The transparency and accessibility that Melonport brings, combined with the extensive range of trading capabilities that Lendroid enables, have opened up powerful possibilities in fund management.

There’s something incredible happening in fund management, and Melonport is at the heart of this development. For the first time, fund management has been made transparent, accessible, and trust-independent.

To understand the significance of this, let’s take a look at what fund management is and where it stands today.

For those who came in late, Fund Management means using money and other assets to make more money. It is the investment and manipulation of various kinds of assets, for the benefit of the investor. Sounds straightforward enough, until you get to the question, ‘so who does the fund management?’

Market Pains

Traditionally, an investor, based on recommendation or reputation, picks a fund management firm and more or less hands over assets in the hope that they are put to work in her interests. However, what actually happens to the asset — where is it being held, how and for how long — is anyone’s guess.

Fund Management is, therefore -

Totally Trust Dependent: An investor has no choice but to trust in the fund manager. Her assets are at his disposal, and transparency is low. Centralized, Vulnerable: All fund management, whether traditionally or on the blockchain, is done through centralized exchanges. Any system where funds or assets are held by one entity, in one place, is vulnerable. Centralized things tend to get hacked, like this or worse, like that. Prohibitively Complex: Traditional fund management is complex, swathed in layers upon layers of bureaucracy and complex jargon, which puts off regular people who just want to invest in something profitable. Limited scope on the Blockchain: On the blockchain, fund management is not only vulnerable, but rather sad in terms of scope. Currently, what an investor or a fund manager can do is to hold a position long. This means acquiring an asset and holding it (doing nothing with it) till its value increases.

It doesn’t have to be so.

Enter Melonport

All that changes with Melonport. They are the creators of Melon, a ‘blockchain software that seeks to enable participants to set up, manage and invest in technology regulated digital investment funds’.

And Melon does this without the vulnerabilities or pains listed above, by being:

Open: The smart contracts, or on-chain agreements between investor and fund manager, are visible and comparable on the blockchain. Competitive, not Complex: The costs and complexity for setting an investment portfolio on Melon are significantly lower than they are with traditional asset management. They put it eloquently in their whitepaper, ‘seconds and cents versus months and millions’. Decentralized: A portfolio can be managed, set up and invested in, in a decentralized manner. Your records and assets are stored on a decentralized blockchain. And your smart contracts too are executed in a decentralized manner. Aligned to the Investor: The investor takes the driving seat. On Melonport, an investor can stipulate some conditions for handling the assets — what a fund manager can do, as well as what he can’t.

The result is that security vulnerabilities, inefficiencies and market risks are all mitigated significantly.

Proof of the efficacy of what Melonport has created is in the rapidly increasing participation in investment funds on the blockchain.

At the M-0: New Possibilities and a Ready Market

Lendroid was at the M-0 at Zug (Crypto Valley) in Switzerland, held recently. Organized by Melonport, this is the first Swiss blockchain conference for asset management. It was an excellent platform for networking with some really bright minds engaged not only in crypto, but also fund managers looking for the next big thing, the most viable break from conventional methods.

As for Lendroid, we saw the promise, the future, of fund management. We realized that there was a natural synergy between what we’re both attempting to do.

And the market is huge. Sample this -

Margin funding has soared, as recorded by some widely used exchanges like Poloniex and Bitfinex. On the latter exchange alone, USD funding has increased from 14.8 Million to 168.5 million (Oct 2016 to Oct 2017); BTC loans have gone from USD 6.12 Million to USD 183 Million (Oct 2016 to Sep 2017); and ETH loans have risen from USD 834,192 to USD 88.29 Million (Oct 2016 to Sep 2017)

Now, if Lendroid and Melonport combined forces, here’s a sneak preview into what one could do, in addition to holding long.

1. Leverage: On Lendroid, a fund manager can use some of the investor’s assets (say ETH, ETC, DGD, REP or MKR) as collateral, take a loan against it, and hold a position on leverage. This means borrowing money to buy digital assets whose value he believes will increase. Lendroid 101. It’s important to note that this decision by the fund manager is driven by the investor’s instructions, baked into the melonport smart contract.

2. Borrow Against the Portfolio: While the fund manager sweats the assets and collateral, the investor has in her hands the token she received when creating the Melonport portfolio. This token, come to think of it, is backed by the portfolio. The value of the token is at least the value of the assets in the portfolion. So the investor can now get on Lendroid, borrow against this token itself and trade further, by herself.

3. Short Selling: If holding long is to make money off your faith in the growth of an asset, short selling is where you monetize your lack of faith! The fund manager (if the investor so allows) puts up collateral, and borrows a token that he feels will lose value in the future. He sells it in the market. And shortly, when the token is indeed cheaper, he buys it back and repays the loan.

4. Earn Interest: The fund manager can choose a low-risk, low-friction means to make the asset work — by lending it to borrowers looking for funds for their own trading related activities. Say there’s some ether in the portfolio and the investor’s decision is to go long, the fund manager could lend a portion of it out for an interest. This earns additional income for the portfolio, with no downside.

With the terms of every transaction — borrowing, trading, creating or changing positions, repayment of loan, liquidation of collateral — all baked into inviolable smart contracts, execution and enforcement are automated and independent of interference or trust. Here too, Melonport has a nifty tool titled Oyente. It’s an analysis tool for smart contracts.

With Lendroid + Melonport, fund management thus becomes more powerful and effective, through -

Trading on the blockchain is no longer lame: Trading finally opens up on the blockchain. The possibilities, even off the cuff, are way more than previously imagined. Go long, go short, leverage, lend, borrow, margin trade and so on and on. A decentralized, open architecture: There’s no central repository of your smart contracts or, more importantly, your funds. The execution too is decentralized. True trust independence: When you don’t have to trust the system is when you can finally trust it! Enforcement of repayment and other terms are automated, so the risk and friction of trading is mitigated.

We believe that this collaboration is an important development in our field, one that could have exciting implications across the board.

The Melonport team have been awesome and generous and incredibly positive about this. At the M-0, We met so many fund managers with diverse and invariably interesting views. The most important takeaway was that through M-0, Melonport unveiled something that’s really hard to get at — what people are actually looking for. In that sense, M-0 is the Ground Zero for ‘what’s next’ Fund Management.

The interest, as we saw earlier on in this post, is growing. And the potential benefits for early adopters in the field is massive. Time to get on the wagon and find out just how much.