Exposure

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Inspiration

The Exposure team consists of two core team members Thales and Soloth. Thales at his core is a blockchain developer with a passion for economics and financial products. His long term goal is to bring next-generation financial products onto the blockchain. Soloth is a quantitative investor working on algorithmic trading strategies during his day and at night he is working on the Web3.0.

At the beginning of the year, we were looking for an on-chain investment product that allowed us to trade multiple assets at once. Unfortunately, there was nothing, but then an idea sparked. At first, we didn't think it was practical to build an ETF on-chain due to the excessive gas fees on Ethereum - the cost of a transaction and the time it took to execute was just not feasible. When Serum released anchor, we discovered Solana and saw that an on-chain ETF is possible based on how fast and cheap this new network was.

Today, we envision a disruption in DeFi. On-chain ETFs can be used for many reasons and could completely change the way people invest and trade crypto. There is a range of use-cases, including long-term investing, derivatives markets, speculation, liquidity cocentration, and price efficiency.

What it does

The purpose of Exposure is to create on-chain crypto ETFs, or baskets of cryptocurrencies, that are advantageous for both experienced and inexperienced crypto investors by taking the fundamentals of traditional investment products and packaging them with features that great DeFi projects have built. Exposure does this by creating ETF SPL smart contracts on Solana that can store other currencies on Solana and distribute “shares” that act just as a regular SPL token would. These cryptocurrency basket shares can easily be traded or used on any dex and represent real underlying assets held under a Solana smart contract.

Exposure takes ETFs further and allows users to leverage the underlying assets by deploying their share of tokens into lending projects such as Solend to earn yield while still controlling their shares passively. Users also have access to a credit line, similar to a home equity line of credit, that uses a user’s shares as collateral for their loan. This allows a user to avoid a taxable event by having the ability to withdraw value from their investments without selling them.

How we built it

Exposure ETFs are Solana programs built using Anchor in the rust programming language.

Main Functions:

Completed for Hackathon

• Create: Bundles underlying assets into a single ETF share.
• Redeem: Unpackages an ETF share and releases the underlying assets.
• Crank 1.0: Cranks the weights and index price.

Still in the works

• Swap: Buys the underlying assets and packages them through the create function. Allows for users to directly deposit USDC for ETF shares.
• Crank 2.0: Allows for automatic profit taking, USDC cash dividend distribution and more.

Challenges we ran into

We had many programming questions when we started working on the project due to the minimal documentation. We had to find a solution by talking to other developers in the Serum discord channel most of the time. In the end, we were able to fix all the errors that came up and got the first Exposure ETF deployed on Solana.

One of the interesting technical blocks we faced were handling the # of accounts needed to perform the core functions of the Exposure Protocol (Create and Redeem).

Accomplishments that we're proud of

We are proud to say we designed the first decentralized ETF built on any blockchain. Because of Solana's low cost, speed, and transparency, we were able to accomplish this. A solution may be possible on ETH, but it would never be viable due to the very high gas fees ETH charges on each transaction.

What we learned

One thing we learned was that there are limitations to Solana accounts. Initially, we wanted our first ETF to consist of 10 different tokens, but we are only doing 5 for the first ETF due to limitations. In the future, the protocol will be able to stack ETFs into a parent ETF to allow for more assets to be tracked in a single ETF.

What's next for Exposure

Our next step will be creating a new design for the dApp and website. The current site was to get the idea illustrated for the hackathon, but we have hired a professional designer and front-end developer to remake it. Along with this, we will be working towards making the UX easier for anyone wanting to invest in Exposure ETFs by building more dApps such as Exposure Pro and Exposure Lite.

Exposure Portal

The Exposure Portal makes purchasing a crypto ETF easy. To get started, all you need is a Solana wallet, some Solana, and a desire to get involved in the cryptocurrency market.

Features:

• Track ETF growth overtime
• Trade ETF shares on the open market
• Buy ETF shares with USDC
• Redeem ETF shares for underlying assets

Exposure Pro

Exposure Pro is designed to help institutions and market makers create and redeem exposure shares. Users can offer directly to the secondary market to help increase liquidity and lower fees for everyday users. Market makers are incentivized to arbitrage the NAV and Exposure index prices.

• Package assets into ETF shares
• Redeem ETF shares for underlying assets

Exposure Lite

A centralized application to reach a greater audience to participate in Exposure ETFs through their bank or debit card.

• DCA into ETFs with a bank account
• Purchase ETF shares with USDC

Exposure Credit

Borrow USDC from against a portfolio without triggering a taxable event.

Exposure Lend

Lend out any underlying assets of an Exposure ETF shares and earn a yield on top of the principal.

ETF Markets

Partner with 3rd party projects to provide futures, options, and margin trading for Exposure ETFs

Built With

• anchor
• rust
• solana
• web3