Decentralized cryptocurrency ETFs or traditional cryptocurrency ETFs, which one offers higher returns and is more suitable for novice investors?

As crypto finance (DeFi) grows,decentralized ETFs (DeFi ETFs) are beginning to emerge as competitors to traditional ETFs. So what are the key differences between the two? Which ETF has the edge in the DeFi era? This article will provide an in-depth comparison of their architecture, liquidity, transparency, risk control and other core elements to help investors better understand the potential of decentralized ETFs.

1. What is an ETF?

An ETF (Exchange-Traded Fund) is a type of portfolio made up of multiple assets, where investors can trade ETF units as if they were stocks. ETFs allow investors to gain exposure to a basket of assets at a low cost, and are widely used in stock markets, commodities, bonds, cryptocurrencies, and more.

Traditional ETFs

Traditional ETFs are issued and managed by Centralized Financial Institutions (CeFi) and investors are typically required to purchase ETF units through stock exchanges (e.g., NASDAQ, NYSE). Example:
Grayscale Bitcoin Trust (GBTC), an ETF that tracks the price of BTC
Coinbase 50 Index, a crypto market ETF issued by Coinbase
S&P 500 ETF (SPY), ETF tracking the S&P 500 Index

Decentralized ETF (DeFi ETF)

The Decentralized ETF (DeFi ETF) is an ETF that runs on the blockchain and uses smart contracts to manage assets without the need for a centralized institution. Investors can trade ETFs directly on DeFi platforms (e.g. YamaSwap, Glam, Sosovalue) without relying on traditional financial institutions. Example:

YamaSwap’s decentralized ETFs - anyone can create, track Grayscale, CMC100, IBIT or custom portfolios!

Index Coop (DPI), decentralized ETF that tracks DeFi tokens.

PieDAO, Set Protocol, provides decentralized portfolio management.

Sosovalue, provides asset classes such as defi, rwa, meme, etc.

Glam, Provides professional crypto ETF services, aiming to be the BlackRock on the chain.

2. Traditional ETFs vs Decentralized ETFs: Core Comparisons

3. Why decentralized ETFs are better suited for the DeFi era?

1. Permissionless and Truly Open

Traditional ETFs are controlled by financial institutions and regulators, and ordinary users are not free to create or modify ETFs, whereas decentralized ETFs allow anyone to create and manage their own portfolios, such as:
Tracking BTC, ETH, SOL, DeFi tokens
Copy KOL trading strategies (e.g. Grayscale, CMC100)
Combine with AI Agents for smart asset management

2. Higher Transparency and Prevention of Black Box Operation

Traditional ETFs are managed by financial institutions, and investors can only rely on regularly disclosed position data, which is often lagging behind. The positions and transactions of Decentralized ETFs are fully recorded on the blockchain, which can be viewed by anyone at any time, ensuring transparency and fairness.

3. Freedom to trade and buy and sell at any time

• Traditional ETF: limited by trading hours, market liquidity and only traded on weekdays.
• Decentralized ETF: 24/7 trading via DEX (e.g. YamaSwap) and supports cross-chain liquidity.

4. Low cost, reducing exploitation by middlemen

• Traditional ETF fees: fund management fees + trading commissions + fund custody fees
• Decentralized ETF Fee: only Gas Fee for Smart Contract Execution, no additional Management Fee

For long-term investors, decentralized ETFs are a more efficient investment tool by avoiding the high fees of centralized financial institutions.

5. AI Intelligent Management to Optimize Returns

AI Agents can be combined with DeFi ETFs to provide intelligent investment management:

Automated Rebalancing: adjusts asset allocation based on market volatility
Social Data Analytics: track KOL money flows to optimize investment strategies
Risk management: monitor price trends in real time to avoid large pullbacks

For example, YamaSwap allows users to create personalized ETFs in conjunction with AI trading strategies for better investment returns.

4. What are the other advantages of a traditional ETF?

While DeFi ETFs offer many advantages, traditional ETFs are still superior in some ways:
Higher compliance: regulated by SEC, CFTC, more friendly to institutional investors
Suitable for traditional investors: more accessible to both institutional and retail investors
Fiat currency support: can be purchased directly in USD, EUR, no need to convert cryptocurrency

Therefore, DeFi ETFs are more suitable for Web3 users, while traditional ETFs are more suitable for institutional investors or users unfamiliar with DeFi.

5. Conclusion: is decentralized ETF a better choice in the age of DeFi?

In the age of DeFi, decentralized ETFs offer greater transparency, liquidity, low fees and intelligent management, providing investors with more freedom and room for innovation.

If you want the benefits of Decentralized Finance (no licensing, smart management, transparent trading), then Decentralized ETFs such as YamaSwap are a better choice.

If you still rely on the traditional financial system (fiat currency deposits, institutional custodianship), then traditional ETFs are still the safer option.

In the future, as the DeFi ecosystem matures and AI technology advances, decentralized ETFs are expected to replace some of the traditional ETFs and become the mainstream way of investing in the next generation of crypto assets.

Experience YamaSwap now and explore decentralized ETFs in the age of DeFAI!