Recap of AMA with Struct Finance on Avalanche India
On the 3rd of August 2023 @ 8:00 PM IST, An AMA session was held on Avalanche India’s official Telegram group with special guests from Struct Finance. Below we present to you an excerpt from AMA with questions and answers. It was wonderful and very informative, Enjoy reading :)
Round 1: Introduction of the guests and the project
Q1- Please introduce briefly yourself, your team, and some key features of Structured Finance
Hi, my name is Ersin, and I am the cofounder alongside Louis and Miguel, my other two co-founders. Struct Finance is a DeFi platform that specializes in structured finance, offering a wide range of structured financial products tailored to the needs of both retail and institutional investors. Our tranching mechanism enables diversified investment opportunities through interest rate vaults, providing users with access to various markets.
Our team, spanning across 5 continents, is a diverse group of 8 individuals each specialized in their respective field. We bring experience from blockchain, venture building, business management, software development, architecture, and more. This diversity allows us to pool insights from various industries, applying them creatively to our project.
Our paths crossed at a VC accelerator called Antler, where we decided to embark on this journey together. We participated in two hackathons — Chainlink and Wintermute — where we ranked 3rd and 4th, respectively. More importantly, these experiences introduced us to our future team members from various countries.
Months later, we successfully raised $3.9 million from 24 investors and took part in the Avalanche Summit in Barcelona. We then set up ‘hackerhouses’ in different parts of the world, where our team, who had left their homes and countries to join us, could focus on building Struct Finance.
Along our journey, we’ve built a strong network, streamlined our processes, and solidified our foundations. We’ve learned a lot, but most importantly, we’ve had fun along the way. Our team is very close-knit; we share knowledge and learn from each other. After undergoing multiple security audits, we finally launched on Avalanche six weeks ago and have since achieved over a million dollars in TVL.
About Struct: Struct Finance is a DeFi platform that specializes in structured finance, offering a wide range of structured financial products tailored to the needs of both retail and institutional investors. Our tranching mechanism enables diversified investment opportunities through interest rate vaults, providing users with access to various markets.
Recognizing the demand for customizable investment tools in DeFi, we are launching with a suite of predefined products. Our vision is to foster effective and efficient markets by distributing risk, enhancing capital efficiency, expanding investment options, and bridging the gap between the digital and real-world economies. With the ability to create structured financial products from both on-chain and off-chain assets, we align with the future direction of Avalanche and strive to bring new possibilities to the DeFi landscape.
Q2 — Lately, Struct Finance launched BTCB-USDC Vault. Could you highlight how it works and its benefits to users in terms of potential returns and risk management compared to other investment options?
BTCB-USDC Vaults by Struct Finance offer an innovative investment opportunity with predictable returns on Bitcoin. Leveraging Avalanche’s BTC.B and USDC, these vaults aim to generate higher yields compared to traditional Bitcoin investments. The dual-tranche system of BTCB-USDC Vaults ensures a balanced distribution of yield. Initially, the senior tranche (BTC.B) receives the yield, providing a steady and predictable return. Any additional yield beyond the commitments for the senior tranche flows into the junior tranche (USDC), offering the potential for higher returns.
The senior tranche is hedged by BTC.B being converted into GMX’s GLP token, which has a lower delta. This sets up a short Bitcoin position against GLP, contributing to risk mitigation. Meanwhile, the USDC in the variable tranche is converted into GLP, resulting in a positive delta, offering potential upside during favorable market conditions.
Yield generation within the BTCB-USDC Vaults is driven by the GLP token, which accrues real yield from sources such as swap fees, perpetual interest, and liquidations. Stakers of the GLP token benefit from a substantial 70% share of these fees, making it a sustainable and rewarding investment.
The dual-tranche structure accommodates different risk preferences. The senior tranche guarantees the initial capital and offers a steady return, making it suitable for conservative investors. On the other hand, the junior tranche carries higher market risk but has the potential to capture substantial profits during favorable market conditions.
Some of our key features are:
- Flexible 1-month, 2-month, and 3-month terms
- Senior tranche (BTC.B) for conservative investors
- Junior tranche (USDC) for higher risk tolerance
- GLP token for real yield generation
- Tailored risk and return profiles
Q3 — Can you share the future roadmap of Struct Finance, also what is the target market Struct Finance is focused upon?
At Struct Finance, we have exciting plans for the future as we continue to expand and enhance our product offerings. We are also considerate which products we release that are taking less market risk. While we are considering the introduction of an AVAX trading pair product, it is important to note that this is still under evaluation and requires thorough backtesting. We are exploring various possibilities of how AVAX can play a role within our platform.
In terms of partnerships, we are actively exploring integrations with other Avalanche-based protocols. Our next collaboration is with Trader Joe’s Autopools, which offer managed concentrated liquidity and will give us more design space. This integration could bring additional value and opportunities to our users and we will be the first ones to integrate. This will happen within the next few weeks.
On the target market question, it includes both institutional and retail users within the DeFi space. One of our primary objectives is to democratize access to financial instruments that were traditionally limited to privileged parties, such as institutions and accredited individuals. By providing structured financial products on the blockchain, we aim to empower a wide range of users to participate in DeFi and benefit from the potential yields and risk-adjusted returns.
Our approach to driving adoption globally is twofold. Firstly, we are focused on education and awareness-building. By translating our litepaper into multiple languages and actively engaging in AMA sessions and community interactions, we aim to educate users from various countries and communities about the benefits and potential of structured financial products.
Secondly, we prioritize the creation of value-added products. By developing innovative and tailored financial solutions, we aim to attract users who see the value in utilizing our platform for their investment needs. The flywheel effect will come into play, where an increasing number of users and Total Value Locked (TVL) will attract more users, further increasing adoption and expanding our community.
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Round 2: Telegram Live Questions
Question 1: How secure is the Struct finance project ? Is it audited to ensure security and to fix bugs ?
We treat security very seriously. On the smart contract end, we have a very thorough process in place — this includes internal reviews from our team, reviews from smart contract security researchers, and finally audits from renowned external auditors. We currently have been audited thrice. We intend to add community audits in the future, and are already in the process of having a bug bounty program in place.
Question 2: Do you have an audit certificate? “or”
Are you working on auditing to make your project safer and more reliable?
Yes. We have 3 audits so far. You can find details here in the link
https://www.notion.so/struct-finance/Audits-5b16f07308024dec848808aaf1a5a21d?pvs=4
We also have a security expert who review our contracts in an ongoing basis
Question 3: What do you think the future trend of DeFi is? What is the biggest flaw that DeFi is currently facing? And is the Genesis Universe project looking to solve that problem?
We envision a future where decentralized finance is not just a niche or alternative market, but the cornerstone of global financial operations. Believe that RWAs will play a huge part in it as well.
Not familiar with the genesis universe project tbh
Question 4: How do you plan to spread awareness about your project in different countries where English is not spoken well?
We are a global project with local ambitions :) This means that we are expanding globally, but do care and put a lot of attention to local communities. We did translate our Litepaper into 13 or 15 languages so far and we are in the process to focus also in different countries, hire community managers and do local campaigns to educate the community. Being successful in local communities around the world will make you a global project. Further we are very touched by the fact that when we have conversations with people from around the world that are looking into web3 and DeFi to see patterns that are everywhere the same. Everywhere we see people with the same vision and the same needs, the young generation in each country has the same or similar values. And that is what encourages us ! We are focusing on every market
Question 5: Can you compare and contrast structured financial products with other alternative investments, such as hedge funds or private equity?
Structured financial products are investments that are derived from underlying on-chain or real-world assets. They use a variation of credit/risk, liquidity, and maturity transformation techniques to achieve specific investment goals.
Hedge funds are private investment funds that pool capital from investors (accredited or institutional) to employ strategies to outperform the market.
Private equity are funds that invest in companies that have not been listed
Question 6: Why choose the avalanche chain? Are you optimistic about the development prospects of avalanches, or are you supported by avalanches?
We share a common vision with Avalanche — we both believe that real world assets will be part of DeFi’s future. As assets such as debt instruments come on, we believe that structured finance will be crucial to proper risk distribution and liquid markets, both of which will help to create a more effective and efficient defi ecosystem.
Question 7: Is your project for English speaking countries only or do you have a community for non-English speaking users? If so, are they local?
No we are in the process to cultivate local language communities !!
We are looking into a lot different countries, especially emerging markets, and we are going to onboard more community managers to build the local communities — we want to make it a truly local/global community !!!
Question 8: How do you plan to spread awareness about your project in different countries where English is not spoken well?
Hey, great question. We have taken some steps to have a global presence. We have translated our Litepaper in 13+ languages. You can find details in the link below
https://www.notion.so/struct-finance/Litepapers-0f7bc79ace9a4a928d91a48dbc4619a8?pvs=4
We will soon start supporting local languages starting from East to West timezones. Please join us in Discord and turn your notifications
Question 9: Partnership is always an important factor for every project. So who is your partner? What are the benefits you get from those relatiionships?Do you have an audit certificate?
“or”
Are you working on auditing to make your project safer and more reliable?
We have 24 institutional investors ranging from market makers, VCs, trading firms, etc (Wintermute, QCP Capital, Bixin Ventures, Finality Capital, IVC, Blizzard, Avalaunch, etc). You can find the full list on our website. Avalanche Foundation (Blizzard) is also an early investor and has been supporting it since the beginning. About partnerships, we have some integration and commercial partnership with GMX, the largest Decentralized Perp Dex, from which we build our products.
Yup we have been audited. Do check out my previous ans!
Question 10: What is the target market of Struct Finance ? how will the largest Number of users be reached ?
At StructFinance, our target market includes both institutional and retail users within the DeFi space. One of our primary objectives is to democratize access to financial instruments that were traditionally limited to privileged parties, such as institutions and accredited individuals. By providing structured financial products on the blockchain, we aim to empower a wide range of users to participate in DeFi and benefit from the potential yields and risk-adjusted returns.
Our approach to driving adoption globally is twofold. Firstly, we are focused on education and awareness-building. By translating our litepaper into multiple languages and actively engaging in AMA sessions and community interactions, we aim to educate users from various countries and communities about the benefits and potential of structured financial products.
Secondly, we prioritize the creation of value-added products. By developing innovative and tailored financial solutions, we aim to attract users who see the value in utilizing our platform for their investment needs. The flywheel effect will come into play, where an increasing number of users and Total Value Locked (TVL) will attract more users, further increasing adoption and expanding our community.
While we have a global approach to adoption, we also remain considerate of regulatory aspects. We have measures in place to mitigate regulatory risks and ensure compliance with relevant laws in different jurisdictions.
Overall, our focus on education, valuable product offerings, and a global approach to adoption will be instrumental in reaching the largest number of users and establishing StructFinance as a leading DeFi protocol in the market.
Question 11: Is there a KYC requirement for the transactions we will make on the Platform? What documents are required for KYC, if any? Finally, what are the transactions we can do without KYC?
Our contracts are deployed on the avalanche blockchain and accessible permissionlessly
Question 12: Are there any plans to involve the community in the creation of new content, such as user-generated quests or missions, to enrich the ecosystem?
Yes, sure. We have an active community participating and supporting us in Discord. I’d recommend to join us and introduce yourself
https://discord.gg/MHMacHCFZp
Question 13: I am interested to invest in your project. When and where can I buy your tokens Is it already listed exchanges?
We are currently still focusing on making sure that we are and can continue to deliver value to our community and users. Our token plans will be released after
Question 14: What do you see as the advantages of building on Avalanche?
Avalanche fundamentally enhances Struct Finance in a multitude of ways, most notably by fostering an environment that aligns with our long-term vision and by providing us with essential support and resources for our ongoing growth and development.
Avalanche’s vision of a future where all the world’s assets are digitized aligns closely with our focus on creating and customizing structured financial products. Their versatile ecosystem allows us to structure a vast range of digitized assets, tailoring them to the needs of a broader range of investors. This synchrony of visions lends considerable value to our project, enabling us to stride toward a future where all types of assets, both on-chain and off-chain, can be accessed and managed more efficiently through our platform.
In addition, the support we have received from Avalanche has been invaluable. The teams at Avalabs and Blizzard have been our partners since the project’s inception. They saw the need to build this DeFi primitive, understood our vision, and recognized how our tranching mechanism can contribute to fostering composability within the Avalanche ecosystem and beyond. Their backing has not only provided us with the resources to develop our protocol but also connected us with key partners in the DeFi space.
Finally, being a part of Avalanche means being part of a thriving and dynamic community. The strong developer community, the supportive ecosystem, and the overall atmosphere exudes a family-like feeling, making it fun to develop on Avalanche. The ecosystem’s collaborative nature promotes a sense of unity, which ultimately drives innovation and growth. This, in essence, significantly contributes to enhancing our project, as we are not only supported but also inspired by the vibrant Avalanche community.
They have a really novel consensus mechanism that makes the chain scalable. Furthermore, we are aligned on the same vision re RWAs (as mentioned earlier). We believe that many will come through their subnets and that is where the design space for our products will flourish
Question 15: How does Struct Finance ensure that users can profit during periods of both low and high market volatility?
During periods of low volatility Liquidity Providers can opt for the fixed returns on Struct Finance despite market fluctuations. This can be interpreted similarly to what Traditional Fiance calls fixed-rate income. The fixed rate allows prioritized cash flow, thus reducing risks, as well as a slighter lower interest rate that compensates for the security of the investment.
This position is specifically adapted to those who are willing to take less risk and are mainly interested in using their capital efficiently, without letting it sit idle.
For instance, this can be a good strategy to set after a bear market bottom. Even though crypto markets may not be jumping up immediately from the bottom, a fixed yield allows users to utilize their funds efficiently without exposing them to volatility-related risks.
Should market conditions shift towards heightened volatility and increased trading activity, LPs on Struct Finance may contemplate switching to Variable Returns.
Contrasted with fixed returns, variable returns could offer users an opportunity to capture a larger portion of the yields, driven by increased trading fees and liquidations.
High volatility can boost APRs but also escalates the drawdown risk for LPs, especially in falling markets. These conditions can impact the GLP index price, subsequently affecting the variable yield. LPs, though not subject to liquidation, face exposure to yield and principal risk in the variable yield tranche during price declines. On the other hand, rising markets can amplify variable yield returns. LPs must, therefore, grasp the delicate balance between market volatility, risk, and return in their investment choices.
Before taking a position, users should also ask themselves whether they foresee volatility to be the same or to increase, or decrease. One must be extremely cautious to not be caught in a falling market.
Question 16: I would like to understand better how the tranching process in Struct Vaults gives more flexibility and control over investment strategies. Can you explain in simple terms?
It results in a larger variety of products at the end of the day — more options for users to choose from which could better fit their portfolios
Question 17: What are the next major plans in struct finance #Roadmap?
We are just gearing up to be able to source different types of yield sources and yield differentiation, and we are committed to continually aligning our products with groundbreaking innovations in the market.
Everything can be tranched! And we’re the ones that are going to do it.
Liquidity Pools
Foreign Exchange
RWAs
LSDs, LSDfi, LRTs
They all could be the next thing that we build on. 👀
The core principle of tranching the risk of assets is in fact universal and applies to several asset classes. Our upcoming products and initiative will reflect this philosophy.
Question 18: I’m curious about the different assets that can be deposited on the Variable side of Struct Vaults. Can you tell me more about them and how they differ in terms of risk?
Each Struct vault has 2 tranches. The senior and Junior Tranche. The Senior tranche is for people who prefer predictable returns and the Junior Tranche is for those who aim for higher returns (and are a bit more comfortable taking risks). To dive deeper into how the mechanics work and how do we manage risks. I’d suggest to read our Litepaper (which explains the mechanics) and our Risk & Fact Sheet documents (which shows the analysis on different asset pairs)
Litepaper
https://docsend.com/view/3a239uwepsp9c2pb
Risk & Fact Sheet
https://www.notion.so/struct-finance/Risk-Fact-Sheet-5727dfbe5c5c44e3953a90d7e7e7fa98?pvs=4
Question 19: According to the project’s roadmap- what are your most important next priorities?
short term roadmap includes more integrations with other DEXes, lsds, real yield assets!
