Struct Finance, a decentralized finance (DeFi) platform that allows investors to trade tailored structured financial products linked to crypto, has released its interest rate vault and “tranching” mechanism.
The firm will include different tokens, tokenized derivatives, vaults, pools in a permissionless manner to craft new products tailored to the investor’s risk appetite, according to a press release.
“The new interest rate products allow anyone to split and repackage the risk of any yield-bearing DeFi assets in different parts to fit their risk profile through an innovative process called ‘tranching’,” said the press release.
The products are a single vault split into two portions, or tranches that have different returns. Firstly, a fixed-return tranche for conservative investors looking for consistent returns. Secondly, a variable-return for investors with higher risk appetite.
The yield from the underlying asset flows into the fixed tranche to ensure predictable returns, while the remainder is allocated to the variable tranche, which gets enhanced exposure to the underlying yield-bearing asset, said the press release.
“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,” said the press release. “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.”
Struct Finance is currently available on layer-1 protocol Avalanche.
