How to Create Your First Onchain ETF

We have watched hundreds of baskets get created on the platform. Some attract holders within days. Others sit empty. The difference usually comes down to a few decisions made before the deploy button gets clicked.

This is how we would build a simple thematic basket today, walking through the same interface you will use, and calling out the decisions that actually matter. If you have built a traditional ETF before (or tried to), the contrast will be obvious. If you haven't, that is sort of the point.

What Is an Onchain ETF?

An onchain ETF is a basket token (BSKT) built on the ERC-7621 standard that bundles multiple ERC-20 tokens into a single, tradeable unit. ERC-7621 extends ERC-721 (the NFT standard), meaning each BSKT is a unique, non-fungible token that holds a portfolio of ERC-20 assets inside it. It works similarly to a traditional ETF: investors get diversified exposure through one asset, and the underlying holdings are transparent and verifiable.

The key differences are what make it interesting. BSKTs are fully decentralized, meaning no custodian holds the underlying assets on your behalf. They are permissionless, so anyone can create one or invest in one. And as ERC-7621 tokens, they are composable with the rest of DeFi, so your basket token can be traded on DEXs, used as collateral, or integrated into other protocols.

Before You Start

You need three things:

• An Ethereum wallet. MetaMask, Rabby, or any wallet that supports Ethereum. Make sure it is connected to the right network.
• Some ETH for gas. Deploying a basket is an onchain transaction, so you will need ETH to cover gas fees.
• A clear strategy. Know which tokens you want to include and why. The best baskets have a coherent thesis, not just a random collection of tokens. If you are not sure where to start, the app has six starter templates (Blue Chip, DeFi, AI, and others) that give you a pre-built allocation to work from.

Step 1: Choose Your Assets

Start by deciding which tokens belong in your basket. The best approach is to pick a theme and stick with it. Some examples:

• DeFi blue chips: AAVE, UNI, MKR, LINK
• AI tokens: FET, RNDR, OCEAN, AGIX
• Layer 2 ecosystem: OP, ARB, MATIC, METIS
• Stablecoin yield: A basket of yield-bearing stablecoins

When choosing assets, consider diversification (don't put everything in one sub-sector), liquidity (tokens with thin trading volume will make your basket harder to mint and redeem), and correlation (assets that all move in lockstep don't provide much diversification benefit).

For this walkthrough, we will build a "DeFi Core" basket containing AAVE, UNI, MKR, and LINK. This is a real allocation we have seen work well on the platform, not a hypothetical.

Step 2: Set Your Weights

Next, decide how much of each token should make up your basket. Weights are expressed as percentages and must add up to 100%. There are a few common approaches:

• Equal weight: Give every asset the same allocation. Simple and avoids concentration risk. For four assets, that's 25% each.
• Market-cap weighted: Allocate more to larger assets. This mirrors how most traditional index funds work.
• Conviction weighted: Put more weight on the assets you're most bullish on. Higher potential returns, but more concentrated risk.

For our DeFi Core basket, we will go with a conviction-weighted approach:

• AAVE: 35% - largest lending protocol by TVL, consistent fee revenue
• LINK: 30% - oracle infrastructure, hard to replace
• UNI: 20% - dominant DEX, but governance token value is less clear
• MKR: 15% - proven track record, but smaller position because of its higher token price and concentrated governance

Notice we are not equally weighting everything. The reasoning behind each weight matters more than the exact number. Holders want to see that you have a thesis, not just a coin flip. You can always rebalance later if your view changes.

Step 3: Configure Your Basket

Now give your basket an identity. You'll need to set a few things:

• Name: Something descriptive that tells potential holders what the basket is about. Example: "DeFi Core Index"
• Ticker symbol: A short symbol, like a stock ticker. Example: "DEFI4"
• Description: A brief explanation of your strategy and what the basket aims to achieve.
• Management fee: The annual fee you'll charge holders, expressed as a percentage. This is how you earn revenue as a basket creator.

On management fees: keep them competitive. High fees discourage holders and make your basket less attractive compared to alternatives. Look at what similar products charge and price accordingly. A fee between 1-3% annually is a reasonable starting range for most strategies.

Step 4: Deploy

With everything configured, it's time to go live.

1. Go to bskt.alvara.xyz and connect your wallet.
2. Navigate to the basket creation interface.
3. Enter your assets, weights, name, ticker, description, and fee.
4. Review everything carefully. Once deployed, some parameters can't be changed.
5. Submit the transaction and confirm it in your wallet.
6. Pay the gas fee and wait for the transaction to be confirmed onchain.

Your basket token is now live on Ethereum. It has its own contract address, and anyone can view the composition, mint new units, or redeem existing ones. It will also get an automatic risk rating from Xerberus, grading each token from AAA to D and giving your basket an aggregate score that holders can check before they commit.

Step 5: Share and Grow

A basket with no holders does not earn fees. Once your BSKT is deployed, you need to get it in front of people.

First, verify your identity. Connect your X account and complete Human Passport verification through Gitcoin Passport. Verified managers show up differently in the app, with a checkmark next to their name and a trust tier (Bronze, Silver, or Gold). Holders look for this. Anonymous baskets with no verification attract less capital, and for good reason.

Your basket automatically appears on the manager leaderboard, ranked by performance, holder count, and total value locked. The leaderboard is the primary discovery mechanism on the platform, so how your basket performs in the first few weeks matters.

When someone mints your basket, they deposit the underlying tokens in the proportions you set and receive your BSKT token in return. The more holders you attract, the more management fees accrue to you.

Some practical tips for growing your basket:

• Build in public. Share your reasoning when you make changes. Write about your strategy on X.
• Track performance. The app gives you 13 technical indicators. Use them, and share the results.
• Be consistent. The best fund managers have a clear strategy. Do not chase trends with every rebalance.

Managing Your Basket Over Time

Creating the basket is just the beginning. Good portfolio management is an ongoing process.

You can rebalance your basket's weights as market conditions change. If one asset has outperformed and now represents a larger share of the basket than intended, adjust the weights to bring it back in line. If your thesis on a particular token changes, update the allocation accordingly.

Management fees accrue automatically based on the total value held in your basket. You do not need to manually collect anything. The protocol handles fee accounting onchain.

Monitor your basket's performance regularly. Pay attention to how the underlying assets are doing individually and as a group. A well-managed basket that adapts to changing conditions will attract and retain more holders than one that gets deployed and forgotten.

Mistakes First-Time Creators Make

We have seen enough baskets launched on the platform to spot the patterns. Here is what trips people up:

• Too many tokens. Fifteen assets in a basket is not diversification, it is dilution. Each token should be there for a specific reason. If you cannot explain why it is in the basket in one sentence, cut it.
• Setting fees too high. A 5% management fee on a basket with no track record will not attract holders. Start at 1-2% and increase it later once you have proven the strategy works. Holders can see the fee before they mint.
• Skipping verification. An unverified, anonymous basket next to a Gold-tier verified manager with a linked X account? Holders pick the verified one. Verification takes a few minutes and it is the single biggest trust signal on the platform.
• No thesis. "I like these coins" is not a strategy. The description field exists for a reason. Explain what the basket captures and why these specific weights. Holders read this.
• Ignoring liquidity. Including a token with $50K daily volume in your basket means minting and redeeming will be expensive due to slippage. Check the liquidity of every token before you add it.