Idle + Amphor: A Leap Into Direct-to-Strategist Yield Tranches
New high-yield wstETH Yield Tranches are here. Amphor’s refined ETH vault, advanced with smoothly streamlined risk management.
We are thrilled to present a new class of risk diversification products for DeFi: the Direct-to-Strategist (D2S) Yield Tranches.
This product line empowers liquidity providers to engage in risk-adjusted yield through a seamless integration within sophisticated strategies managed by investment funds, institutional borrowers, digital asset managers, and experienced strategists. The first introduced are wstETH Yield Tranches based on Amphor’s ETH vault.
About Amphor
Fueled by a team of seasoned experts, Amphor provides yield enhancement solutions for DeFi. Prioritizing meticulous risk assessment, continuous monitoring, and resilient processes, it seamlessly integrates traditional finance tools like options and leverage into its strategies, offering a gateway to advanced yield opportunities within the DeFi ecosystem, and delivering consistently competitive returns.
Amphor’s ETH vault
Among Amphor’s offerings, there are options-based vaults, also known as Synthetic Liquidity Provider (LP) Impermanent Loss (IL) Hedged Strategies, which are currently accessible for BTC, USDC, and ETH. Utilizing a set of call and put options with varying strike prices and weights, these strategies replicate an LP position on a volatile asset pair while hedging against IL within defined bands. Throughout the contract’s duration — ranging from 1 to 5 weeks — the vaults generate fixed daily coupons in the form of option premiums, as long as the underlying asset price fluctuates within a pre-specified range.
Strategy Showcase
The ETH Vault specifically mirrors the payoff of a position in Uniswap v3 liquidity pool, while dampening Impermanent Loss on the ETH/USD pair. Users participating in this strategy gain directional exposure and generate yield in wstETH. The Vault represents an ideal choice for users with a strategic interest in ETH accumulation.
Compared to the equivalent Uniswap v3 position, this configuration typically results in a higher premium over the same time period, all while offsetting directional exposure (IL). Additionally, the ETH Vault reaps the benefits of Ethereum’s native staking yield derived from holding wstETH.
Risk Mitigation Measures
Depending on the assumed bias (bearish or bullish) the capital might be at risk, if ETH price at maturity is below the Risk threshold (in bullish bias) or above it (in bearish bias). To address this risk, the Vault can restructure the position with new parameters, such as extending the epoch duration or changing the strategy bias, to protect the principal from realized loss and expand the product’s price range before contract settlement.
For each Epoch, maturity is limited to 6 weeks (8 weeks post-restructuration), while leverage is capped at x2.5 (x4 post-restructuration).
The worst-case scenario involves a complete shift to 100% ETH, triggered from the low band and settling at maturity. If ETH rebounds above the low band or undergoes restructuring, losses can be avoided. However, in the event of a rapid drop, around -10% below the lower band resulting in a -50% deviation from the entry price, the strategy opts for a decisive cut, limiting the loss to a maximum of 25% (in line with the maximum x2.5 leverage that can be set).
wstETH Yield Tranches uncovered
Based on the described ETH vault, new Senior and Junior wstETH Yield Tranches empower liquidity providers to seamlessly tap into Amphor’s yield enhancement solutions, while choosing the risk-return ratio that most aligns with their portfolio management goals.
The window for interacting with wstETH Yield Tranches aligns with that of the Amphor ETH vault. Withdrawal and deposit openings occur on a weekly basis (Monday, 5pm UK time), for a 24-hour duration, given that the Vault Early Terminates by trading above the High band (bullish bias) or below the Low band (bearish bias).
As long as ETH/USDC is trading above the “Risk threshold,” the vault generates a fixed APR determined at the beginning of each epoch (the current one, being 20.8%). Every week, the vault undergoes early termination if the ETH price closes above the “Termination threshold”.
In the event the vault reaches maturity and the ETH price concludes below the “Risk threshold”, on February 20, 2024, at 5pm UK time, the capital becomes susceptible to risk. To mitigate potential losses, Amphor will restructure the position if the ETH price approaches the “Risk threshold”.
With full spectrum coverage on deposits secured by the Junior liquidity, the Senior class fortifies Amphor’s automated on-chain risk management framework. This serves as a highly efficient solution for proactively managing various risks associated with the strategy, including smart contract and oracle vulnerabilities, market risks, as well as risks specific to Yield Tranches.
In tandem with the risk-mitigation measures implemented by Amphor itself during market fluctuations (as outlined in the preceding paragraph, limiting potential losses to a maximum of 25%), Senior LPs benefit from a substantial layer of protection.
Simultaneously, the Junior class provides risk-on users with amplified returns, thanks to the significant share of yields received as compensation for the coverage provided to the Senior counterparty.
Direct-to-Strategist Yield Tranches: What’s next
We firmly believe that DeFi’s essence lies in disintermediating interactions, fostering a more efficient and equitable financial ecosystem. By establishing a direct link between liquidity providers and strategists, this new generation of Yield Tranches marks a transformative leap, empowering users with efficient and risk-adjusted yields based on advanced vaults offered by established industry players.
As the entire landscape of private debt shifts on-chain, we anticipate expanding our product suite with more Direct-to-Strategist Yield Tranches. This commitment ensures liquidity providers access to a diverse array of yield opportunities across multiple assets and underlying, moving towards a future where financial interactions are seamless, decentralized, and tailored to every participant’s unique needs.
About Idle DAO
Idle DAO is a decentralized organization that builds yield automation infrastructure for DeFi. From brand new protocols to institutional and DAOs, businesses of every size use Idle protocol to optimize capital efficiency and manage their treasuries.
Everyone deserves the best for their idle funds in terms of returns and risks. Over the past four years, Idle has rolled out the features and services, defining and shaping the yield aggregation and risk tranching space. To learn more about Idle’s strategies:
