Make Yield Your Own: Perpetual Yield Tranches are Live!
Idle DAO is thrilled to announce the latest addition to its product suite: Perpetual Yield Tranches, a brand new product that segments yields and risks to appeal to a diverse range of users.
The Idle protocol has been pioneering the DeFi yield aggregation space, introducing a brand new class of structured products with Best Yield strategy. After exploring the risk management space with the Risk-Adjusted strategy, we are now establishing an additional tranching module that distributes DeFi yields and risks in a targeted way.
What is a Tranche?
“In the financial world, a tranche represents a product split that carries specific features like risk, yields, duration. Tranches are often arranged together to create pools of diversified products or baskets of investments with similar risk-return characteristics”.
Leveraged Yields & Covered Risks
With Perpetual Yield Tranches, LPs can earn a higher share of yield by taking a higher percentage of risk (with Junior Tranche), or they can hedge the risk by depositing their assets into a built-in protected tranche (with Senior Tranche):
The Senior tranches have a first lien on the assets — they’re in line to be repaid first, in case of default. Junior tranches have a second lien or no lien at all, depending on the entity of the default. For this reason, Junior holders are awarded with a higher portion of the underlying yield, while Senior holders can still enjoy DeFi ample yields with built-in coverage protection.
Unlike other risk tranching platforms, Perpetual Tranches do not require any capital formation period or locking period on your funds. Perpetual tranches give the flexibility to users and integrators to enter or exit from their investment position anytime. This feature allows it to retain full composability with other DeFi protocols or integrators while enabling it to offer tailored products to final users.
Idle has always put security first, hence Idle PYTs’ smart contracts have been audited by two different professional auditing firms before the release (Consensys Diligence and Certik). All the related and previous audits for the Idle protocol are available here.
Yield and Loss Scenarios
These two classes of tranches have been designed and developed to meet different users’ needs. Whether you’re an experienced risk-lover degen or a new joiner to DeFi amazed by its yields, this new product will offer something for you.
Given the nature of the two classes of tranches, which differ in terms of risks and gains opportunities, it is possible to explain their behavior through two scenarios: a Yield case and a Loss case.
First of all, it is important to highlight that the interest earned in the pool will be split between the two classes according to a predefined ratio, which gives 10% of interests to Senior Tranches and 90% of interests to Junior Tranches.
Assume there is a pool with 1000 DAI in total with a 10% APY; these would be the scenarios:
- In the Yield case, the interests generated in the pool (100 DAI in total) will be split as 90 DAI (90% of the interest) to Junior Tranche and 10 DAI (10% of the interest) to Senior Tranche. The current APY is higher in Junior Tranche because, as mentioned above, this class takes more risk than the Senior one and is rewarded accordingly.
- In the Loss case, the only class of tranches affected by a possible loss will be the Junior one. Suppose, there is a 100 DAI hack loss, the Senior tranche will have the entire capital protected, while Junior tranches will bear a partial loss of the funds deposited.
Official Release: What’s included
This product release includes the tranches pools: DAI, FEI (which tokenize the risks and yields of idleDAI Best-Yield and idleFEI Best-Yield for both the Senior and Junior tranches classes). Additionally, this release includes Lido (stETH) and experimental pools for Convex (FRAX3CRV and MIM3CRV) tranches, with a 1M deposit cap for the TVL (sum of Junior and Senior assets under management).
Idle Perpetual Yield Tranches are available at idle.finance/#/dashboard/tranches.
With this new introduction, Idle proves to be one of the key protocols in the DeFi space that offers fully automated risk management and leveraged yields on users' deposits by combining different yield sources and lending providers.
Looking Forward: PYTs for any asset!
Since 2019, Idle has been battle-testing its protocol while proving to be a competitive and secure protocol in the DeFi space by focusing its strengths on the B2B and institutional segments.
This release is an additional milestone towards the freedom to automatically manage and maximize returns by choosing the most suitable risk level.
Perpetual Yield Tranches are based on the concept of Yield As A Service, providing an innovative and easy-to-integrate solution to partners that want to offer a yield- and risk- customized experience to their final users.
With this in mind, we are already planning to release other assets, protocols, and on chains during the following months. Stay tuned, next year will be full of new developments! Integrators won’t need to stitch together different protocols or manage protocols’ updates and changes — Idle will provide them with an easy and secure yield integration experience.
The benefits for our partners and integrators are manifold:
- 💰 If you look to increase your protocol’s liquidity, we’re here to launch a grant with you!
- 📈 If you are an asset issuer and your protocol is listed on protocols like Convex or Curve, we’re here to bootstrap your pool!
- 🧩 If you look for a yield source for your product, we’re here to show you how easy it is to integrate PYTs!
Interested in any of the activities listed above? Reach out to Idle Leagues by filling this form. We are keen to hear your plan and available to help you on the next steps!
Want to be part of the DeFi revolution? Take a seat at Idle DAO — join us in Discord 🤝