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 platform enables users to craft new products tailored to their risk appetite, including different tokens, tokenized derivatives, vaults, and pools in a permissionless manner.
The new interest rate products allow investors 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”. The products are a single vault split into two portions, or tranches, with different returns. The fixed-return tranche is designed for conservative investors looking for consistent returns, while the variable-return tranche is 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.
“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.