What Are On-Chain Funds? Hedge Funds of the Future
An on-chain fund is a pooled investment vehicle that runs on public blockchain infrastructure instead of inside a private legal and administrative stack. A trader — the operator — sets the strategy and executes the trades. Contributors deposit capital and share in the performance. The difference from a traditional hedge fund is not the idea; it is the plumbing. Every position, every rule, and every transaction is enforced by smart contracts and visible on-chain, in real time, to everyone in the fund.
What is an on-chain fund?
Strip a hedge fund down to its mechanics and you get three things: capital from several people pooled together, a manager with discretion over how it is deployed, and compensation tied to how that manager performs. On-chain funds keep all three. What they discard is the machinery that historically sat around them — the fund entity, the administrator, the custodian, the placement agent, the quarterly letter.
In place of that machinery is a smart contract. Contributor capital sits in a treasury governed by the fund's rules, and those rules are code rather than a document describing what someone intends to do. The operator can trade within the fund's mandate. They cannot walk off with the balance, because custody was never theirs to begin with.
This is why the structure is described as non-custodial. Rayze does not hold your capital, and neither does the fund operator. You retain ownership of your share and access to liquidity throughout.
On-chain funds vs. traditional hedge funds
The comparison below is structural, not a claim about returns. A well-run traditional fund can outperform a poorly-run on-chain one, and vice versa. What changes is who can start a fund, how quickly, and how much you can see once you are in it.
| Dimension | Traditional hedge fund | On-chain fund |
|---|---|---|
| Setup | Fund entity, administrator, legal counsel, placement agent — months and significant cost | Launch a fund in minutes; no entity, administrator, or placement agent required |
| Custody | Assets held by a custodian on the fund's behalf | Non-custodial — assets held in smart-contract treasuries; contributors keep ownership |
| Transparency | Periodic reporting; positions typically disclosed after the fact, if at all | Every position, rule, and transaction visible on-chain in real time |
| Liquidity | Redemption windows, lock-ups, and notice periods | Exit whenever you choose; paid out in USDC |
| Track record | Self-reported performance, selectively disclosed | Permanent on-chain record that cannot be edited or erased |
| Access | Accredited-investor gating and high minimums are common | Join through an invite link; sign up with an email and fund from Coinbase |
How on-chain funds work in practice
An operator launches a fund and defines its mandate. Contributors join — on Rayze, typically through an invite link — and deposit capital into the fund's treasury. From that point the operator trades the pooled capital according to the mandate, and contributors watch it happen rather than waiting for a statement.
Risk is contained structurally through vault partitioning: a fund can run isolated execution sleeves, each with its own trading policy, so one strategy's drawdown does not automatically become every strategy's drawdown. Exits are handled in USDC and are available whenever you want them, rather than being gated to a quarterly redemption window.
Operator compensation comes from two places: a deposit fee charged on contributor capital as it enters, and performance carry on contributor profits. The incentive is deliberately one-directional — operators earn materially when contributors earn.
What on-chain funds trade
The venues determine what a fund can actually do, and on-chain funds are no longer restricted to spot crypto. Rayze funds have direct access to Hyperliquid, Polymarket, and Aave, plus every token on-chain.
In practice that covers 50+ assets spanning crypto, equities, and commodities, with perpetual futures available at up to 40x leverage. Hyperliquid perpetuals — perps — are a core part of that surface: they let an operator take leveraged directional exposure without an expiry date, which is why they dominate active crypto trading strategies.
For a contributor, the appeal is access to that surface without operating it yourself. You are not managing margin, monitoring funding rates, or sizing perp positions at 3am. The operator does that, and you hold a share of the outcome.
Risks and limitations
On-chain funds remove specific problems and introduce others. An honest assessment of both is the only useful kind.
Leverage magnifies losses exactly as it magnifies gains. A fund trading perpetuals at high leverage can lose capital very quickly, and transparency does not prevent that — it only means you watch it happen in real time. Operator discretion remains a genuine risk: a verified track record describes what someone has done, not what they will do next, and past performance does not predict future results.
Smart contracts carry their own risk surface. Code that holds capital can contain bugs, and non-custodial design means there is no intermediary who will reverse a loss on your behalf. The transparency and self-custody that make on-chain funds attractive are the same properties that make mistakes final.
Rayze is also a beta-stage product, and the fee structure described here reflects beta terms rather than permanent ones.
Frequently asked questions
- Are on-chain funds the same as hedge funds?
- They serve the same purpose — pooled capital managed by someone with discretion, compensated on performance — but the structure differs. An on-chain fund has no fund entity, administrator, or custodian. Capital sits in a smart-contract treasury, the rules are enforced in code rather than described in a document, and positions are visible on-chain in real time instead of being reported periodically.
- Is an on-chain fund the same as copy trading?
- No. Copy trading mirrors a trader's positions into your own account, so you absorb your own execution, slippage, and position sizing — two people copying the same trader can get different results. In an on-chain fund the operator places one trade for the whole fund and you hold a share of it, so there is a single execution and returns are divided proportionally.
- Who controls the money in an on-chain fund?
- You do. Rayze is fully non-custodial, meaning neither the platform nor the fund operator holds your capital. Assets are held in smart-contract treasuries governed by the fund's rules, and you keep ownership and access to liquidity at all times.
- Can I withdraw from an on-chain fund at any time?
- Yes. Exits are paid in USDC and are not gated behind redemption windows, lock-ups, or notice periods the way traditional fund redemptions typically are.
- What can an on-chain fund trade?
- Rayze funds have direct access to Hyperliquid, Polymarket, and Aave, plus every token on-chain — 50+ assets across crypto, equities, and commodities, including perpetual futures at up to 40x leverage.
- What does it cost to run or join an on-chain fund on Rayze?
- During beta there is no cost to create or maintain a fund. Fund activity carries a 0.25% transaction fee on trading volume, and a 1% protocol fee applies only when exiting a fund. Operators separately earn a deposit fee on incoming contributor capital plus performance carry on contributor profits.
Back a fund, or run your own
Invest alongside traders with a verified on-chain record, or launch a fund and raise contributor capital.
Rayze is a non-custodial technology provider — not a broker-dealer, investment adviser, or financial intermediary. Nothing on this page is financial, investment, tax, or legal advice. All investing involves risk, including loss of principal, and leverage increases that risk. Past performance does not predict future results. Users are solely responsible for their own investment decisions.
Social trading, copy trading, and on-chain funds
On-chain funds are frequently grouped with social trading and copy trading, and the distinction is worth being precise about, because the mechanics differ in a way that matters to your outcome.
Copy trading mirrors another account's trades into your own account. When the trader you follow opens a position, an equivalent position opens for you. That sounds equivalent to investing alongside them, but you are the one absorbing the execution: your fill, your slippage, your position sizing relative to your account, your latency. Two people copying the same trader can end up with meaningfully different results.
An on-chain fund works differently. The operator places one trade on behalf of the entire fund, and you hold a share of that fund. There is one execution, one fill, one cost basis, and the returns are divided proportionally. You are not reproducing someone's trade — you are invested in the same position they are.
The social layer sits on top of this rather than replacing it. You can follow any trader, watch positions as they are taken, and compare operators on a leaderboard ranked by verified on-chain performance. Because the record is on-chain, a track record is something a trader accumulates rather than something they assert.