Welcome to the second medium article regarding the Bronwyn Protocol. We highly recommend reading the first article which gives an overview of the protocol, it can be found here.
The Bronwyn Protocol results in, what we have termed, a Stable Growth Fund. In short, the SGF is like the standard, boomer mutual fund but with some upgrades. But before we explain these upgrades, let’s take a look at what a traditional boomer mutual fund looks like. (TLDR at the bottom)
- Basics of the Traditional Mutual Fund
According to Fidelity, “Mutual funds are investment strategies that allow you to pool your money together with other investors to purchase a collection of stocks, bonds, or other securities that might be difficult to recreate on your own.” Such funds may also be referred to as “pooled investment vehicles”. The pooled money is then used to buy a portfolio of different stocks and/or bonds.
A benefit of partaking in a mutual fund is the pooled assets. This provides the opportunity for higher growth for an individual who is unable to contribute large amounts of money.
However, there are several glaring issues in these boomer mutual funds. The main issue being the exorbitant fees the investors are charged for things like compliance, auditing, administration, custody, management and overseeing transactions. We believe this is wildly inefficient, as many of the fees just end up lining the pockets of the people who are in control of your money.
Smart contracts will allow us to bypass completely unnecessary fees and allow you to have complete control over your own invested assets through tokenization. Though the fund is pooled, everyone is their own investment manager for their share of the fund. You decide when to enter/exit the the fund.
2. Bronwyn’s Stable Growth Fund > Boomer Mutual Fund
Due to legal reasons, we are apprehensive to call what results from the Bronwyn Protocol a “mutual fund” or “pooled investment vehicle”. Primarily, we want to refer to it as an economic experiment, as we do not, legally, guarantee any value. But for the sake of brevity, we have decided to refer to the resultant product as a Stable Growth Fund (henceforth, SGF).
We have re-imagined and improved the way a Mutual Fund can operate. By applying a mathematical formula and tokenizing shares in the SGF for people to buy, we are able to circumvent wasteful fees and “fund managers”. And the fees that are necessary get redistributed to the token holders. (As we know, not only does the token value increase along with the underlying assets, the token value increase with every transaction a user makes.)
Another important difference between the boomer fund and SGF is that there is no singular “fund manager”. The basket of assets is already decided by the smart contract and investment returns are automatically updated in the users wallet via the BRON token as it appreciates over time.
2.1 Entering the SGF
In this graphic, the BRON token is symbolized by the “SGT” or Stable Growth Token. As individuals buy BRON tokens from the contract, the BRON tokens are backed by the contributed assets in the portfolio. Additionally, the tokens automatically disperse gains in the form of token price appreciation. With the basket of assets being held by the contract, we are able to bypass several unnecessary intermediaries.
2.2 Withdrawing from the SGF
With the standard mutual fund, investors must jump through several hoops, wait several days (sometimes weeks), and pay large fees to realize their investment and returns. This is another area the SGF has improved. All Stable Growth Fund investors are allowed to realize their investment, at any time they please and near instantaneously.
You may be thinking, “But wait, if investors can withdraw at any time, doesn’t that mean the fund shrinks and my tokens decrease in value?” Not at all. Since we force users to permanently burn their tokens in order to realize their investment, the total token supply permanently decreases in proportion to the funds withdrawn. Furthermore, if most investors decided to withdraw their investment all at once, there would still be liquidity in the contract from the Capital Rebalance Treasury (which buys first 35% of total supply). The burn fee will always be slightly higher than the mint fee, so as to ensure the the Stable Growth Token (BRON) will appreciate in value, regardless of the transactions taking place.
3. TLDR
- Boomer mutual funds have a lot issues such as high fees and almost zero transparency
- Buying a BRON token means that you own a share of the fund and automatically earn any fees generated by contract interactions of other users
- Selling (aka burning) your tokens is the only way to exit the fund and realize your investment
