PANews reported on February 13 that according to The Block, Dennis Dinkelmeyer, CEO of the tokenized protocol Midas, revealed that Midas is launching Liquid Income Tokens (LYTs), a new type of "on-chain hedge fund" architecture. These products are designed to compete with relatively new income tools such as Ethena's USDe and BlackRock's BUIDL tokens, which Dinkelmeyer called "outdated."
Like USDe and BUIDL, each Midas LYT will tokenize a specific trading or investment strategy, generating returns for holders. However, unlike these "quasi-stablecoins", LYTs will have a floating reference value. Dinkelmeyer claims that while these "synthetic dollars" may maintain a peg to the dollar like traditional asset-backed stablecoins (including USDT and USDC), they are actually a completely different financial product that is more used for investment rather than as a means of payment or trading pair.
LYTs address these risks by treating hedge funds as on-chain hedge funds and allowing the token value to track the performance of their assets. Midas' first batch of LYTs will tokenize actively managed trading strategies of decentralized finance (DeFi) asset managers Edge Capital, RE7 Capital, and MEV Capital. In addition, unpegging on-chain hedge funds is intended to promote investment flexibility and broaden access to a wider range of assets beyond U.S. Treasuries. According to the prospectus, all Midas LYTs will share a common liquidity pool, allowing atomic redemptions at par value. Each LYT is issued as an ERC-20 asset, which means they will be composable in the Ethereum DeFi space.
