DeFi is a worldwide, open financial system designed for the internet era — an alternative to a system that is opaque, tightly managed, and kept together by decades-old technology and processes.
It provides you with control and visibility over your money. It exposes you to global markets and offers alternatives to your local currency or banking options.
DeFi products provide financial services to anybody with an internet connection, and mostly customers own and manage them. So far, tens of billions of dollars in cryptocurrency have gone through DeFi apps, and the amount is rising by the day.
Here comes Tranchess, a crypto-asset management protocol, offering various risk-return products.
Tranchess protocol is more than simply a standalone asset management environment; it also includes numerous capabilities that might be useful in the DeFi area.
It is a one-stop market for people looking to make use of a broad range of DeFi services such as single-asset yield farming, borrowing and lending, trading, and so on.
As the DeFi Ecosystem progresses beyond the exploratory stage, it begins to attract a wider range of investors with varying risk appetites and risk capabilities.
Tranchess’ unified tokenized asset management platform meets these demands in an innovative approach. On Binance Smart Chain, it offers a complete array of DeFi services, including single-asset yield farming, fixed-interest rate lending, and leveraged trading.
Let’s explore Tranchess in detail.
What is Tranchess?
Tranchess is a yield-enhancing asset tracker with a variety of risk-return alternatives inspired by tranche funds that appeal to different types of investors with different risk tolerances.
It has created a one-of-a-kind solution to help investors optimize their earnings.
The protocol contains three tranche tokens (QUEEN, BISHOP, and ROOK) and its governance token CHESS for each fund.
- QUEEN is a long-term holding fund with medium risk and a normalized medium return.
- BISHOP fund is for consistent profit: low risk + risk smart contract, low return.
- ROOK fund is a leveraged crypto asset trading fund with a high payoff for high risk.
Tranchess produces several risk/return matrices from a single core fund. The primary fund tracks a certain underlying asset and might be divided into halves.
One sub-fund offers a high-yielding token to risk-averse investors, while the other offers leveraged exposure to the underlying asset to risk-seeking investors.
Tranchess core portfolio consists of three goods at the moment.
The QUEEN tranche is a Bitcoin tracker with a higher yield.
BISHOP is a yielding delta-neutral token comparable to a stable-coin, and ROOK is a BTC tracker with a 2x leverage.
CHESS holders presently earn 50% of protocol fees and decide the internal interest rate spread payable to ROOK holders.
The team intends to extend to other chains and incorporate different underlying assets in the future.
Token QUEEN represents the major tranche, or main fund, as it is known in the old-school financial business.
Each QUEEN Token represents a part of the primary money. The primary fund is an index fund that tracks the performance of assets. QUEEN’s Net Asset Value (NAV) is entirely associated with the underlying asset’s price.
Tranchess now has two primary funds, the BTCB fund, and the ETH fund, resulting in two QUEEN tokens, bQUEEN and eQUEEN.
Token BISHOP may be thought of as a USDC generating product. Its holders earn interest at a fixed rate that varies every week.
The protocol reads the USDC interest rate from Venus and multiplies it by a premium chosen by community votes, every week.
The sum becomes BISHOP’s fixed interest rate for the next week. bBISHOP and eBISHOP interest rates are determined individually.
The second half of the divided main tranche is Tranche ROOK. It is a leveraged instrument that does not require forced liquidation.
Token ROOK holders borrow from Token BISHOP holders on a daily basis in order to purchase the primary fund that monitors the underlying assets.
The holders get the main fund’s earnings and losses; i.e., Token ROOK’s return = the main fund’s profits and losses – the interest given to Token BISHOP.
By borrowing equity from Tranche BISHOP, Tranche ROOK creates a leveraged portfolio.
Because it borrows from inside the primary tranche, Tranche ROOK does not face the danger of forced liquidation, as do other leveraged instruments on the market.
How Tranchess Works?
Tranche QUEEN is Tranchess’ primary fund that tracks the BTC price and includes a yield farming option.
Rather than storing BTC, users may use the creation process to trade BTCB (wrapped BTC on BSC) for QUEEN tokens, or they can buy on the Tranchess swap for USDC.
You may earn CHESS as additional rebate benefits by staking QUEEN. If you wish to discontinue staking in the QUEEN fund, just use the redemption process to change your QUEEN tokens back to BTC.
QUEEN can be divided/merged into BISHOP and ROOK tokens at the same time.
The QUEEN fund’s tranche BISHOP is a sub-fund. It pays a preset daily interest rate as BISHOP holders supply cash to Tranche ROOK.
In the average person’s terms, this Tranche BISHOP interest is risk-free since BISHOP holders lend USDC to ROOK holders to leverage their positions.
And the APR of Tranche BISHOP is computed using Venus’ weekly borrowing rate and community vote. BISHOP holders are not subject to a lockup period.
Since the loan is in the primary tranche, ROOK is a leveraged financial instrument with no forced liquidation. ROOK holders can borrow from BISHOP holders regularly, allowing them to leverage their position in the main tranche QUEEN.
To put it another way, ROOK holders borrow USDC from BISHOP holders to magnify their exposure to the major QUEEN funds.
Tranchess Primary Market is used for QUEEN token generation and redemption, as well as splitting and merging. This functionality supports users while interacting with three tranches.
Tranchess Swap is a platform-based order-book exchange that allows users to swap for three token tranches directly on the platform.
Tranchess Key Advantages
Tranchess employs tranching, an innovative method used in structured finance to obtain distinct risk-return characteristics from a core fund. These tranches appeal to different types of investors with different risk tolerances.
Tranchess’ tokenized approach addresses the following three DeFi pain points:
- Investors that are risk-averse desire investment returns that are predictable and have little or no market risk. Most yield farming prospects in the present DeFi market require price risks of at least two assets and suffer from impermanent loss. Thus, such options are not available.
- Long-term investors of big assets, like BTC, desire to keep market exposure in a more liquid manner while generating a higher return on their investment. So far, Bitcoin investors have only had access to a few single-asset yield farming alternatives.
- Chance-taking investors demand-leveraged exposure via derivatives with high capital usage, low cost, and no risk of forced liquidation (e.g. through oracle or liquidation engine failures). Congestion is a problem for on-chain settlements, as opposed to centralized exchanges with real-time matching engines. As a result, most protocols would impose a high margin requirement, which is harmful to capital efficiency.
Tranchess’ goal in the DeFi market is to deliver long-term solutions. Asset management has long been a vital component of the financial industry.
While there are other intriguing protocols in the DeFi landscape, Tranchess is the first of its kind. It serves as a benchmark asset management solution and a trading environment with cutting-edge tools for both amateur and expert traders.
I hope this article gives you a clear picture of this interesting protocol. Share your views in the comments.