Struct Finance launches customizable interest rate products to enable DeFi users to earn predictable returns
While ChatGPT has undeniably dominated news headlines in recent months, it would be remiss to overlook other exciting developments in the tech world, particularly within the realms of blockchain and cryptocurrency.
As the economy gradually recovers, there is a renewed surge of interest in cryptocurrency and decentralized finance (DeFi). In fact, the value locked in DeFi platforms has already reached a staggering $52 billion as of April. This significant figure underscores the growing appeal and adoption of DeFi, signifying a promising trend in the broader cryptocurrency landscape.
As the adoption of DeFi continues to gain momentum, there is a promising outlook for increased user participation in the coming months. In line with this trend, Ava-Lab-backed Struct Finance today announced the official launch of customizable interest rate products on the mainnet to enable DeFi users to earn predictable returns on their investments.
In a highly volatile crypto industry, users now have the opportunity to invest in customized products that align with their risk-return preferences, thereby offering predictable and diversified returns. Structured financial products are innovative investment instruments that derive their value from underlying on-chain or real-world assets. These products employ various techniques related to credit/risk, liquidity, and maturity transformation to achieve specific investment goals.
By deviating from the performance of the underlying assets, these investment instruments cater to a wide range of investors. Struct Finance facilitates the seamless interaction of different tokens, tokenized derivatives, vaults, pools, and protocols in a permissionless manner, allowing the creation of new products tailored to individual investors’ risk appetite.
“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.
The new Interest Rate Products allow anyone to split and repackage the risk of any yield-bearing DeFi assets in different parts to fit their risk profile through an innovative process called “tranching.” Every Interest Rate Product is a single vault split into two portions, or tranches that have different return configurations including a Fixed-return Tranche for conservative investors looking for consistent returns and a Variable-return Tranche for investors with a higher risk appetite seeking superior returns.
The yield from the underlying asset flows into the fixed tranche first to ensure predictable returns. The remainder is then allocated to the variable tranche, which gets enhanced exposure to the underlying yield-bearing asset. Compared to the fixed tranche, the variable tranche might accrue more yield, less yield, or no yield. Interest Rate Products allow conservative investors looking for fixed yield to get protection from risk-on investors looking for higher yield.
The unique ‘tranching’ system allows users to select from Fixed or Variable Tranches according to their risk appetite. Tranching essentially enables institutional liquidity and crypto degens to provide liquidity for each other. For secure operations, Struct has set an initial limit per tranche, with a commitment to gradually raising these caps over time.
In addition, Struct Finance also announced that it will launch the Struct Factory – a capability not offered by any of its competitors – to let investors craft their own structured financial products on-chain according to their unique needs. Notably, these custom products will not only serve the creators but will also be available for others to utilize, fostering a more inclusive and adaptable financial environment. This innovative feature will allow you to design your own Interest Rate Product using assets like USDC, BTC.b, AVAX, or WETH. Struct Finance provides backtesting support to assist you during the product creation process.
The lack of fixed-yield returns in crypto has been a deterrent to the entry of both larger institutions and smaller players with more conservative risk appetites. Considering the Struct Factory allows permissionless tranching of liquidity pools, fixed-rate returns may become commonplace enough to tame the wild and volatile returns of Web3. Once unlocked, fixed-rate returns have the power to pave the way for institutional liquidity to safely step into the DeFi without compromising the core tenets of decentralization.
Struct Finance is integrating with GMX and leveraging GMX’s Liquidity Provider Token (GLP) to generate predictable yields in the form of Fixed and Variable Returns for its users. GMX is a pioneering decentralized exchange known for its innovative features and capabilities, including the GLP token. This token represents a significant breakthrough in the industry and is currently a central part of GMX’s trading system.
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.
Backed by Ava Labs, Struct Finance is a DeFi platform specializing in tailored structured financial products linked to digital assets. The company also provides users with the ability to create and customize their own financial instruments, leveraging tokenized positions that generate yield. This opens up a wide range of diverse investment opportunities for users. Notably, Struct Finance employs a tranche-based system in its innovative financial products. This intelligent approach ensures that the yield generated is distributed among different investor classes, striking a balance between offering a consistent yield for risk-averse investors and the potential for higher returns for those seeking more adventurous investment strategies.
Currently accessible on Avalanche, Struct Finance has plans to expand its platform to multiple blockchain networks in the near future, further enhancing its reach and offering a broader range of investment options to its users.