2023-6-22 00:53 |
Leading DeFi platform Struct Finance has announced the launch of the innovative Interest Rate Vaults and unique tranching mechanism on its mainnet. These innovative features aim to provide investors with tailored structured financial products linked to digital assets, offering predictable and diversified returns amidst the highly volatile crypto industry.
Investment opportunities have evolved with the emergence of structured financial products. These innovative instruments are intricately tied to on-chain or real-world assets and utilize various strategies, including credit/risk assessment, liquidity management, and maturity transformation, to fulfil specific investment objectives.
Unlike traditional investments, structured financial products offer unique dynamics that diverge from the performance of underlying assets, making them appealing to a diverse group of investors. At the forefront of this financial revolution is Struct Finance, a platform that enables seamless interaction between various tokens, tokenized derivatives, vaults, pools, and protocols, allowing investors to tailor their investment portfolios based on their risk preferences.
Miguel Depaz, one of the Co-founders of Struct Finance, emphasized the platform’s commitment to making structured financial products accessible and understandable for all individuals. Struct Finance aims to empower investors with different risk appetites, ranging from risk-averse newcomers to seasoned crypto enthusiasts. The launch of Interest Rate Vaults marks the first step in offering tailored financial products that cater to diverse investors.
Struct Finance’s Interest Rate Products and Tranching MechanismThe new Interest Rate Products introduced by Struct Finance allow users to split and repackage the risk associated with yield-bearing DeFi assets into different portions, known as tranches. Each Interest Rate Product comprises two tranches: a Fixed-return Tranche and a Variable-return Tranche. Conservative investors seeking consistent returns can opt for the Fixed-return Tranche, while those with a higher risk appetite can choose the Variable-return Tranche for potentially superior returns. The yield generated by the underlying asset is first allocated to the fixed tranche, ensuring predictable returns.
The remaining yield is then allocated to the variable tranche, which benefits from enhanced exposure to the underlying yield-bearing asset. This unique tranching system allows conservative investors to secure fixed yields while accommodating risk-seeking investors pursuing higher yields.
The tranching mechanism, available on Struct Finance, allows users to select either Fixed or Variable Tranches based on their risk appetite. This system enables institutional liquidity providers and crypto enthusiasts to provide liquidity for one another. Struct has initially set limits per tranche to ensure secure operations but plans to increase these caps over time gradually.
Additionally, Struct Finance is introducing the Struct Factory, a feature that sets it apart from competitors. The Struct Factory empowers investors to design their own structured financial products on-chain according to their specific needs. These customized products benefit their creators and are available for others to utilize, fostering inclusivity and adaptability within the financial ecosystem. Users can leverage assets like USDC, BTC.b, AVAX, or WETH to design their Interest Rate Products, with the support of backtesting provided by Struct Finance.
The absence of fixed-yield returns in the crypto market has deterred both larger institutions and risk-averse players from entering the space. However, the permissionless tranching of liquidity pools through the Struct Factory could make fixed-rate returns more common, potentially stabilizing the volatile returns witnessed in the Web3 ecosystem. Fixed-rate returns have the potential to attract institutional liquidity while preserving the core principles of decentralization.
Struct Finance has integrated with GMX and is leveraging GMX’s Liquidity Provider Token (GLP) to generate predictable yields in the form of Fixed and Variable Returns for its users. GMX, a pioneering decentralized exchange, offers innovative features, including the GLP token. This integration enables Struct Finance to optimize returns for its users while providing liquidity to the GMX platform through the GLP token.
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