platform is managed by the MatrixDAO. The MatrixDAO is a decentralized self-governed community organization. In the early stage, the platform launched several main conceptual ETF funds as the basis for platform’s launch, and then gradually transitioned to community self-governance to jointly determine the construction and implementation of ETF products. The ultimate goal is to let community members determine the development and future direction of the main decision-making platform.

MatrixETF Set is an ETF-DeFi protocol, which can provide convenient asset portfolio and trading services for asset issuers/KOLs, asset managers, and individuals. Through this protocol, any user can create a cryptocurrency-based ETF, accept user capital inflow and operate the fund using the tools provided by the platform (including DEX trading, lending, farming, governance, insurance, strategy, etc.), participate in DeFi to obtain income.

Functional Support

Buy: Use ETH and other basic assets to purchase ETF fund shares.

Mint: Use a basket of tokens corresponding to the fund to mint fund shares.

Swap: The transaction between fund Token and ETH. Later, it will be extended to the transaction exchange between fund Token, ETH, and any basket of Tokens corresponding to the fund.

Redeem: Redeem a basket of Tokens with fund units. The Token in the basket obtained is the underlying assets not used for purchase.

Buy and Mint

The same point: The result is to buy ETF products.

Buy: Buying ETF directly from the DEX can be understood as buying ETF shares from other investors without increasing the total fund shares;

Mint: When purchasing ETF, a basket of cryptocurrencies is exchanged for fund shares through the subscription mechanism written in the smart contract, which will increase the total fund shares and total flow flux. Single currency and multi-currency are supported.

Multi-currency Mint

The user enters the number of ETFs to be purchased, and the App automatically calculates the number of each component currency included;
Start with the Mint function, deduct the corresponding amount of component currency from the user’s wallet to the smart contract;
The smart contract transfers the user’s component currency into the fund pool kept by the contract;
Trigger the mint contract function to transfer the corresponding number of ETFs to the user.

Single Currency Mint

The user inputs the number of ETFs to be purchased. The App automatically calculates the corresponding required number of ETH;
Starting with the Mint function, deduct the corresponding amount of ETH from the user’s wallet;
Divide ETH according to the proportion of component currency of the fund, go to Uniswap, Sushiswap and other DEX to buy the corresponding amount of component currency and transfer it to the smart contract;
The smart contract transfers the user’s component currency into the fund pool kept by the contract;
Trigger the mint contract function to transfer the corresponding number of ETFs to the user.

Matrix DeFi Index Set (MDI) — DeFi Related Funds

Matrix DeFI index (MDI) is a capitalization weighted index fund, which is composed of DeFi protocols in the cryptocurrency market (including UNI, SUSHI, AAVE, SNX, MKR, COMP, YFI, CRV, GRT, etc.), and can track popular DeFi assets in the whole cryptocurrency market. MDI is issued based on market share and real capital.

MDI index will be reweighted on the first day of each month. When the market value of MDI fund exceeds $10 million USD, the number and proportion of tokens corresponding to each MDI fund will be updated at the same time.

In addition to MDI, MatrixETF also has MCI (public chain sector fund), MSI (Solana sector fund), stablecoin fund, NFT fund, etc.

The Proportion of MDI fund assets

The MDI fund comprises popular DeFi projects in the cryptocurrency market, including UNI, SUSHI, AAVE, SNX, MKR, COMP, YFI, BNT, CRV, GRT, etc.

The MatrixETF configuration adopts the fundamental weighting method, with the circulating market value accounting for 70% and the fundamentals accounting for 30%.

The price and circulation of each token are obtained through CoinGecko and CoinMarketCap. Fundamentals MatrixETF will analyze the tokenenomics, project development, protocol security, token transaction risk, community foundation, etc.

Tokenomics

MDF is currently deployed on the Ethereum and Solana blockchains.

Governance Token: MDF
Total Supply: 1,000,000,000 tokens

IDO Public sale: 0.5%

Private Sale Round: 6.25%;
Unlock 10% before launch, and the rest will be unlocked once a quarter and completed within one year.

Private Sale + Round: 2%;
Unlock 15% before launch, and the rest will be unlocked once a quarter and completed within 9 months.

Team: 15%;
Among them, 20% will be unlocked six months after launch, and the remaining 80% will be unlocked linearly in the next 24 months.

Consultant: 3%;
20% will be unlocked six months after the launch; The remaining 80% will be unlocked linearly over the next 24 months.

Liquidity pool: 1%;
Used for liquidity pool creation of DEX.

Community ecosystem and operation: 27.25%;
Including airdrop, community promotion, various activities, or proposal awards, 6% will be unlocked immediately after launch, and the remaining 94% will be unlocked linearly for 4 years.

Matrix Treasury (Reserve)：45%;
The Matrix DAO community will vote to determine the attribution and application scenarios and unlock them by 4 years, including staked and liquidity mining incentives, ETF fund incentives, community activities, etc.

Practical Value Analysis

Practical Value:

Participation in community governance;
Participate in liquidity mining, staked mining, etc;
Trading fee or other discounts and proof-of-stake;
Purchase ETF products

Possible risks:

Partial cash out by fundraisers;
Team asset cash out;
In case of overall plate fluctuation, ETF may have greater risks.

Note: This article is only for sharing and does not constitute any investment advice.