According to a report by PANews on February 13, Dennis Dinkelmeyer, the CEO of the tokenization protocol Midas, revealed that Midas is launching Liquid Yield Tokens (LYTs), a new "on-chain hedge fund" architecture. These products are designed to compete with relatively new yield-bearing tools such as Ethena's USDe and BlackRock's BUIDL tokens, which Dinkelmeyer claims are "outdated".
Like USDe and BUIDL, each Midas LYT will tokenize a specific trading or investment strategy, generating yields 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 US dollar like traditional asset-backed stablecoins (including USDT and USDC), they are actually a fundamentally different financial product, more geared towards investment rather than as a means of payment or exchange.
LYTs address these risks by treating hedge funds as on-chain hedge funds and allowing token values to track the performance of their underlying assets. Midas' initial LYTs will tokenize the actively managed trading strategies of decentralized finance (DeFi) asset management firms Edge Capital, RE7 Capital, and MEV Capital. Additionally, the decoupling of on-chain hedge funds aims to promote investment flexibility and broaden access to a wider range of assets beyond just US Treasuries. According to the whitepaper, all Midas LYTs will share a common liquidity pool, allowing for atomic redemptions at par value. Each LYT will be issued as an ERC-20 asset, meaning they will be composable within the Ethereum DeFi ecosystem.
