On-chain NAVs eliminate trust gaps. The Net Asset Value (NAV) of a fund is the single source of truth for investors, but in traditional finance, it is a black-box calculation published with a multi-day delay. On-chain NAVs, calculated via oracle networks like Chainlink or Pyth, provide a real-time, verifiable, and composable valuation that any smart contract can audit.
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Blog
The Future of Fund Management is On-Chain NAVs and Instant Redemptions
How blockchain's real-time transparency and automated settlement are dismantling the quarterly reporting cycles and investor gatekeeping of traditional finance.
introduction
THE FRICTION
Introduction
Traditional fund management is structurally incompatible with the 24/7, global nature of digital assets.
Instant redemptions break the liquidity cycle. Traditional funds operate on capital call and redemption cycles that last weeks, creating massive opportunity cost and lock-up risk. Tokenized shares on platforms like Ondo Finance or Maple Finance enable instant secondary market liquidity, decoupling investor exits from the fund's underlying asset liquidation schedule.
The model shifts from custody to verification. The core job of a fund manager ceases to be safeguarding assets in a custodian like Coinbase Custody and becomes verifying the integrity of on-chain operations and oracle feeds. This reduces operational overhead and counterparty risk by orders of magnitude.
Evidence: Funds using Ondo's US Treasury token (OUSG) settle redemptions in minutes, not quarters. This demonstrates the structural advantage of on-chain primitives over legacy administrative plumbing.
key-trends
THE END OF LEGACY INFRASTRUCTURE
Executive Summary
Traditional fund management is bottlenecked by opaque, manual processes. On-chain Net Asset Values (NAVs) and instant redemptions solve this by leveraging blockchain's inherent transparency and settlement finality.
01
The Problem: The 30-Day NAV Lag
Traditional funds calculate NAV monthly, creating a massive information asymmetry between managers and investors. This lag enables front-running and mispricing, eroding trust.
- Opaque Pricing: Investors buy/sell based on stale data.
- Operational Risk: Manual reconciliation invites errors and fraud.
- Liquidity Mismatch: Capital is locked, unable to react to market moves.
30+ days
Data Lag
$10B+
At Risk
02
The Solution: Real-Time On-Chain NAVs
Portfolio holdings and valuations are recorded on a public ledger (e.g., Ethereum, Solana), enabling verifiable, real-time NAV calculation. This transforms fund shares into programmable, price-discovered assets.
- Transparent Audit Trail: Every asset and valuation is cryptographically verifiable.
- Composable Yield: Enables instant integration with DeFi protocols like Aave and Compound.
- Regulatory Clarity: Provides a single source of truth for auditors and regulators.
24/7
Live Pricing
~0
Reconciliation
03
The Killer App: Instant Redemption Pools
Fund shares tokenized as ERC-4626 vaults enable instant liquidity via on-chain secondary markets or dedicated redemption pools, eliminating gatekeepers and waiting periods.
- Atomic Settlements: Swap fund tokens for underlying assets in a single transaction.
- Dynamic Pricing: Redemption value is algorithmically derived from the live on-chain NAV.
- Capital Efficiency: Unlocked capital can be deployed in DeFi for additional yield.
<1 min
Redemption Time
10x
Liquidity Boost
04
The Architecture: Oracle Networks & ZK-Proofs
Secure, real-world asset (RWA) data is brought on-chain via decentralized oracle networks like Chainlink. Zero-knowledge proofs (ZKPs) can privacy-preserve sensitive portfolio data while proving valuation integrity.
- Tamper-Proof Data: Oracle networks provide cryptographically assured price feeds.
- Selective Disclosure: ZK-proofs (e.g., using zkSNARKs) enable audits without exposing full holdings.
- Modular Design: Separates data provisioning from fund logic for resilience.
99.9%
Uptime SLA
~500ms
Data Latency
05
The Precedent: Ondo Finance & Maple Finance
Pioneers like Ondo Finance (tokenized treasuries) and Maple Finance (on-chain credit pools) demonstrate the market demand for transparent, liquid, on-chain fund structures. They validate the product-market fit.
- Proven Demand: Billions in TVL migrated to these transparent models.
- Institutional Onboarding: Major asset managers and corporates are already participating.
- Regulatory Engagement: Active dialogue with regulators sets a working framework.
$5B+
Combined TVL
50+
Institutional Users
06
The Outcome: Disintermediating the Custodian
The final step removes the traditional custodian and transfer agent. The blockchain itself becomes the definitive ledger of ownership and entitlement, slashing fees and operational overhead.
- Cost Collapse: Removes layers of intermediaries, reducing fees by 50-80%.
- Self-Custody Empowerment: Investors hold their fund shares directly in their wallet.
- Global Accessibility: 24/7 markets open to anyone with an internet connection.
-80%
Admin Cost
Global
Access
thesis-statement
THE NEW PRIMITIVE
The Core Argument: Liquidity as a Default, Not a Privilege
On-chain fund management replaces opaque, quarterly NAVs with continuous, verifiable liquidity.
Funds become composable assets. A tokenized Net Asset Value (NAV) on a chain like Arbitrum or Base transforms a static share into a programmable financial primitive. This enables instant collateralization in DeFi lending markets like Aave or integration as a yield-bearing asset in protocols like Pendle.
Redemption is a swap, not a process. Shareholders redeem by selling the fund token directly on a DEX like Uniswap V3. This eliminates gatekeepers and multi-day settlement delays, creating a continuous liquidity curve instead of periodic liquidity events.
Transparency eliminates trust assumptions. Every portfolio position and NAV calculation is publicly verifiable on-chain. This audit trail, powered by oracles like Chainlink or Pyth, removes the need for blind faith in a fund administrator's quarterly report.
Evidence: The $1.3B TVL in real-world asset (RWA) protocols like Ondo Finance and Maple Finance demonstrates market demand for tokenized yield. On-chain funds are the logical evolution, applying this model to native crypto strategies.
THE FUTURE OF FUND MANAGEMENT IS ON-CHAIN NAVS AND INSTANT REDEMPTIONS
The Transparency Chasm: Traditional vs. On-Chain Fund Mechanics
A direct comparison of operational mechanics, transparency, and investor experience between traditional fund structures and on-chain native funds.
| Feature / Metric | Traditional Fund (e.g., Hedge/VC Fund) | Tokenized Fund (Off-Chain Backing) | Native On-Chain Fund (e.g., onchain.fund) |
|---|---|---|---|
NAV Calculation & Audit Frequency | Quarterly, with 60-90 day lag | Weekly or Monthly, with 7-14 day lag | Real-time, on-chain (every block) |
Investor Redemption Period | 30-90 day notice, quarterly/yearly gates | 7-30 day notice, subject to manager liquidity | Instant (via AMM) or < 24h (direct) |
Fee Transparency & Structure | Opaque; 2% management + 20% performance | Semi-transparent; on-chain but off-chain ops | Fully on-chain; automated, verifiable logic |
Portfolio Transparency | Quarterly letters, selective disclosure | Off-chain attestations, delayed reporting | Live, verifiable on-chain holdings (EVM, Solana) |
Settlement & Custody Risk | High (bank/broker intermediaries) | Medium (custodian + bridge risk) | Low (non-custodial, smart contract held) |
Minimum Investment | $500k - $1M+ | $10k - $100k | $1 - $100 (permissionless) |
Operational Cost (as % of AUM) | 1.5% - 3.0% | 0.8% - 1.5% | 0.1% - 0.5% (automated execution) |
Regulatory Arbitrage Access | Limited to accredited investors | Often limited to accredited investors | Global, permissionless (subject to local law) |
deep-dive
THE INFRASTRUCTURE STACK
Architectural Deep Dive: Building the Real-Time Fund
On-chain funds require a new stack of modular components for real-time NAV calculation and instant settlement.
Real-time NAV calculation is the core primitive. Funds must replace daily batch processing with continuous on-chain price oracles from Chainlink and Pyth, feeding into a smart contract that recalculates the Net Asset Value with every block.
Instant redemptions require composable liquidity. A fund's treasury must fragment across Layer 2 rollups and EigenLayer AVSs, with automated rebalancing via cross-chain messaging protocols like LayerZero or Axelar to meet withdrawal demand.
The settlement layer is the redemption contract. This smart contract atomically burns a user's shares, calculates their pro-rata NAV, and executes a swap via UniswapX or CowSwap to deliver the requested asset, eliminating traditional multi-day delays.
Evidence: Protocols like Maple Finance demonstrate on-chain loan NAVs, while Ethena's sUSDe showcases instant redemptions via perpetual futures liquidity, proving the model's technical viability.
protocol-spotlight
ON-CHAIN FUND MANAGEMENT
Protocol Spotlight: The Builders Dismantling the Old Guard
Traditional fund infrastructure is being replaced by protocols that offer verifiable NAVs, instant liquidity, and composable strategies.
01
The Problem: The NAV Black Box
Traditional funds report Net Asset Value (NAV) with T+1 to T+7 day lags, creating opacity and settlement risk. Audits are expensive and periodic, not continuous.
- Lag creates arbitrage gaps for sophisticated players.
- Investors cannot verify holdings in real-time.
- Manual processes lead to errors and high operational overhead.
T+7
NAV Lag
$1M+
Annual Audit Cost
02
The Solution: On-Chain State Verification
Protocols like Centrifuge and Maple Finance publish portfolio activity to a public ledger. Every asset and liability is a verifiable on-chain state change.
- Real-time NAV is a Solidity function call, not a PDF report.
- Immutable audit trail reduces fraud and simplifies compliance.
- Enables instant, programmatic actions like margin calls and fee calculations.
24/7
NAV Availability
-90%
Audit Complexity
03
The Problem: The Liquidity Trap
Traditional fund redemptions involve gate periods, notice windows, and manual processing. Investors are locked in, and managers must hold cash buffers, diluting returns.
- Quarterly or annual redemption windows trap capital.
- Fire sales to meet redemptions hurt remaining LPs.
- ~2%+ of AUM held in non-yielding cash for liquidity.
90 Days
Typical Notice
2% AUM
Cash Drag
04
The Solution: Instant Redemption Pools
Protocols like Solv Protocol (for convertible notes) and Ethena (for yield-bearing synthetics) use AMM-based secondary markets or dedicated liquidity pools.
- LP shares are instantly tradable against a curated pool of assets.
- Redemption is a swap, not a formal request.
- Managers can invest 100% of capital for yield, eliminating cash drag.
<1 Min
Redemption Time
0%
Cash Drag
05
The Problem: The Strategy Silo
Traditional fund strategies are monolithic and opaque. Investors cannot customize exposure or compose strategies. Fees are high for bundled, non-modular services.
- "One-size-fits-all" fund vehicle limits investor choice.
- Strategies cannot be used as money legos in DeFi.
- 2-and-20 fee model persists due to operational monopolies.
2 & 20
Standard Fees
0
Composability
06
The Solution: Composable Vaults & Modules
Infrastructure like Balancer Boosted Pools, Morpho Blue, and EigenLayer allows for the creation of modular, programmable strategy vaults.
- Investors can mix-and-match risk/return modules.
- Vault tokens are ERC-20s, usable across DeFi for lending, collateral, or further yield.
- Fee competition drives rates toward performance-only models.
ERC-20
Strategy Token
-75%
Fee Pressure
counter-argument
THE REAL-TIME LIE
Steelman: The Limits of On-Chain Transparency
On-chain NAVs and instant redemptions create a transparency standard that exposes the operational fragility of traditional fund management.
Real-time NAVs are a trap for traditional funds. Publishing a daily net asset value is a legal fiction that allows for back-office settlement; a live on-chain price from an oracle like Chainlink or Pyth reveals intraday volatility that fund managers cannot operationally hedge.
Instant redemptions break the carry trade. Traditional funds use subscription/redemption cycles to manage liquidity for illiquid assets; on-chain funds using ERC-4626 vaults face bank-run risks if underlying assets, like private credit on Centrifuge, cannot be sold instantly.
Transparency creates front-running vectors. A fully visible portfolio on Etherscan or Dune Analytics allows sophisticated actors to arb a fund's predictable rebalancing trades, eroding alpha for all LPs, a problem protocols like CoW Swap's batch auctions mitigate.
Evidence: During the 2022 crypto crash, several DeFi funds with transparent on-chain positions faced debilitating liquidations and redemption pressures that opaque TradFi counterparts avoided through operational delays and gates.
risk-analysis
ARCHITECTURAL FRAGILITY
Risk Analysis: What Could Derail the On-Chain Fund?
On-chain NAVs and instant redemptions are not a panacea; they expose funds to novel, systemic risks that must be engineered around.
01
The Oracle Problem is Now a Fund-Killer
Real-time NAV calculation depends on price feeds for illiquid assets. A stale or manipulated oracle can trigger a bank run or allow arbitrageurs to drain the fund at an incorrect price.\n- Single-point failure from reliance on Chainlink or Pyth for exotic assets.\n- Liquidity mismatch between on-chain oracle updates and off-chain market reality.
~30s
Update Latency
$1M+
Slash Risk
02
MEV Extraction as a Tax on Shareholders
Predictable redemption and subscription cycles are free money for searchers. Sandwich attacks and priority gas auctions directly reduce the NAV for all remaining LPs.\n- Front-running predictable large mints/redemptions via Flashbots.\n- Solution dependency on nascent MEV mitigators like CowSwap, UniswapX, or SUAVE.
10-50 bps
Slippage Tax
>90%
Txn Visibility
03
Cross-Chain Fragmentation Breaks the NAV
A fund holding assets across Ethereum, Solana, and Avalanche cannot have a single, atomic NAV. Bridging delays and bridge hacks create reconciliation hell and redemption arbitrage.\n- Settlement risk using LayerZero, Wormhole, or Axelar for intra-fund transfers.\n- Valuation lag where the on-chain NAV is wrong until all cross-chain states are synced.
2-20 min
Bridge Finality
$2B+
Bridge Hack TVL
04
Regulatory Arbitrage is a Ticking Clock
Operating a global, on-chain fund invites scrutiny from SEC, MiCA, and others. The 'instant redemption' feature may itself be classified as a money transmitter license or banking activity.\n- Jurisdictional attack surface expands with every KYC-less investor.\n- Enforcement action could freeze smart contract upgrades or redemptions entirely.
24-36 mo.
Regulatory Lag
Global
Exposure
05
Liquidity Black Holes During Volatility
Instant redemptions work until they don't. A market crash can trigger a synchronous rush for the exit, draining on-chain liquidity pools and causing the fund to trade at a massive discount to its own NAV.\n- Reflexivity: Redemptions force asset sales, depressing NAV, triggering more redemptions.\n- Dependency on AMMs like Uniswap V3 which can become imbalanced.
Minutes
Liquidity Evaporation
-20%+
Potential Discount
06
The Smart Contract Upgrade Governance Trap
To mitigate these risks, the fund's logic must be upgradeable. This creates a centralization vs. security dilemma. A malicious or coerced upgrade can steal all assets.\n- Multisig reliance creates a legal entity dependency, defeating decentralization.\n- Time-lock delays for upgrades (e.g., 7 days) break the 'instant' redemption promise.
3/5
Typical Multisig
7 days
Security Delay
future-outlook
THE LIQUIDITY FRONTIER
Future Outlook: The 24-Month Horizon
On-chain Net Asset Value (NAV) and instant redemptions will replace opaque, slow fund operations by 2026.
On-chain NAV is the new standard. Funds will publish verifiable, real-time portfolio valuations using price oracles like Chainlink and Pyth, eliminating the quarterly reporting lag that creates arbitrage and trust gaps.
Instant redemptions kill the liquidity mismatch. Protocols like Superstate and Ondo Finance demonstrate that tokenized fund shares on L2s like Base or Arbitrum enable T+0 settlements, bypassing traditional multi-day ACH and wire delays.
The infrastructure is already live. The proliferation of permissioned DeFi pools (e.g., Aave Arc) and compliant tokenization rails (e.g., Securitize) provides the legal and technical substrate for institutional adoption at scale.
Evidence: Ondo Finance's USDY treasury bill token processes redemptions in seconds on-chain, contrasting with the 7-day settlement cycle of a traditional money market fund.
takeaways
THE END OF THE 45-DAY WAIT
Key Takeaways
On-chain Net Asset Values (NAVs) and instant redemptions are dismantling the legacy fund management stack, replacing opaque quarterly reports and slow wires with transparent, programmable, and liquid capital.
01
The Problem: Opaque NAVs and Slow Redemptions
Traditional funds operate on a quarterly reporting cadence with redemption cycles taking 30-90 days. This creates massive information asymmetry and liquidity risk for LPs, locking capital inefficiently.\n- Information Lag: NAVs are stale, preventing accurate secondary market pricing.\n- Capital Lockup: Investors cannot exit or rebalance without severe delays.
90d
Redemption Lag
Quarterly
NAV Updates
02
The Solution: On-Chain NAV Oracles
Protocols like Goldfinch and Maple Finance use on-chain oracles to compute NAVs in real-time from underlying loan repayments and treasury activity. This creates a single source of truth for fund value.\n- Real-Time Transparency: NAV updates with every on-chain transaction.\n- Programmable Compliance: Automated fee calculations and investor waterfalls.
Real-Time
NAV Updates
100%
Audit Trail
03
The Solution: Instant Redemption Pools
Funds can integrate with Aave or Compound-style liquidity pools or use specialized redemption vaults, allowing LPs to exit positions instantly by swapping fund tokens for stablecoins. This decouples liquidity from the fund's underlying asset cycle.\n- 24/7 Liquidity: Exit positions without waiting for fund administrator approval.\n- Price Discovery: Secondary market creates continuous NAV validation.
Instant
Redemptions
~0.3%
Swap Fee
04
The Architectural Shift: From Custodian to Smart Contract
The fund's core operations—capital calls, distributions, fee accruals—are encoded into immutable logic. This removes administrative bottlenecks and counterparty risk tied to traditional custodians like State Street or Northern Trust.\n- Automated Operations: Eliminates manual reconciliation and errors.\n- Reduced Counterparty Risk: Assets are programmatically controlled, not held by a third-party bank.
-70%
Ops Cost
24/7
Settlement
05
The New Risk: Oracle Manipulation and MEV
On-chain NAVs introduce new attack vectors. A manipulated price feed for a fund's illiquid asset could trigger incorrect redemptions. MEV bots can front-run large redemption transactions.\n- Oracle Security: Requires robust designs like Chainlink or Pyth with multiple data sources.\n- MEV Mitigation: Integration with private mempools like Flashbots or fair ordering sequencers.
Critical
Oracle Risk
$M+
MEV Opportunity
06
The Endgame: Composable Fund Strategies
With standardized, liquid on-chain NAV tokens, funds become DeFi primitives. They can be used as collateral in lending markets, integrated into structured products via MakerDAO or Centrifuge, and enable on-chain fund-of-funds.\n- Capital Efficiency: Unlock dormant fund equity for leveraged yield.\n- Strategy Composability: Seamlessly allocate between hedge fund, private credit, and venture strategies.
10x
Capital Efficiency
Composable
Legos
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