DeFi platform Struct Finance has just launched its ground-breaking Interest Rate Vaults and unique tranching mechanism on the mainnet. The launch means that its now possible for investors to interact with customised structured financial products tied to digital assets. Users can keep their funds in a secure location while investing in items that match their risk tolerance and return expectations.
In the financial markets, structured financial products are cutting-edge investment instruments that are based on and correlated with on-chain or physical assets. In order to accomplish their goals, they employ a wide range of credit/risk transformation, liquidity transformation, and maturity transformation strategies.
These investment products are popular because they provide returns that differ from those of the underlying assets. Tokens, tokenized derivatives, vaults, pools, and protocols all work together in a permissionless environment on Struct Finance to create new products that are individualised for each investor based on their comfort level with risk.
How Struct Finance is disrupting DeFi
Struct Finance is on a mission to make traditional financial products to be accessible to the masses. The company is breaking down barriers to entry for these structured financial products so that anyone can use them with confidence.
Using a method called “tranching,” investors in the new Interest Rate Products can tailor the level of risk associated with any yielding DeFi asset to their own needs. Each and every Interest Rate Product is a single safety deposit box that has been split in two portions, or tranched, to accommodate two distinct return structures:
- Tranche with a Fixed Rate of Return (FRT) for Risk-Averse Investors
- A Variable -Return Tranche to accommodate varying levels of risk tolerance.
The fixed tranche receives the yield from the underlying asset first, guaranteeing stable returns. The remaining amount goes to the variable tranche, which gains more direct access to the underlying yielding asset.
The yield accrued on the variable tranche may be greater than that of the fixed tranche, less than it, or even zero. Interest Rate Products provide safety for risk-averse investors seeking a fixed yield against more aggressive investors seeking a greater income.
Institutional liquidity and crypto degens can essentially offer liquidity for each other thanks to tracing. Struct has established an initial limit per tranche for safe operations and has promised to gradually increase these restrictions over time.
The Struct Factory, another new offering from Struct Finance, will enable investors to create customised structured financial products on the blockchain. Using assets like USDC, BTC.b, AVAX, or WETH, you can create your own Interest Rate Product with the help of this function.
Besides helping their creators, these unique items can also be used by others, making the financial system more accessible and flexible. To help you out with the development of your product, Struct Finance offers backtesting services.
Both major institutions and smaller players with lower risk tolerances have often stayed away from the crypto market due to the absence of fixed-yield rewards. If fixed-rate returns become commonplace enough, the wild and erratic returns of Web3 can be tamed. Struct Factory enables permissionless tranching of liquidity pools. Once released, fixed rate returns have the potential to clear the way for institutional liquidity to enter the DeFi in a secure manner that does not undermine the DeFi’s fundamental decentralisation principles.
Integration with GMX
To provide its customers with stable returns in the form of both Fixed and Variable Returns, Struct Finance has integrated with GMX and is making use of GMX’s Liquidity Provider Token (GLP). The GLP token is just one of many novel features and capabilities offered by GMX, a leading decentralised exchange. This token is currently an integral feature of GMX’s trading system and marks a major innovation for the industry.
By utilizing GLP, Struct Finance provides users with a fixed and variable yield while simultaneously offering liquidity to GMX through the GLP token. This integration enables Struct Finance to optimize returns for its users while supporting the liquidity needs of the GMX platform.