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Struct Finance, an innovative decentralized finance (DeFi) platform facilitating the trading of structured financial instruments, has unveiled its flagship product. Struct has released a customizable interest rate vault that features a groundbreaking “tranching” mechanism.
According to an official statement, Struct Finance will incorporate various tokens, tokenized derivatives, vaults, and pools to create customized interest rate products that align with users’ risk preference. The newly launched interest rate products will empower individuals to divide and repackage the risk associated with any yield-bearing DeFi assets into distinct segments. This is undertaken in a process known as tranching. These products consist of a single vault that is split into two tranches, each offering different returns.
Choose Your Interest
The first tranche Struct has pioneered caters to conservative investors seeking consistent fixed returns, while the second tranche suits those with a higher risk appetite and provides variable returns. The yield generated by the underlying asset is directed to the fixed tranche, ensuring predictable returns. The remaining yield is allocated to the variable tranche, providing it with amplified exposure to the yield-bearing asset.
“The lack of fixed-yield returns in crypto has been a deterrent to entry of both larger institutions and smaller players with more conservative risk appetites,” stated Struct. “Considering the Struct Factory allows permissionless tranching of liquidity pools, fixed rate returns may become commonplace enough to tame the wild and volatile returns of web3.”
More Structured Products in the Works
The tranching mechanism developed by Struct is merely the first in a series of planned products, designed to provide DeFi users with diversified investment opportunities. At the core of these products is the series of interest rate vaults that will power the Struct Finance ecosystem as it develops.
Built on top of GMX (GLP), Struct’s vaults tranche an underlying yield-bearing asset into two, creating a product that generates fixed yield, and another with enhanced exposure to the performance of the underlying asset. Currently live on Avalanche’s layer1 network, Struct’s future plans include the release of a native token and the development of additional structured financial products.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.