What is Velvet Capital?
In this episode, Nick Drakon is joined by Vasiliy Nikonov to discuss passive on-chain investing, B2B, profitability, incentives and more.
Read our notes below to learn more.
About Vasiliy
Was a venture builder at Long Hash Ventures which is one of the first blockchain incubators and VC funds.
Was a project leader at Boston Consulting Group in New York working with financial institutions, banks, brokers and investment management firms to help them launch corporate ventures, digital products and anything to enhance their user experience and products.
Passive Investing On-chain
Less than 1% of all crypto holders ever tried DeFi.
There is no easy way to onboard crypto-curious people.
More crypto-curious folks are getting motivated and trying to explore DeFi after seeing centralized entities collapse last year.
They’re seeing fundamental shifts to people’s mindsets and willingness to move to DeFi but it needs to be simplified.
Regulation for Passive Investing
They’re trying to work with institutions and other projects to get as much clarity as possible.
The regulatory clarity will just be a matter of time.
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What is Velvet Capital?
It is a platform that allows anybody to create an index fund that anybody else can invest in.
It is a new DeFi asset management and financial rails for anyone to build on top of it.
Their v1 is up and running on BNB Chain.
They integrated with Transak so people can buy with a bank account or credit card.
Users need to deposit $BNB then the $BNB gets allocated into the fund according to the strategy that is set and then users receive a portfolio-backed or fund-backed token that represents their share in the index.
Business Model
Their fee is just a share of the asset management fee that users set up.
They’re doing everything manually right now and there’s a one-on-one negotiation basis.
In the future, they will streamline the process and users will be able to set up any fees they want.
B2B discussions
They want to attract the best, world-class asset managers that are building world-class financial products.
They are in talks with a few potential clients on the supply side which are hedge funds, asset managers, banks, family offices, and traditional financial institutions.
There’s a spectrum of crypto friendliness or nativeness in a way.
There are very large traditional institutions who are only starting to explore crypto right now.
They are going to run a pilot with their clients and scale it further.
Transaction Profitability
They are optimizing the gas fees as much as possible.
They are part of Binance Labs and won $BNB Chain hackathons.
The fee side is still going to shake out positively for them because the 5-10 basis points are being charged every 2 weeks which ends up being 1-2% annualized.
Low-cost Passive Investing On-chain Products
In TradFi, the cost of passive investing depends on the product.
On average, ETFs have 0.5% to 2% fees depending on the product.
The gas fees are new factors.
They don’t think they will be able to subsidize gas fees for everyone.
$VLVT and Incentives
They made a decision not to launch a token before they have live users and substantial TVL.
They will launch their V2 a couple of months from now depending on the security audit.
The utility of the token is going to be for governance and structured with a sub-dial module.
The token is going to be also used for fee collections.
They are going to do an airdrop to all early users and adapters of their project.
They want to reward anyone who contributes.
Counterparty Risks
For each product, there is a series of separate smart contracts.
Short-term Roadmap
They will streamline the fund creation process.
They will give more flexibility in terms of their product.
They want to be multi-chain and have cross-chain capabilities in different sectors of the industry.
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