Onchain Asset Management

Since the early days of Bitcoin, digital asset management solutions have played a critical role in the Blockchain space. Before the rise of Decentralized Finance around 2020, nearly all professional asset managers relied on centralized exchange and custody partners for their asset management needs. 

As digital assets and the underlying blockchain technology mature, it becomes increasingly essential for Asset Managers to interact with Blockchain applications to utilize the assets they manage actively. By participating in Governance votes, staking or locking tokens, and engaging in other onchain activities such as market-making, Asset Managers can increase the value generated from each asset, resulting in higher returns for their LPs. 

As a result of these developments, Onchain Asset Management solutions are making a resurgence. This blog will explore how Safe {Wallet} and the ecosystem built around it provide a strong foundation for Onchain Asset Management.

This blog is part of a series of Web3 Financial Operations guides and case studies produced by FinOps3. Explore all FinOps3 tools and content on the FinOps3 Platform. 

The drive toward onchain

Multiple factors contribute to the increased adoption of onchain solutions:

• Stablecoins and onchain finance tools such as Lending Protocols and Exchanges have grown steadily over the past years. With over $170B in Stablecoins in circulation and onchain volumes increasing steadily (to over $1T a month), the utilization of onchain tools is expanding. With increased utility and liquidity, executing a transaction onchain is often quicker and cheaper.
• Better onchain data and accounting tools make it easier to operate completely onchain, limiting the often clunky dependencies on traditional infrastructure. 
• L2 and other scaling solutions have significantly reduced the costs of executing onchain transactions (gas costs). 
• Increased onchain native custody and security features, allowing for cheap, flexible, yet highly secure set-ups for asset custody and interactions with blockchains. Even Vitalik Buterin, the Founder of Ethereum, uses an onchain setup like this to secure his assets. 
• Many prominent protocols have matured to a point where their native token plays a critical role in Governance and utility. The most significant shift on this front is the largest protocols progressing toward revenue capture and circulation. For example, Arbitrum DAO is working on a Staked version of its native ARB token optimized for active onchain governance. Uniswap, the largest decentralized exchange, is incorporating a protocol fee switch after nearly years of operating without one.  

Participating in onchain governance and engaging through native dApps to stake a token is becoming the norm, forcing asset managers to interact with decentralized applications to reap the full benefits of their assets under management. 

Operating in the Onchain paradigm‍

Despite the trend toward onchain operations, some limitations and risks should be mitigated to benefit from the onchain economy. 

While large Hacks create scary taglines, the average users who engage with mature solutions are more likely to lose (a share of) their assets through custody-related risks, such as losing custody over their tokens due to bad key management or signing a malicious transaction without intending to do so. 

Many asset managers rely on centralized custody partners to reduce this risk. These solutions are often costly and scrutinize onchain operations due to limiting or slowing down the ability to sign and execute transitions.

Over the past years, an onchain native solution has emerged to reduce custody risks in an onchain native way: Smart Accounts.

The Role of Smart Accounts

Smart accounts are blockchain-based accounts that operate with the help of smart contracts—self-executing contracts with the terms of the agreement directly written into code. These accounts allow for programmable control over assets, enabling automated transactions, permissions, and rules enforced by the blockchain. This level of programmability opens up new possibilities for asset management, such as conditional payments, recurring transfers, and multi-signature authorizations.

Safe {Wallet} is a prime example of how smart accounts revolutionize asset management in Web3. As a smart contract-based wallet, Safe {Wallet} allows users to create multi-signature wallets, requiring multiple private keys to authorize a transaction. This significantly reduces the risk of unauthorized access or theft, as a single compromised key does not grant access to the assets. The robust foundation paired with the programmability opens up a wide range security benefits and operational efficiencies.

Onchain Asset Management through Safe {Wallet} 

The Safe smart account and {Wallet} infrastructure provide a robust yet flexible infrastructure for Onchain Asset Management and operations. For any type of Asset Manager, whether you’re a Crypto Hedge Fund, HNWI, or Family Fund manager, the following elements are relevant and should be taken into account when creating your onchain setup: 

Custody: At the heart is a Safe {Wallet} with several signers and modules that add additional control and safety. 

Signers are wallets collectively controlling the Safe {Wallet}; only when the established threshold of approvals has been reached can the Safe {Wallet} execute a transaction. A set-up includes at least three signers with a minimum threshold of 50% of signatures required to execute a transaction. In practice, a three out of five or four out of seven signature threshold is often used. 

The Safe infrastructure allows for programmable access control, spending limits, and other control mechanisms to optimize team operations based on mandates. For teams that operate on multiple networks, It is possible to deploy a separate Safe with a unique address on each EVM network or to use tools like MultiSafe (Migratooor) to deploy a Safe with the same address on various networks. 

Accounting and Data Analytics: The Safe infrastructure tracks digital assets stored in its standard. A range of solutions is built on top of the Safe infrastructure that provides in-depth accounting features, including creating statements and tracking wallet holdings and values at any moment. 

Curated applications: Safe {Wallet} offers a curated selection of native and third-party apps. A great example is Safe Swap, the in-wallet swapping application built on the latest technology, ensuring the best swapping rate for most assets on Ethereum Mainnet. Over 100 Safe Apps are live currency providing access to the 

In addition to accessing the curated applications, connecting to any dApp outside Safe through the Wallet Connect integration is possible and straightforward. 

Operations Automation: Besides security, intelligent accounts bring efficiency to asset management. By automating complex processes through smart contracts, tasks that once required manual intervention—such as payroll distribution, dividend payments, or even asset rebalancing—can now be executed automatically and accurately. This reduces the potential for human error and streamlines operations, allowing users to focus on higher-level decision-making rather than administrative tasks.

New Asset Management Tools

While the current solution suite built on Safe already provides the best Onchain Asset Management tools in terms of security and flexibility, new solutions are being developed that further enhance and streamline Onchain Asset Management. A great example is Hopper, who is building custom solutions for Asset Management, such as automatic NAV setting, fee systems, multi-chain management, and additional vault features.

Get started with Onchain Asset Management
The FinOps3 platform offers an overview of all available FinOps tools built around Safe. We also provide a complementary starter kit and a free onboarding call with one of our team members to help you set up your Onchain Asset Management workflows. Visit FinOps3.xyz to learn more.