Struct Finance, a DeFi platform that enables investors to engage with tailored structured financial products linked to digital assets, today announced the mainnet launch of its innovative Interest Rate Vaults and unique tranching mechanism. Amid the highly volatile crypto industry, users can now invest in products tailored to their risk-return preferences, providing predictable and diversified returns.
Structured financial products are innovative investment instruments that are derived from and linked to underlying on-chain or real-world assets. They utilize a variety of credit/risk, liquidity, and maturity transformation techniques to achieve specific investment objectives. Offering risk-return dynamics that deviate from the underlying assets, these investment products appeal to a broad array of investors. On Struct Finance, different tokens, tokenized derivatives, vaults, pools, and protocols interface in a permissionless manner to craft new products, tailored according to the investor’s risk appetite.
“Traditional financial products aren’t permissionless to use or create. In fact, they are largely inaccessible to most people. We are making these structured financial products accessible and easy to understand for everyone. Our mission at Struct is to bring the power of such products to investors with all risk appetites, from the risk-averse newcomer to the seasoned crypto native. That’s why we are launching Interest Rate Vaults as the first in our line-up of tailored financial products,” said Miguel Depaz, one of the Co-founders of Struct Finance.
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.” Every Interest Rate Product is a single vault split into two portions, or tranches that have different return configurations:
- A Fixed-return Tranche for conservative investors looking for consistent returns
- A Variable-return Tranche for investors with a higher risk appetite seeking superior returns
The yield from the underlying asset flows into the fixed tranche first to ensure predictable returns. The remainder is then allocated to the variable tranche, which gets enhanced exposure to the underlying yield-bearing asset. Compared to the fixed tranche, the variable tranche might accrue more yield, less yield, or no yield. Interest Rate Products allow conservative investors looking for fixed yield to get protection from risk-on investors looking for higher yield.
The unique ‘tranching’ system allows users to select from Fixed or Variable Tranches according to their risk appetite. Tranching essentially enables institutional liquidity and crypto degens to provide liquidity for each other. For secure operations, Struct has set an initial limit per tranche, with a commitment to gradually raising these caps over time.
Struct Finance will also launch the Struct Factory – a capability not offered by any of its competitors – to let investors craft their own structured financial products on-chain according to their unique needs. Notably, these custom products will not only serve the creators but will also be available for others to utilize, fostering a more inclusive and adaptable financial environment. This innovative feature will allow you to design your own Interest Rate Product using assets like USDC, BTC.b, AVAX, or WETH. Struct Finance provides backtesting support to assist you during the product creation process.
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. 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. Once unlocked, fixed rate returns have the power to pave the way for institutional liquidity to safely step into the DeFi without compromising the core tenets of decentralization.
Struct Finance is integrating with GMX and leveraging GMX’s Liquidity Provider Token (GLP) to generate predictable yields in the form of Fixed and Variable Returns for its users. GMX is a pioneering decentralized exchange known for its innovative features and capabilities, including the GLP token. This token represents a significant breakthrough in the industry and is currently a central part of GMX’s trading system.
By utilizing GLP, Struct Finance provides users with a fixed and variable yield while simultaneously offering liquidity to GMX through the GLP token. This integration enables Struct Finance to optimize returns for its users while supporting the liquidity needs of the GMX platform.
Struct Finance is at the forefront of the DeFi revolution, with a vision to transform the design and utility of financial products. It empowers users to design their own financial instruments, harnessing the power of tokenized, yield-bearing positions to unlock a world of diverse investment opportunities. Moreover, its cutting-edge financial products adopt a tranche-based system, smartly distributing yield between different investor classes. This balanced approach guarantees a steady yield for risk-averse investors while also offering the prospect of heightened returns to the more adventurous. Initially available on Avalanche, Struct Finance plans to go multichain in the near future.