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One of the most innovative innovations in modern finance has been ETFs, which have shaped the art of . For millions of everyday people, they made diversified investing liquid and available for investors. These slang words were “off-chain financial infrastructure products” designed for the world in which they were thought up.
Summary
Traditionally known as “crypto ETFs” for digital-native assets, * Crypto ETCs are legacy wrappers of the asset’s — stripping ownership rights, block onchain utility, limit trading hours and charge high fees while offering only price exposure.
- Direct ownership allows for personalization and compounding onchain portfolios allow flexible weights, tax optimization, yield strategies, governance participation, 24/7 automated rebalancing.
This is the future of onchain direct indexing (not tokenized wrappers) smart contracts can replace middlemen, preserve asset utility and deliver diversified investing without losing control or flexibility.
But that’s what’s wrong with this ETFs were not designed for the onchain world. They were designed for markets that close daily, settlements taking days and a system dependent on middlemen to execute creations and redemptions. Layer on high fees and static composition, and what once made sense now looks increasingly outdated.
This is a new age where assets are more useful than just governance and dividends, where transactions are programmed and executed by code not people – and where wealth can be grown onchain. The question is, “why do we wrap next-generation assets in the design of last century’s designs” Crypto ETFs don’t move the model forward – they retrofit onchain assets into legacy financial structures.
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Giving up more than you realize
You have a wrapper around the assets when you buy an ETF, not the real assets themselves. But the ETF issuer owns the real assets, removing rights and advantages that are associated with ownership from you. Nearly 60% of global ETFs with more than $11 trillion in assets are The Big Three BlackRock, Vanguard and State Street – which has enormous voting power for you. Most ETF investors have no say on how companies they invest in are governed by the laws of which their company is invested.
Cryptography is a particularly bad issue, where assets often offer staking rewards, governance rights and airdrops, lending opportunities or other token utility when you directly hold the asset. Unlike Crypto ETFs, which may track price but do not pass through the onchain benefits of direct ownership.
While spot crypto markets are 24 hours a day, Crypto ETF investors can also trade when equity markets close. ETF investors are left offside during any overnight volatility due to this inequality. Then comes the restrictions on asset inclusion. There is no room for personalization and investors are given pre-packaged options with no choice. The ETFs do not exist for most cryptocurrencies, but the ETCs that are present may include token-less Ethereum (or would prefer to exclude) or other tokens you don’t believe in and might be more likely to have no meaning.
At last, investors have a major downside to the fees — which has generated record profits for issues like BlackRock and other issuers. A 150 basis point charge for Grayscale’s Bitcoin ETF is a base point of $150 per . In a way to put that in context, that’s 15 times the fee of SPY, the most popular ETF which tracks the S&P 500. It’s also a way for retail investors to pay ongoing ETF charges for limited exposure, even though they could buy and hold Bitcoin ($BTC) directly on platforms such as Coinbase without any custody costs.
Closing the personalization gap
Core holdings of ETFs are not a part of high-net-worth investors’ core holding, which avoid the use of an ETC. Instead, they copy the index by directly buying the underlying stocks (a process called direct indexing). But it doesn’t just give them voting rights, but does also unlock a much more important tax optimization. In your possession of the underlying assets, you may select what one to purchase/sell; and when you own it. At the time of tax season, this control matters hold out on winners, sell the losers and then use those losses to offset gains. In the meantime, ETF investors can buy or sell the full index.
But the real breakthrough is onchain personalization, though, that’s what really makes it possible. Rather than having them stuck in an ETF wrapper, portfolios can be constructed with customizable weights and exclusion lists, dynamic reallocation to new assets, immediately rebalance on dips (and then decide when and how) one asset sells. This flexibility is whereby one can choose to lend and earn yield at the asset level with onchain assets, a position that was never an option off-chain. Now that anyone can direct index, whether you’re investing $10 or $10 million in onchain assets because they are decimalized, it means someone can now do the same thing.
It already has infrastructure to do this better, such as the . Such continuous, automated management is practical with near-zero fees and high-throughput blockchains such as Base or Solana (SOL) that are available in High-Thrupput Blockchains like Base. The new middle manager, automating portfolio management while you still own the company, is smart contracts. Their constant operation is to execute tactics 24/7 without manual intervention. Unlike the clunky UX that defined early crypto, the new generation of systems hide all the complex steps under the “hood” (including abstracting gas fees, signing multiple transactions and cross-chain bridging) in which it is used.
Accessibility as a handicap
Crypto ETF evangelists say they make crypto more accessible through familiarity and regulatory clarity. The current brokerage accounts of legacy institutions offer it is more secure to buy something, which makes it safer to purchase. A key benefit of investment should not be lost, but accessibility shouldn’t require sacrificing the core benefits of an investment. But for crypto investors, it’s not necessarily the choice of a traditional interface or real ownership; that’s what the next generation of crypto apps need to offer the same familiarity and safety as regular brokerage accounts with largely needed focus on long-term diversified investing. It will be the same to buy an ETF with the ease of buying a custom, direct-indexed ETC built onchain. The key is that investors will not have to surrender control, transparency and the ability to use their assets for governance or lending.
Attempts have been made at onchain solutions, including tokenized ETFs, but most only copy the wrapper model of the product. This is the problem once tokenized, trading of ETF (ETF) is governed by liquidity of the wrapper and not the liquidity for the underlying funder. The liquidity of bitcoin, e.g. Bitcoin and Ethereum ($ETH) is high; while a tokenized 50/50 $BTC and $ETH index doesn’t exist. The point is completely missed by these tokenized ETFs, which attempt to provide outdated financial primitive for a very crypto-native audience with knowledge of the utility that comes directly from direct ownership. I’m thinking that the wrapper is the wrong model of .
Crypto’s new destination
From 2024 to 2025 the global ETF market increased from $11 in 2000. It has a projected $30 trillion by 2030 projections, and 5 trillion to more than $15 trillion. Another world is a different universe the assets of the world are being on chain and can finally be released from their wrappers. The future gives all investors direct ownership of their assets without middlemen and all of the new utility that comes with ownership a world where portfolios are automated, cross-chain seamlessly executed, and built for digital-native assets.
ETFs were a genius of their day, solving the real problems that had been present in the 1990s but we’re not living today as it is. Assuming we are not attempting to adapt ETFs for crypto, but rather be building new tools in the future of finance. This new reality already has infrastructure for this new. We just need the courage to use .
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Brian Huang
The cofounder and CEO of Glider, Brian Huang is the founder and chief executive of. He’s a well-known figure in the world of high-frequency trading, having worked at World class trading company XTX Markets and working on low-latency machine learning based strategies. He was after XTX the product developer of Anchorage Digital’s trading systems, which are operated by some of the world’s largest institutions. Brian first touched crypto in 2015 as part of the infamous Bitcoin Project at MIT, where he also graduated with dual degrees in Computer Science and Management. *****
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