🔧 How Does It Work?

Fume is a web application that operates on top of its proprietary on-chain protocol, which is built on EVM-compatible smart contracts. The platform currently supports Ethereum, Arbitrum One, Base , and Binance Smart Chain, with Arbitrum being the preferred choice due to its superior efficiency in terms of both cost and execution speed.

Investor Interaction

Investors can participate in an on-chain fund either by investing with stablecoins or through traditional fiat currencies. The platform provides a seamless way for investors to interact with on-chain funds, removing many of the barriers typically associated with blockchain-based investments.

Fund Manager Tools

For fund managers, Fume offers full flexibility in managing assets. The manager can connect any preferred custody solution to the on-chain fund to receive subscriptions and manage the underlying assets. This ensures that the funds are stored and managed securely, without Fume ever touching the money itself.

Automated Protocol Functions

The smart contracts handle:

• Tokenized Fund Units: The protocol issues tokenized units of the fund, representing each investor's ownership.
• NAV Calculation: The smart contracts calculate the Net Asset Value of the fund. Every calculation is recorded on-chain.
• Position Adjustment: After each NAV calculation, the protocol adjusts investor positions to keep things fair. This can happen through equalization (all positions rebalanced in one step) or series-based tracking (each investment cohort managed independently). Either way, investors who entered at different times and prices are treated correctly.
• Fee Computation: The protocol computes and extracts performance and management fees automatically.

Because these run through smart contracts, there are no manual errors or extra fees.

Accounting methods

Fume supports two ways of handling the complexities that arise when multiple investors enter a fund at different times and prices:

• Equalization-Based Accounting: The default. Each time the NAV is calculated, the protocol adjusts all investor positions so that everyone holds the correct value. Investors who joined at a higher price are not unfairly diluted by those who joined at a lower price, and vice versa. High-water marks and performance fees are tracked per investor, even though all units are part of the same pool.
• Series-Based Accounting: An alternative for funds that need to track each investor group separately. Each time new investors subscribe, they go into their own "series," a distinct cohort with its own entry price, high-water mark, and fee calculations. When the terms of different series converge (e.g., after a performance fee crystallization), they can be merged into one. This makes it straightforward for fund managers and auditors to trace each cohort's history.

Both methods use the ERC-6909 token standard, which manages multiple unit types within a single smart contract.

Learn more about the components: