From index mutual funds in the 1970s to ETFs in the 1990s, traditional finance has spent decades refining diversified baskets. Each evolution lowered costs, tightened tracking error, and expanded market access. But both models were ultimately built for — and constrained by — legacy market rails.

Today, index funds are a $20 trillion‑plus market, broadening access to diversified investing and fueling decades of growth in passive asset management. Yet every share still moves through a gauntlet of custodians, brokers, and clearing houses, embroiling investors in a web of settlement lags, hidden fees, and opaque counterparty risk.

ETF “plumbing” map: every ETF creation, redemption (left column) & trade (right column) flows through a dense stack of intermediaries before positions are finally settled. DTFs collapse these functions into open, auditable, & trustless smart contracts, replacing layers of off‑chain risk and reconciliation with transparent, atomic settlement.

Enter Decentralized Token Folios (DTFs). DTFs take the simplicity and accessibility of index investing to new levels with modern blockchain tech: placing the basket directly in smart contracts, enabling permissionless 24/7 trading, and replacing Wall Street middle‑men with decentralized onchain governance.

Where mutual funds relied on end‑of‑day NAVs and ETFs added market‑hour liquidity, DTFs deliver real‑time transparency, instant mint‑and‑redeem, and programmable governance and fee flows that anyone can verify on the blockchain. Below, we unpack how DTFs stack up against their TradFi predecessors and how they change what’s possible for diversified investing.

Core advantages of DTFs

DTFs offer the familiar benefits of ETF investing, but with a new degree of openness, accessibility, and innovation through their blockchain-native design. This lets DTFs surpass older index vehicles in three key areas: investibility, accessibility, and flexibility.

Side‑by‑side scorecard for index mutual funds, ETFs, and DTFs on three key dimensions: investibility, accessibility, and flexibility. DTFs match or surpass traditional baskets on every metric, while adding permissionless operation, onchain transparency, and decentralized governance.

Let’s take a closer look at DTFs’ advantages on each dimension:

1. Investibility

• Easy diversification & strategic exposure: Frombroad-market exposure to targeted narratives, all in a single click
• Fair pricing without middle-men: Dutch auctions & solver networks (CoW Swap) provide deep liquidity without centralized intermediaries
• Fully on‑chain mechanics: Transparent execution & less tracking error

2. Accessibility

• No gatekeepers: No minimum investment, no privileged entities
• Instant mint & redeem: No settlement windows or NAV timing games
• Direct DeFi integration: Tap into deep liquidity for tight spreads and minimal slippage
• Live holdings reporting: Trace any asset or rebalance event in real time
• 24/7 trading: Trade any time on decentralized exchanges

3. Flexibility

• Composability: DTFs can include any token, including AMM LP tokens, tokenized real-world assets, or lending positions
• Permissionless creation: Anyone can launch a new DTF — no custodians or authorized participants required
• Customizable governance: Choose Reserve Rights (RSR), another token, or even NFT‑based voting to steer fees, weights, and rebalancing rules

Why DTFs matter for markets today

DTFs aren’t just a technical upgrade — they reshape how access, innovation, and value creation work in a fully onchain environment. Today, that shift is already changing what’s possible:

1. Less friction, more transparency — Real‑time data and smart‑contract enforcement remove guesswork and settlement risk.
2. Faster access to emerging themes — With permissionless deployment, DTFs can be spun up instantly to track fast-moving narratives for timely, targeted exposure.
3. Global 24/7 liquidity — No need to wait for New York’s opening bell; liquidity follows demand around the clock.
4. Programmable value flows — Creators can route fees to RSR burns, delegate treasury growth, or share revenue directly with holders.
5. Community‑driven innovation — Permissionless launch pads mean the next great thematic index can come from a DAO, not a Wall Street giant.

Transform murky back-office plumbing into one-click clarity with DTFs. Index investing but instant, permissionless, & programmable.

Join the onchain index revolution

Diversified investing shouldn’t be gated by market hours, minimum balances, or opaque intermediaries. DTFs bring index investing onto open blockchain rails — adding speed, flexibility, and decentralized governance to the playbook. By unlocking instant, permissionless access, DTFs make markets faster, fairer, and open to all.

Ready to join the onchain index revolution?

• Explore live DTFs on app.reserve.org
• Watch our video explainer, What is a DTF?
• Deep dive into the advantages of DTFs at reserve.org/dtf/

Head to app.reserve.org to mint, trade, or govern your first DTF today.