Curated mini-portfolios aim to simplify crypto investing, bridging the gap between complex Web3 systems and mainstream financial users.
There’s been a great deal of talk around Web3, its growth over the last 3-5 years especially, and when — or if — the industry will ever reach that tipping point of mass adoption. There have been many predictions that have come and gone, and each time we understand a bit more about two critical elements: the complexities of the Web3 ecosystem as a whole, and the mindset of the “mass adoption” individual.
We’ve realized that in order to reach mass adoption, the industry needs to gravitate to where these individuals are. The tech needs to match their expectations of what they can do with Web3. It needs to match their expertise level, which is typically significantly lower than any early adopter of new technology. They need to see the value of Web3, and need to see so much value compared to their current solutions (Web2, TradFi, etc.) that the adoption cost (learning it, signing up for a wallet, learning all the new processes, and taking a risk on the unknown) is worth paying.
For those platforms developing on Web3, this boils down to two lessons: Make things easier, and make the value obvious. Has Web3 accomplished this? Not quite, but it is making some progress.
We’ve seen some genuine attempts at this across the industry. This is in part why art-based NFTs became so popular: they were extremely easy to understand, essentially digital trading cards or memorabilia. What they didn’t have was lasting value because its popularity caused a bubble, and its downfall.
On the other end of this, there have been a number of extremely valuable trading tools in Web3, allowing investors to explore strategies and yields in ways that no TradFi platform could ever hope to match. The problem, however, was that the average person had no hope of understanding the system enough to benefit, and that lack of understanding could easily lose them as much money as they invested.
So how do we find the balance between simplicity and value, driving engagement to the average person in a way that shows what they could do with Web3, makes it easy to see how the system works, and makes the onboarding process incredibly easy?
It’s harder than we’ve realized because Web3, when you look under the hood, is incredibly complicated. But if we think about it, TradFi is very complicated too. In fact, the internet we use today is massively complex, but is thankfully hidden from us as we easily navigate it. Is it possible to do something similar for Web3? Let’s look at a very promising use case: Mini-portfolios.
The Investment Portfolio: Simple and Valuable
For those who have invested at all, whether in Web3 or TradFi, they are familiar with a portfolio: A collection of investments that each contain a known risk/reward estimate, and are selected so that as a whole, they have a predictable level of risk and return that is buffered if any single item behaves outside its expected range.
For example, if you want a portfolio that is aggressive, you are willing to accept more risk for the chance of greater reward. To do this, you have a number of investments that take on this profile. However, you set up these investments to come from different industries or sources so that they will behave independently from each other. You also have a number of lower risk, lower reward investments that can smooth out any volatility.
A portfolio strategy has been around as long as trading itself. But how does that adapt into the Web3 industry? If we have a Web3 portfolio, it will consist of different tokens representing either digital currencies or tokens used by platforms (and many that do both). Like any investment, the token represents the ongoing success of its value, and the investor hopes the token will rise in value over time. Many of the tokens have predicted risk and return, and can be treated like any other portfolio if you group different tokens together.
The problem is, tokens can be much more volatile than other investments. Not all the time, but enough that the confidence we have in the risk and reward can vary more than say, stock indexes or bonds. With Web3, there are risks of promising tokens crashing, or platforms even performing rug pulls. Whether or not this happens often, these type of incidents are what most often make their way onto mainstream news. Non Web3 people see that there was another scam in blockchain, not that the average Web3 investor saw sizable returns.
There are a growing number of Web3 platforms that are working hard to make the experience easier and more intuitive for the average user. Onboarding is getting better, and things like investment portfolios have a direct parallel in traditional finance, so users can understand the concept. This is great news! But it only solves part of the problem.
Mini-Portfolios and Pre-Vetting
The “mass adoption” user can take the journey toward a Web3 portfolio if the platform is simple. But there are two big hurdles left to resolve. First, it doesn’t take long before the average non-Web3 user is overwhelmed by choice, by complexity, and by not having a strong sense of the risk/reward for a given token. Second, because they are not Web3 experts, even more seasoned TradFi experts don’t know how to properly analyze a token to see how promising and stable it might be.
This is where Web3 platforms can come in to close that gap. The leader in this niche is likely Byrrgis, and it is their wolf pack approach that combines these two problems. The platform is very wolf themed, and for good reason.
The concept of a portfolio as a wolf pack really does strike a lot of the right chords: strength in numbers, the unique attributes of each member help the pack as a whole, and the weaknesses are held up by the other members too. The wolf pack itself is a collection of tokens, which shares these “pack” type behaviors and becomes a mini-portfolio.
Instead of investing everything you have into a massive portfolio, users can instead pick out which mini-portfolios they like, investing in one or more according to the risk appetite they have. The other critical point is that any token that makes it into a curated collection has been vetted by the platform. This means that the wild and crazy elements of Web3 are kept out, allowing people to have a stronger sense of how their investment will likely behave.
This understanding of picking out what “packs” you want to back, and knowing that all the tokens have been pre-vetted will very likely allow a non-Web3, TradFi user to fully understand what they are doing and be confident in the results. Other platforms should make note of this strategy, because the average “mass adoption” user very likely will.
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