How Nova Finance is Revolutionizing On-Chain Asset Management

November 1, 2021
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Part 3 of our Nova mini-series: An exploration into the purpose and benefits of the Nova Finance Protocol.

As more aspects of our lives operate and exist within the online world, so too does our money, possessions and data. This is a movement often referred to as the internet of value and cryptocurrencies, DeFi, NFT’s, Securitized tokens and other types of digital value are all part of this transition that society is making.

In Part 2 of our mini-series, Tom discussed how Cryptocurrency had the potential to break the debt cycles that governments and banks have been operating for hundreds of years. He also highlighted the potential for DeFi to become the foundation for funding innovation going forward and how its decentralized and global nature can allow for anyone to support innovation and prosper from its success.

In part 3 today, I will explore the role which we see Nova playing in this new paradigm and how our programmable asset framework is accelerating asset management to new levels in customization, connectivity and control within our Portfolio MVP.

The risks and missed opportunities within funding innovation

More and more people are realizing that cryptocurrencies, blockchains and other digital assets like NFT’s are the future. Stores of value, data management and new distribution models for art are a few of the many areas that these technologies are solving problems and enhancing for the greater good. There is still much more potential innovation that can be delivered in the future too.

The easiest way to support this innovation and prosper from its success is to buy and participate in these assets. But which of these assets will go on to reach their potential? Looking at the failure rates of startups and the graveyard of dead blockchains and cryptocurrencies, the answer is very few. For individuals with less time, experience and resources compared to VC’s and financial institutions, it can be extremely challenging to sustainably allocate funds to support these waves of innovation. Almost every cryptocurrency investor has been the victim of a rug pull, security exploit, getting liquidated or simply hodling an asset as its value declines into oblivion. For a minority, the gains have vastly outweighed loss and this has given them the resource and resilience to persevere but for the majority, they don’t have these luxuries.

Even if you are surviving, are you maximizing the value of your resources? With the range of functionality that DeFi has made accessible, it is no longer just about investing in these assets and hoping for the best. The opportunities to earn yield from these assets, enhance gains and hedge value can assist in bringing in additional significant returns. This is why DeFi has become a thriving industry in its own right; it brings the opportunity of income diversification within the cryptocurrency space.

These are the challenges that Nova Finance and our programmable asset framework seek to bring solutions and ideas to. If our management layers for these assets can assist in reducing downside and increasing upside, people can prosper and will have more resources in the future to support innovation. If people fund more innovation, the rate of innovation is likely to increase. In the end, the more we collectively pioneer and innovate, the more benefits humanity will witness in all aspects of life.

The value of experience

When it comes to investing and financial management, nothing quite beats experience. Within the cryptocurrency space, there are many people who have survived and thrived throughout its history so far. Each of these people have their own unique perspective, lessons and vision for the future that could be beneficial for others to understand and utilize for their own success.

Throughout our product research, we found many reasons as to why most choose not to share this insight with others. One of the main reasons was the fact that there is little incentive to share this knowledge. Some choose to utilize this knowledge to gather social followings but this route doesn’t interest everyone in this position. Nova’s incentive model to reward portfolio creators makes sharing their thesis a profitable activity — another diversification of income for these types of users.

Users of Nova can browse a diverse range of portfolios created by experienced cryptocurrency investors

Another of the key reasons is that the crypto space changes so quickly that the composition of assets and planning for the market can be outdated within a few weeks. A fair few interviewed recalled friends and family bothering them regularly on what coins to buy and sell and while they were happy to help, it was time and energy that could be saved if there were better ways to share and communicate ideas. Nova’s portfolios are easy to understand and break down the creators thesis and reasoning for the portfolio. The range of controls also allow the contents of portfolios to change as the market evolves, something we discuss later on in this article.

For less experienced users, they have the opportunity to join these portfolios and participate in funding innovation alongside the experienced. It allows them to begin to learn of the various techniques and ideas that are commonly used within the space and boost their own understanding.

The Power of Adaptability

Some of the controls and adaptability that can be programmed into a portfolio asset

There are other protocols that have attempted to deploy products around asset management through portfolios and indices. However, few of them have found any significant level of product market fit. We believe that one of the main reasons for this lack of traction is the limited adaptability these structures have.

Due to the speed of innovation and investment cycles within the cryptocurrency space, most assets have short term peaks where they perform better than the majority of the cryptocurrency market. After these peaks, many assets either fade to irrelevancy as more innovative assets emerge or the asset reaches its potential in price and speculative capital moves on in search of the next high potential asset.

Indexes in particular are limited if they are structured around a specific type of asset within the space such as an Ethereum DeFi asset index. Indexes have historically been a great way for investors to gain exposure and reduce certain aspects of risk in more established traditional markets, the S&P500 is a great example of this. The problem with the cryptocurrency space is that it is not fully mature and is dominated by short term cycles for most assets outside of Bitcoin and more established network assets like Ethereum & Solana. This makes most indexes and correlated portfolios within the space a poor long term hold.

If a portfolio or index structure is fixed and unable to be changed or adapted, many become sub optimal within 2–3 months of deployment or even worse, completely unprofitable. An experienced investor will be able to adjust thier portfolio in real time as needed but this leaves inexperienced investors using these services out of date, missing the best moments to redistribute assets and with no understanding about the current investment landscape within the space.

This is one of Nova’s key advantages: the ability to recognize market trends and change methodology as required in a secure and automated manner.

Nova’s framework is creating the ability to adapt on-chain. Every asset within a portfolio can have its own layers of instructions to identify situations and select the optimal path forward. These situations are mapped out by experienced users and then deployed to execute and adapt as needed. This ensures that no user is left behind as the markets evolve.

The best part about the controls is the diverse range of the situations they can be applied to. An investor who has an aggressive profit hunting style can benefit just as much as an investor who cares about preservation and minimizing downside risk.

As we continue to develop Nova, more of these controls and structures will become available in formats that require no code and are as easy to set up as possible. We also want to hear ideas from the community so feel free to reach out to us within Discord!

Asset Management Beyond Nova

Nova isn’t a closed system. In fact, it is designed for as much connectivity as possible with other protocols and frameworks. To begin with, we are focusing on two aspects:

1) Integrations

Instead of having an asset sat within the smart contracts of the portfolio, they can be delegated to external protocols to generate additional yield. We are working on making a range of lending and swap protocols on Solana available through Nova so that users can capture all the benefits of expert knowledge, customization and control while having the opportunity to increase returns.

2) Composability of nAssets

Portfolio Assets (and other nAsset types in the future) represent value within the programmable asset framework through the form of SPL tokens within Solana. This means that the value can be used by other protocols. In particular, we see our assets as valuable for Lending and CDP orientated platforms. We are already exploring composability opportunities with other protocols both within and outside of the Solana ecosystem.

Conclusion

At Nova, we are working hard in delivering high levels of customization, connectivity and control for our community through our Portfolio MVP and programmable asset framework.

We’re very excited to release our whitepaper in the coming days to detail further how our protocol works and some of its key features and benefits. Stay tuned on our Twitter and Discord for its release!

About Nova Finance

Nova is a programmable asset framework that allows people to access DeFi without having to learn complex financial management skills. Within the product, users can create a portfolio of assets which auto-generate returns through yield strategies while auto-executing on investment strategies such as dollar cost averaging, take profit calls and much more.

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