Struct Finance, backed by Ava Labs, has launched customizable interest rate products on the mainnet. Now cautious investors no longer need to avoid DeFi, whether they are institutions or smaller players. The mainnet launch of Struct Finance’s cutting-edge Interest Rate Vaults and a distinctive tranching mechanism was announced today. Struct Finance is a DeFi platform that allows investors to interact with bespoke structured financial products tied to digital assets. Users may now invest in products catered to their risk-return preferences, offering predictable and diversified returns, amid the very volatile crypto market.
Innovative investment instruments called “structured financial products” are developed from and connected to underlying on-chain or physical assets. To meet particular investing goals, they make use of a range of credit/risk, liquidity, and maturity transformation approaches. These investment products draw interest from a wide range of investors because they provide risk-return dynamics that differ from the underlying assets. On Struct Finance, various tokens, tokenized derivatives, vaults, pools, and protocols interact in an unrestricted way to create novel products that are suited to the risk tolerance of the investor.
“Traditional financial products aren’t permissionless to use or create. In fact, they are largely inaccessible to most people. We are making these structured financial products accessible and easy to understand for everyone. Our mission at Struct is to bring the power of such products to investors with all risk appetites, from the risk-averse newcomer to the seasoned crypto native. That’s why we are launching Interest Rate Vaults as the first in our line-up of tailored financial products,” said Miguel Depaz, one of the Co-founders of Struct Finance.
Through an innovative method known as “tranching,” the new Interest Rate Products enable anybody to split and repackage the risk of any yield-bearing DeFi assets in numerous ways to meet their risk profile. The user has the option of fixed returns (10%) at a reduced risk or variable returns (up to 65%) at a larger risk. Each Interest Rate Product is a single vault divided into two tranches, each of which has a distinct return structure:
- A fixed-return tranche for cautious investors seeking steady profits.
- A variable-return tranche for investors wanting bigger profits but with a higher risk tolerance.
To achieve predictable returns, the yield from the underlying asset goes into the fixed tranche first. The remaining funds are then distributed to the variable tranche, which now has increased exposure to the underlying yield-bearing asset. The variable tranche may provide a greater yield than the fixed tranche, less yield, or no yield at all. Interest Rate Products provide risk-averse investors seeking greater yields a way to be protected against conservative investors seeking a set rate.
Depending on their risk tolerance, consumers may choose between Fixed and Variable Tranches using the innovative “tranching” mechanism. Through trading, institutional liquidity and crypto derivatives may basically exchange liquidity. Struct has established an initial cap per tranche for secure operations with a pledge to progressively raise these limits over time.
In addition, Struct Finance will provide the Struct Factory, a feature that none of its rivals currently offer, to let investors create their own customized structured financial products on-chain. Notably, these unique solutions will benefit not just the creators but also the general public, promoting a more inclusive and flexible financial climate. You may create your own Interest Rate Product utilizing assets like USDC, BTC.b, AVAX, or WETH thanks to this ground-breaking innovation. Struct Finance offers back-testing assistance to help you with the product development process.
The absence of fixed-yield returns in the cryptocurrency market has prevented both bigger institutions and smaller players with more cautious risk appetites from entering. Given that permissionless liquidity pool switching is permitted by the Struct Factory, fixed-rate returns may become prevalent enough to tame the erratic and unpredictable returns of Web3. Once unlocked, fixed-rate returns have the potential to open the DeFi up to institutional liquidity without jeopardizing the fundamental principles of decentralization.
For the benefit of its customers, Struct Finance is integrating with GMX and using the Liquidity Provider Token (GLP) from GMX to provide predictable returns in the form of Fixed and Variable Returns. GMX is a pioneering decentralized exchange renowned for its cutting-edge features and capabilities, including the GLP token. This token is presently a key component of GMX’s trading system and marks a major industry advance.
Struct Finance uses GLP to provide consumers with a stable and variable return while also giving GMX access to liquidity through the GLP token. Through this interface, Struct Finance is able to satisfy the liquidity requirements of the GMX platform while optimizing returns for its consumers.
