The capitalization of Decentralized Token Folios (DTF) exceeds $9 million in the first eight months since launch, with an average monthly growth of 30%.
Decentralized finance enters a new phase, and this time the transformation is driven by on-chain indices.
Nearly fifty years after the inception of the first index funds, a new financial revolution is poised to reshape the way investors and institutions build their portfolios. Following the era of mutual funds and ETFs, 2025 marks the rise of Decentralized Token Folios (DTF): on-chain products that bring the logic of automatic diversification into the blockchain world.
According to the report “The Next Index Revolution” published by Reserve Research in November 2025, DTFs represent the next step in the evolution of ETFs, offering real-time transparency, decentralized governance, and 24/7 access.
Summary
Key Points of the Article
- DTFs replicate the ETF model but entirely on the blockchain, with on-chain governance and transparency.
- 68.9% of investors already use traditional ETFs, and 85% declare themselves ready for crypto-indexed products.
- The DTF have surpassed a market cap of 9 million dollars in less than eight months, with an average monthly growth of +30%.
- From 2021 to 2025, the tokens in circulation increased from 500,000 to 18 million, fueling the demand for automatic diversification tools.
- The adoption of DTF shows a growing convergence between the traditional stock market (S&P 500) and the crypto market with 500 assets.
From Index Funds to ETFs: Half a Century of Innovation
In 1976, John “Jack” Bogle, founder of Vanguard, launched the first index fund for retail investors: the Vanguard 500 Index Fund.
It was a modest beginning — just 11 million dollars raised against a target of 150 million — but it marked a pivotal turning point. In the following decades, the total capitalization of ETFs surpassed 10 trillion dollars, democratizing market access and making diversification accessible to everyone.
The next evolution came in 1993 with the SPDR S&P 500 ETF (SPY) by State Street, today the most liquid fund in the world, with $29.3 billion in daily trading volume.
ETFs have combined the diversification of mutual funds with the liquidity of stocks, reducing costs and tax inefficiencies. However, as Reserve points out, they remain centralized instruments tied to the operational limits of Wall Street: limited market hours, low flexibility, and delayed transparency.
Fifty years later, DTFs aim to follow the same trajectory — but in an on-chain version, without intermediaries or closing hours.
The Demand for Diversification in the Digital Market
The cryptocurrency market surpassed $4 trillion in market capitalization in 2025, according to Reserve.
In this context, the need for diversified exposure has rapidly increased: investors no longer want to focus solely on Bitcoin or Ethereum, but on entire sectors such as DeFi, gaming, artificial intelligence, or real-world assets (RWA).
Managing dozens of tokens manually is complex, costly, and risky. This is where the concept of Decentralized Token Folios (DTF) comes in — indexed portfolios created and managed directly on the blockchain.
A study conducted by Reserve in collaboration with Centiment on 1,050 retail investors in the United States clearly highlights this trend:
- 68.9% of respondents already invest in traditional ETFs;
- 85.6% declare themselves ready to invest in crypto ETFs;
- 85.1% would participate in a decentralized DTF index if it were available on the market.
The message is unequivocal: the demand for digital indexed products already exists, and investors are ready to adopt them en masse.
From Bitcoin ETF to DTF: The Natural Evolution
The approval of Bitcoin spot ETFs in the United States marked the first step towards the legitimization of digital finance within the institutional framework.
Soon after, the Ethereum spot ETFs arrived, and in 2025 alone, BlackRock recorded over 100 billion dollars in assets under management (AUM) with its IBIT fund, the fastest in history to reach this milestone.
However, traditional crypto ETFs still present structural limitations:
- offer exposure to individual assets rather than entire sectors;
- operate within strict market hours;
- depend on centralized custodians;
- publish participation data only once a day or weekly.
DTFs address these issues by combining the passive logic of ETFs with the decentralized technology of DeFi. They are programmable, transparent, and composable — three features that make them a generational leap compared to traditional ETFs.
How DTFs Work
A Decentralized Token Folio is a tokenized portfolio that encapsulates dozens or hundreds of digital assets into a single token tradable on the blockchain.
Each DTF can represent a thematic index — for example, “Top 100 DeFi”, “AI & Blockchain Index” or “Real-World Assets Basket” — with automatic rebalancing and real-time transparency.
The main differences compared to ETFs are substantial:
| Feature | Traditional ETF | DTF |
| Trading Hours | Exchange hours | 24/7 on DEX |
| Governance | Centralized, board of directors | Decentralized, on-chain |
| Creation and Redemption | Reserved for authorized participants | Permissionless, open to all |
| Position Transparency | Daily or weekly | Real-time on blockchain |
| Composability | Limited | Total: integration with DeFi, lending, derivatives |
This approach paves the way for a new form of “programmable investing”, where investors can customize exposure and integrate yield functions (yield-bearing tokens, lending, derivatives, hedging) directly within the index.
The Tokenization Boom: From 500,000 to 18 Million Assets
One of the most impressive data points in the report concerns the explosive growth in the number of tokens:
from 500,000 in 2021 to 18 million in 2025, according to analyses by GeckoTerminal.
This expansion is driven by the ease of creating smart contracts, the spread of DeFi, and the tokenization of real-world assets (RWA), such as real estate, commodities, and traditional financial instruments.
With such a vast universe of assets, individual management becomes impractical. DTFs offer a synthesis solution: they allow participation in the entire on-chain growth ecosystem without the need to manually select individual projects.
Growth and Adoption: The Numbers Behind the DTF Revolution
Officially launched in February 2025, the Index DTF have already demonstrated impressive growth.
Within eight months, the total market capitalization increased from $500,000 to over $9 million, with an average monthly growth rate of 30%.
The speed of adoption is reminiscent of the early phase of ETFs in the 1990s: from a niche product to a cornerstone of global portfolios in less than a decade.
“The growth rate of DTFs is a sign of the maturation of the on-chain ecosystem. When an innovation meets a real market need — such as diversification and transparency — adoption follows swiftly“,
emphasizes Reserve.
This expansion is also facilitated by the permissionless nature of DTFs: anyone can create, launch, and govern new indices without going through intermediaries or custodial authorities.
Transparency and Decentralized Governance
One of the most significant innovations of DTF is real-time transparency.
While traditional funds update data weekly, DTFs allow anyone to verify on-chain allocations at any time.
Every movement, every rebalancing, and every change in composition is visible and verifiable through a blockchain explorer.
Additionally, DTFs introduce an open governance model: investors can directly participate in strategic decisions, from rebalancing weights to adding new tokens, up to managing the yields generated by integrated DeFi protocols.
This paradigm replaces the traditional role of fund boards with a digital financial democracy, more agile and less opaque.
The Convergence Between S&P 500 and Crypto Market
A crucial section of the Reserve report concerns the convergence between the market drivers of the S&P 500 and the top 500 digital assets.
In the past decade, the crypto market was dominated by Bitcoin, with fewer than 10 independent factors influencing prices.
Today, however, the number of independent drivers exceeds 60, a figure comparable to that of the US stock market.
This means that the crypto market is achieving a structural diversification similar to that of traditional markets — a condition that fully justifies the emergence of sophisticated indexed instruments like DTFs.
The analogy is clear: just as the S&P 500 represents the health of the American economy, DTFs can become the “on-chain stock exchange” of the new digital economy.
Impact Analysis: Institutional, Retail, and DeFi
The entry of institutional investors into the on-chain market is one of the factors that could multiply the growth of DTF in the coming years.
Venture capital funds, asset managers, and DAOs (decentralized autonomous organizations) are already experimenting with these tools to replicate thematic exposures with greater efficiency and lower custody costs.
On the retail front, the ability to purchase a single DTF to gain exposure to dozens of assets represents a radical simplification.
The average user can build a diversified portfolio in just a few clicks, without requiring in-depth technical knowledge.
Finally, DeFi finds a strategic ally in DTFs: these indices can be used as collateral for loans, integrated into liquidity pools, or employed in automated yield strategies.
Essentially, DTFs transform passive investment into an active component of the on-chain economy.
Prospects and Risks
Like any financial innovation, DTFs also carry risks.
The intrinsic volatility of crypto markets, the complexity of governance mechanisms, and the dependence on DeFi protocols can introduce operational or technical vulnerabilities.
However, on-chain transparency and the programmability of smart contracts allow for more precise and responsive control compared to traditional funds.
According to Reserve’s projections, if the adoption rate remains stable at 30% monthly, the aggregate capitalization of DTF could exceed $100 million by the end of 2026, becoming a fully-fledged on-chain asset class.
On-Chain Finance Enters the Era of Indices
Decentralized Token Folios represent much more than a technological novelty. They are the meeting point between traditional and decentralized finance, between ETFs and DeFi, between Wall Street and Web3.
Their initial success confirms that on-chain diversification is no longer an experiment, but an inevitable evolution.
Just as index funds in 1976 made investing accessible to millions of people, DTFs promise to democratize the finance of the future, making every investor an active participant in the global digital ecosystem.
The market has already sent the signal: the era of on-chain indices has just begun — and its potential, this time, is measured not only in dollars, but in code, transparency, and participation.
