Waterfall DeFi: True risk tranching for every investor
It seems strange that, at this point in the game, some TradFi investors are still a bit scared of DeFi. You’d rather trust a world that brought us credit default swaps and a global financial crisis? Ok, whatever!
For some newbies it’s the variable rates, however, that act as a barrier to this new universe of investment opportunities, and makes it difficult to assess risk in familiar ways. So for these folks especially, it’s a good time to learn about Waterfall — a decentralized protocol that brings true risk tranching to DeFi, and helps every investor optimize their yield farming strategy.
Tranching is a complete rethinking of yield distribution, which aggregates farming strategies into a portfolio — such as a blend of vaults and AMMs — which is then sliced into tranches according to risk. The capital distribution flows like a waterfall, paying the senior tranche first, then overflowing to the next most senior and so on. The junior tranches bear the highest risk and the highest dynamically leveraged returns. In contrast, the senior tranches in the same portfolio have the highest capital protection.
In my opinion Waterfall DeFi is a game changer, because it enables investors to spread their funds over different tranches of portfolio and earn varying levels of yield based on their risk exposure. Waterfall DeFi tranches enable both risk-averse and high risk-tolerance investors to generate expected returns from the same set of DeFi assets, which smooths the on ramp for newbies — instead of needing to understand every intricacy of the portfolio to make the right investment decision, the salient differentiator is self-awareness of personal risk appetite.
More conservative users can opt for fixed, predictable yields, alongside those leveraging their capital for potential big wins. And every investor can improve the risk diversification in their own portfolio, while the smart contracts underlying the platform do their thing — claiming and selling the underlying yield continually, ensuring optimally weighted average returns for all.
Remember those old credit default swaps? This is a really clear illustration of the transparency of DeFi, vs the TradFi world, where securitized investments get their risk abstracted away to obscurity and no one knows what the hell their funds are really into.
By contrast, Waterfall DeFi offers investors clear information about the portfolio strategy, past and expected performances, and the full characteristics (including risk parameters) of each tranche, for easy comparison.
Welcome to the future.
Waterfall`s ($WTF) founder has over a decade of experience in investment banking and crypto trading strategies, and has put together a strong team led by an ex-McKinsey consultant with unicorn startup experience. Their $2m seed round was a great success, attracting a diverse range of interest including GBV, Divergence, Ascensive Assets, Morningstar Ventures, Boxmining and more, alongside private investment.
But while Waterfall isn’t the only platform offering this methodology to DeFi, crucially the team’s experience in structuring is what makes Waterfall so interesting — because success in tranching is all about how that portfolio is sequentially allocated.
Beginning with 3 initial tranches instead of only 2 across existing protocols, the protocol starts with BSC (chosen for its low gas fees, stable APY farms and growing community) and will expand rapidly including cross-chain compatibility, pursuing a multi-farm capital deployment strategy instead of single-farm. The protocol is chain-agnostic and the platform wholly noncustodial, genuinely contributing to the DeFi ecosystem.
Genuine diversification is the aim, expanding to offer an increased variety of crypto assets going forward, as well as enabling its community of investors the opportunity to structure their own tranches in the future. Waterfall is designed to democratize structured financial products, and reduce the complexity, broadening the potential universe of investors, as the uptake of DeFi continues to expand along the adoption curve.
Go with the Waterfall flow: IEO upcoming
The project will conduct IEO on AscendEX, with $WTF token prices starting at $0.35. The auction starts on October 20th, and listing on 21st, so you need to move fast to get on this one at the top of the cascade. Most of the tokens are reserved for community allocations, so this public sale represents a unique chance to invest up front in this strong prospect.
By acquiring the native WTF token, early investors will be able to play a direct governance role, shaping the evolution of this nascent community and its future incentives, as well as capturing revenue fees generated. The release of tokens is designed to reward real users who take time to interact, rather than speculative flash-farmers.
Staking tokens into the pool for voting rights is the first stage, with the roadmap for V3 including a DAO with staking for creation of tranching strategies, which will also earn structuring fees according to popular adoption.
So don’t miss your chance to join this IEO, and be part of this exciting new DeFi venture — bringing a new layer of investment sophistication to the ecosystem at this crucial stage of its maturity, by rethinking risk allocation.