S5845MR: COOK

COOK

Abstract

This paper presents a protocol for a decentralized wealth management platform. The ultimate product is a trustless, transparent, and well-incentivized platform that provides investors with a selection of wealth management services and fund managers with access to highly liquidized funds.

Executive Summary

Cook Protocol establishes a transparent and flexible asset management platform suited to diverse investors and asset management service providers alike. Investors can monitor a manager’s fund allocations without worrying about fund security or foul play. At the same time, fund managers can leverage Cook Protocol to gain access to investors and carry out virtually any investment strategy without having to opensource the strategy.

Cook Protocol Overview

Cook Protocol is built on an Ethereum blockchain that establishes a generic asset management platform, providing investors with a selection of asset management vehicles from fund managers. Funds can be managed passively or actively through whitelisted DeFi protocols. For each investment fund, a unique ERC-20 token – proportional to their contribution to the fund – is issued to investors. Investors can divest the tokens any time in exchange for the equivalent underlying asset.

An investor invests crypto assets accepted by a particular fund in exchange for ERC20 tokens, representing partial ownership of the fund. The ERC-20 token, or ckToken, is unique to each fund and can be exchanged among investors or redeemed for its underlying assets within the fund. The concept of a ckToken is similar to a share in the stock market, especially with financial products such as exchange traded funds (ETFs). Thus, a ckToken equates to a percentage of ownership in an investment fund with a value proportional to the investment fund’s value. For each investment fund, its ERC-20 tokens become fungible assets that can then be traded among investors, providing convenience and reducing transaction fees

A fund manager initializes a fund by defining an overall strategy and fee structure, accepting assets and access limits to each of the whitelisted DeFi protocols. Cook Protocol allows fund managers to describe investment strategies to attract suitable investors. Funds are then pooled from investors into a smart contract so that the fund manager can allocate passively by following a specific index or actively by managing multiple financial product streams

For each investment fund, the fund manager is granted with the proper permissions according to the given smart contract, which allows the manager to allocate funds to the whitelisted DeFi protocols, such as Compound, 0x, and Synthetix. The amount of funds allocated to each DeFi protocol cannot exceed a pre-determined limit and can only be revised through fund-level governance. In return for providing asset management services, the fund manager is compensated via a fee-based model, wherein investors take all gains and losses while paying a fixed fee to the fund manager. While each transaction within the fund market is transparent, the actual investment strategy can remain opaque to the outside world to spur innovation.

By default, fund managers will pay 2% when they claim the management fees. Fund managers do not need to pay platform fees if they decide to withdraw their management fees in COOK tokens; 100% of the platform fees are then redistributed to COOK token holders who actively contribute to our ecosystem. The platform fees are subject to change as per the community governance in the future.

COOK Token

COOK token is a governance token that allows token holders to shape the future of COOK protocol. The token holders can submit proposals and vote to start incentive programs to grow the ecosystem, improve the governance structure, and upgrade the platform. More details about governance will be explained in the Governance section

Apart from governance, COOK tokens can be used to pay platform fees on Cook Protocol. When investors decide to invest in a popular fund, they will need to pay COOK tokens in advance. When a fund manager initializes funds, they will also need to stake a certain amount of COOK tokens. In addition, when a fund manager decides to claim management fees, they need to pay 2% of the management fees as platform fees.

COOK token holders can potentially share the direct and indirect benefits derived from the platform fees. For instance, the token holders can collectively decide to adjust the platform fees and distribute them to token holders or use them to buy back COOK token in the open markets

Mission & Vision

Cook Protocol was founded on the belief that everyone needs to have access to finance. We contend that decentralization holds the key to empowering people around the world to better manage their assets, and we are helping the world move in this direction by accelerating the transition to adopting decentralized finance.

Mission: Accelerate Adoption of Open and Decentralized Finance

We believe that we can accelerate the adoption of decentralized finance by:

Providing investors with secure, transparent and high-quality asset management services

Providing fund managers with funds and a variety of asset management tools

Vision: Bring Finance to the Masses

In our journey towards achieving this vision, we are:

Democratizing secure, transparent and high-quality financial services with a lasting, positive impact

Becoming a world-leading decentralized asset management platform

Problems

Traditional asset management markets are opaque in revenue, profit, and risk information. They are usually limited to wealthy private and institutional clients due to inherent structural inefficiencies and hefty fee structures. Blockchain-based wealth management provides a promising alternative because of the open and transparent nature of blockchain technology.

However, existing blockchain solutions are often too sophisticated and technically obscure for ordinary investors. Moreover, none of them provides the necessary investment tools for professional fund managers to flexibly carry out a variety of strategies.

Solutions

To tackle the aforementioned challenges, we are creating an Ethereum-based decentralized asset management platform to provide ordinary investors with professional asset management services. The platform offers the following benefits:

Investors can access high-quality asset management services without professional knowledge of decentralized finance (DeFi). They only need to select the appropriate investment strategies and send cryptocurrencies to the corresponding smart contract to obtain ckTokens (fund-specific LP tokens). They can sell or redeem ckTokens at any time

Fund managers can create funds, configure investment strategies to attract investors, and use tools on the platform to execute investment strategies.

Smart contracts guarantee security of the funds and transparency of the underlying assets by limiting the access of fund managers.

Decentralized Autonomous Organization and Tokenomics incentivize global investors and fund managers to interact with each other via smart contracts deployed on Cook Protocol.

Passive investors interested in index-based investing strategies desire a selection of high-level low-fee funds that track the growth of an index or industry. Investors with higher risk-tolerance who seek higher returns require professional fund managers who will bring extensive experience and advanced trading techniques to the table. Cook Protocol aims to become a platform that matches a wide range of investors’ and fund managers’ needs while remaining trustless and transparent.

Market Size

DeFi is at an early stage and has immense growth potential. To put things into context, the global stock market is approximately $73 trillion, the global lending market is $215 trillion, and the global derivatives market is $1200 trillion, dwarfing the $700 billion global cryptocurrency market size

The total value locked in DeFi as well as total DeFi users over time continue to grow exponentially despite some hiccups in token prices for DeFi projects. As the DeFi Pulse chart below demonstrates, the total value locked in DeFi projects exceeded $1 billion in February 2020 and grew 16 times to more than $16 billion by the end of 2020.

Roadmap