Coined in the early 1600s by Miguel de Cervantes, the saying 'don't put all your eggs in one basket' has grown to become one of the most basic investment advice that serves as a guide on how investors should manage their risks.
It is hard to ignore the fact that diversification is a key tenet and mantra of the investor code and this is particularly true in the cryptocurrency industry. Unlike traditional markets, the cryptocurrency space is characterized by high volatility. This makes it almost impossible to accurately predict the price trajectory of digital assets. For instance, Bitcoin plunged to a low of almost $30,000 in mid-May after setting a new all-time high of nearly $65,000 a few weeks earlier.
Such levels of volatility in the cryptocurrency sector highlight the need to invest in multiple assets. However, a decision to diversify one’s portfolio comes with its own challenges. A quick look at CoinMarketCap, a premier price-tracking and market capitalization authority website for cryptocurrencies reveals that there are over 10,500 digital assets that investors can choose from. These assets typically vary from market capitalization to available liquidity, supported exchanges, the blockchain used, yield farming algorithms, and several other parameters.
While investing in popular cryptocurrencies such as Bitcoin and Ethereum is relatively easy, expanding a portfolio to other relatively newer and lesser-known cryptocurrencies can quickly become a herculean task that requires massive overhead in terms of due diligence, transaction costs, and user experience. To put things in perspective, imagine trying to manually invest in 50 cryptocurrencies on 10 different exchanges.
How YDragon is changing the narrative
YDragon was developed to tackle the aforementioned challenges of portfolio diversification in the cryptocurrency space. According to the project’s website:
“YDragon is a cross-chain index ecosystem with yield-bearing collateral, providing a true interoperable cross-asset experience.”
The ecosystem aims to simplify the portfolio diversification process by allowing investors to own multiple assets and explore a plethora of yield farming protocols all at once. Investors are given access to a diversified portfolio of the best performing cryptocurrencies by holding a single token. YDragon index holders are able to generate high yield and passive income on collateralized assets via a staking platform.
To a large extent, YDragon mimics the traditional model of index funds, which allows individuals to invest in a basket of assets. YDragon’s approach, however, employs blockchain tech and therefore does not rely on a portfolio manager, but on smart contracts. This approach ensures that funds are balanced at all times and that more rewards from yield farming are redistributed to the investors.
For a start, YDragon’s indexes will feature what it calls the “B5,” which is made up of the top 5 reputable projects index on the Binance Smart Chain. The selected projects consist of a hand-picked selection of what the team considers to be the "crème de la crème of BSC. Subsequently, YDragon will expand its index offerings to other blockchains such as Avalanche, Matic, and Polkadot.
In addition to being able to invest in indexes, investors can purchase the project’s YDR token, which gives access to the full scope of the project, including the ability to make decisions on future index offerings, such as index composition.
Speaking of the token, YDR will represent roughly 5% of every index offered within the ecosystem. This will help boost the value of the token as interest in the YDragon ecosystem grows. That being said, YDragon’s first index offering and the launch of its YDR token are expected to take place in mid-July 2021. Over the next few weeks, the project’s team is also expected to drop some important announcements, including partnerships, YDragon launchpad, airdrop campaigns, an initial roadmap, and a more detailed whitepaper.