Lessons of the Last 6 Months: What Did We Learn and Where Are We Now?
Welcome to our latest blog, dear Struct community!
In this edition, we’ll reflect on the past six months and share some of the valuable lessons we have learned.
Throughout this period, we strategically launched 35 vaults across various asset pairs, $30 million in Deposits from 2500 unique Wallets.
We’ve always adopted a measured approach to opening new vaults, prioritizing long-term objectives over short-term goals, focusing on responsible management and utility provided to users rather than just increasing Total Value Locked (TVL).
This article delves into our experiences, the rationale behind our approach, and the insights gained from each vault pair launched.
The Struct Approach: Quality Over Quantity
The numbers of vaults launched reflect our approach to avoid launching vaults indiscriminately.
Instead, we strongly believe in creating vaults that align with our responsibility and sustainability values to ensure that each vault would contribute positively to our ecosystem and provide meaningful user benefits. This allowed us to:
- Mitigate Risks: By carefully selecting asset pairs and monitoring market conditions, we minimize user exposure to potential volatility and losses. Ensuring balanced vaults also strengthens our protocol from being agnostic to market movements and performing well in any market condition.
- Enhance User Trust: Prioritizing quality and safety helped us build stronger relationships with our community. Struct continuously analyzes the results of current and past vaults to iterate and improve the user experience.
- Optimize Outcomes: Focusing on responsible vault management led to more stable and predictable results. This way, we avoid vaults that might lead to excessive user losses to optimize their outcome.
Lessons from the Vault Pairs
- Strategic Timing and Durations: Combining volatile assets with stablecoins, such as in the AVAX-USDC vaults, requires strategic timing and shorter durations to mitigate risks from rapid price movements and achieve positive outcomes.
- Asset Selection: Offering vaults with inherently stable and trusted assets, like Bitcoin-backed BTCb-wBTC vaults, attracts significant TVL and provides robust performance, highlighting the importance of selecting high-value assets.
- Term Length and Rebalancing Management: The AVAX-sAVAX and BTCb-AVAX vaults demonstrated the necessity of carefully managing term lengths and rebalancing strategies to optimize returns and minimize risks from high asset volatility and frequent rebalancing.
Vault Performance and Learnings
During the past 6 months, we deployed 35 vaults across six different asset pairs.
Let’s go through each of them and their performance:
1. AVAX-sAVAX Vaults
The AVAX-sAVAX vaults showcased strong performance, benefiting from the synergies between staked AVAX (sAVAX) and native AVAX tokens.
The fixed APRs for this pair were consistently high, typically ranging between 15% and 20%, providing a reliable base return for users.
However, the Variable APRs varied due to market conditions and price stability.
The frequent rebalancing in response to these rapid price movements often led to lower Variable APRs, especially in this pair’s initial three vaults.
These low yields can be attributed to:
- A rapid increase in AVAX prices
- Subsequent frequent rebalancing
On the positive side, sAVAX yields approximately 5.62% APR, and the APR achieved in our vaults is added to this base yield, enhancing overall returns.
The assets are strongly correlated, resulting in low or negligible impermanence loss. However, if the autopool liquidity is low and AVAX prices move drastically within a short period, frequent rebalancing in the autopools may lead to lower yields.
Nonetheless, this pair has demonstrated resilience and strong potential when managed strategically.
2. BTCb-wBTC Vaults
The BTCb-wBTC vaults were among the most popular, driven by strong demand for Bitcoin yields and confidence in the asset’s long-term value.
These vaults benefited from the inherent stability and trust in Bitcoin-backed assets, with fixed APRs averaging around 10%.
Variable APRs generally performed above market APRs, ranging from 4.69% to 30.54%, with low impermanent loss. Despite the overall stability, rapid price movements in BTC led to frequent rebalancing, which did not affect yield generation.
The performance of these vaults remained robust throughout, attracting significant TVL. The BTCb-wBTC vaults illustrated that offering vaults with Bitcoin derivatives is highly attractive to users, providing a stable, high-value asset that appeals to a broad range of investors.
3. AVAX-USDC Vaults
The AVAX-USDC vaults maintained consistent performance, benefiting from the inherent stability of the USDC stablecoin and AVAX’s growth potential. This pair provided a balanced risk-reward profile, with fixed APRs between 15% and 20%.
- We deployed four AVAX-USDC vaults; three ended positively, while the latest ended negatively.
- The first two vaults and the latest one were impacted by rapid moves in AVAX prices during their respective months, which led to significant variations in Variable APRs.
Combining a volatile asset like AVAX with a stablecoin like USDC helped mitigate some risks but highlighted the need for strategic timing in vault openings. Our analyses showed that vaults with shorter durations, such as one month, could reduce risks and achieve high APRs — unless there are drastic price changes in AVAX during the period.
Overall, this pair can compensate for impermanent loss if the price movements are not too drastic, as it is the leading pair with the most transactions and yielding the most returns. However, the AVAX component introduces risk, with two-month terms being particularly risky. With a one-month term, the variable is more likely to result in a positive outcome. The primary learning for this pair is to open vaults during periods of low volatility and to opt for shorter durations.
4. EURC-USDC Vaults
The EURC-USDC vaults have been performing well, offering users a safe haven to hedge against currency fluctuations while earning stable returns.
- The fixed APRs remained around 12–15%, providing reliable yields for conservative investors.
- The variable APRs also performed steadily, showing minimal deviation due to the inherent stability of both assets.
This pair underscored the importance of stablecoin pairs in offering low-risk, predictable yields and demonstrated that these vaults could provide consistent performance even in volatile market conditions.
5. BTCb-AVAX and wETH-AVAX Vaults
The BTCb-AVAX and wETH-AVAX vaults did not perform well, as they were launched when AVAX experienced a significant rally. The pairs’ high divergence resulted in substantial impermanence loss and frequent rebalancing.
- Fixed APRs ranged from 10–20%, depending on the term and market conditions.
- Variable APRs showed significant variation, with some vaults experiencing lower returns due to the rapid price movements and frequent rebalancing.
These pairs do not generate the same transaction fees or yield as the AVAX-USDC pair, making them riskier for the variable component. They are particularly unsuitable for two-month and even one-month terms are risky.
This experience highlighted the importance of managing term lengths and rebalancing strategies to optimize returns. Based on these learnings, we are considering introducing shorter duration periods for these vaults to mitigate risks.
Moving Forward
Our experience over the past six months has provided us with invaluable insights into vault management and user preferences.
Here’s what we’ve learned and how we plan to apply these lessons moving forward:
- Strategic Vault Openings: We will continue to prioritize responsible vault openings, ensuring each new vault aligns with our commitment to quality and sustainability.
- User-Centric Approach: Understanding user behavior and preferences will remain at the forefront of our strategy. This will allow us to tailor our offerings to meet their needs, which remains our most important focus.
- Innovative Solutions: We will leverage the insights gained to develop innovative vault strategies that enhance yield opportunities while mitigating risks.
What’s next? Upcoming V2 Enhancements
As we prepare for the launch of our Mainnet, here’s what users can expect from our upcoming V2 release:
- New Yield Sources: Expanding the range of yield sources to include more diverse and profitable opportunities (LST, LRT, RWA, etc.)
- New Asset Types: Introducing new assets, such as restaking tokens and single-side staking options, eliminating the need for rebalancing and impermanence loss.
- New Product Offerings: We are developing new products catering to different user needs and risk profiles, ensuring a comprehensive and inclusive platform through the process of tranching yield.
Addressing V1 Challenges with V2
Struct V1 proved the demand for fixed and leveraged returns, while V2 focuses on addressing the three significant challenges faced by our protocol:
- Scalability: Protocol integrations are time-consuming and costly to execute and audit.
- Centralization: Interest rate product contracts are currently created and maintained by the Struct team due to the risk of spam.
- Distribution: The scalability and centralization aforementioned problems make it difficult to increase the distribution channels in which interest rate products can be offered.
The previous six months have laid the foundation for our expansion through a calculated plan for new vaults. By focusing on responsible vault management and strategic deployment, we have built a solid foundation for sustainable success.
We are committed to continuing this path, by offering our users the best opportunities for yield that tailors their needs and risk profiles.
Stay tuned for more updates as we continue to innovate and expand our offerings.
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