Introducing Perpetual Yield Tranches — Guarded Launch Phase #1

No legend says return management. It’s always risk management. If risk is managed well, returns would be ample. And what needs to be seen is risk adjusted returns.

Today, Idle Finance unveils the first step of a guarded launch for the brand new Perpetual Yield Tranches, adding a new risk- and yield- tranching primitive to its suite of DeFi products.

In the financial world, a tranche represents a product split that carries specific features like risk, yields, duration. They are often arranged together to create pools of diversified products or a basket of investments with similar characteristics.

Perpetual Yield Tranches are available in beta for the next 2 weeks at beta.idle.finance

Tranched yields & risks

Tranches allow users to enjoy optimized DeFi yields with built-in protection on deposits by holding the Senior class, and leveraged yield exposure with Junior one.

The novelty behind Idle Perpetual Yield Tranches is the epoch-free model, which brings limitless product iterations and interactions: liquidity providers can now deposit and withdraw anytime, with no maturity date or locking period.

A Senior Tranche offers the safest way to access DeFi yields, thanks to its built-in protection feature. With this instrument, LPs can enjoy and participate in complex and exotic products, reducing the exposure to tail risks. Senior Tranches intrinsically have a first lien on the underlying assets — they’re first in line to be repaid in case of default (hack, loss of funds).

A Junior Tranche receives an amplified yield by carrying a higher grade of risk, as Junior holders have a second lien or no lien at all in case of fund losses. This class of tranches is designed to receive a higher share of yield compared to the Senior class, which will proportionally compensate their Junior counterparts for taking such risks.

Using a guarded launch approach, we are launching a first $DAI tranches pool that tokenizes the risks & yields of idleDAI Best-Yield pool.

The yield generated by the combined TVL of Junior and Senior tranches will be split with the following distribution:

  • 80% to Junior Tranche
  • 20% to Senior Tranche

This product release comes with a series of benefits for tranche-holders:

  • Cheaper and optimized gas cost for deposit and redeem operations
  • Governance tokens (COMP, stkAAVE) automatically harvested to boost yields
  • Staking opportunity to receive $IDLE liquidity mining on top (generated via Best-Yield)

Guarded Launch approach

The pool initially starts with a $500k deposit cap for the TVL (sum of Junior and Senior assets under management), and after two weeks the TVL capacity will be increased to $5m (only if the previous deposit cap is reached, and no bugs get discovered during the initial phase).

For this initial guarded launch period, part of the admin rights (stop deposits, rebalance, and redeem operations) will be controlled by Idle Labs with the help of Idle Dev League — once we complete the process, these admin rights will be assigned and controlled by Idle DAO and its tokenholders.

The codebase has been already audited with ConsenSys Diligence, and an additional review of the last changes will undergo in the next couple of months.

By depositing in Senior and Junior products, LPs receive AA_idleDAIYield and BB_idleDAIYield tokens. These are ERC-20 tokens built with fungibility in mind, enabling the Idle protocol to unlock many composable use cases.

Looking at the future, tranches tokens could be used as collateral for DeFi money markets, traded on DEXs with stablecoin pairs to generate additional access points and increment yields for LPs. Tranches yields could be traded in bond coupons, interest rate swaps or other financial instruments, and incorporated into indexes and baskets of tokens with just a few lines of code.

Going beyond tranching DeFi Yields & Risks

This is just the first of a series of announcements that will include a cascading release for other assets like USDC and USDT.

Starting from our yield-bearing assets, now Idle has room to explore the implementation of other assets and protocols.

Looking ahead, there is a multi-billion $ sea of protocols that built vault strategies, derivative products on staking, AMM pools combining emerging assets, and lending features for leverage investments. This new set of products will allow Idle to sail and surf the bountiful waters of DeFi yields.

This new financial product will allow our integration partners to add a brand new stack of products for onboarding additional TVL via a tailored risk-adjusted product offering. We have been talking with many of our partners, and we’ve been proud to witness a palpable thrill in them. Who will be the swiftest at integrating this brand new product?

The partners that embrace this new paradigm — that seek to build long-term value for their users — will help deliver long-term returns and build a brighter and more prosperous future for the DeFi world.

Go check the Perpetual Yield Tranches, available in beta for the next 2 weeks at beta.idle.finance

This is a call to protocol founders, DAOs, and DeFi builders! We are looking forward to exploring the next batch of integrations, and our Idle Leagues would love to hear from you — join us in Discord or fill up this form! 🤝

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