Vyper Protocol - Permissionless Tranching
WHY VYPER? 🏗️ As of today there are no effective risk-management solutions in DeFi. Vyper is a DeFi DeFi-native solution for effective risk transferring and yield manipulation.
- Smart contract hacks and defaults happen on a daily basis and insurances do not scale
- Current risk management systems are capital intensive and can still result in losses
- Investors with different risk profiles have access to the SAME level of risk. Still, DeFi is blossoming and there are more than 200+ BN $ in TVL across chains and protocols. More and more capital pours in on a daily basis and is hunting for yields, but it is exposed to many risks. We are building Vyper, a financial primitive to pool together yield-generating assets and SLICE them in ANY way, creating different buckets with different risk-return profiles. Let us give you a simple explanation of how tranching works: Imagine Alice and Bob both deposit $50 on a lending protocol, Alice earns a smaller share of the interest generated and Bob earns a higher share. In exchange for this higher yield, Bob is impacted first if any loss happens, whether it results from a hack or a default of the counterparty. Effectively Alice is giving up part of its yield to get protection from Bob. EXPLANATION OF THE TRANCHING PRIMITIVE 📊 In simple terms vyper core’s workflow is structured in three parts. We kept the key inputs very flexible so that application layers can have the freedom of using them as they see fit. First an application layer sets the tranche configuration which depends on the particular use case. Inputs include how much capital goes in each tranche, how the interest should be allocated and also how many tranche tokens to mint for each tranche Second, funds are allocated to the target protocol to generate yield, this could be for instance a lending protocol. Potentially any protocol can be integrated with Vyper Core and become a target for its funds, we have abstracted our interface through the use of Proxy Layers Finally the funds are redeemed from the target protocol. Two scenarios are possible: If no loss happens and yield is generated, capital is returned in full and the interest is split according to the original input On the other hand, if there is any kind of loss, not all capital will be returned. What happens is that capital will be returned first to the senior tranche and only after to the junior with a waterfall mechanism SOME USE CASES: TODAY AND TOMORROW 🚀 The first use case we built for the hackathon is focusing on tranching lending and stables, a product that we all use everyday in DeFi. For lending protocols, Vyper allows for the creation of two tranches out of a lending deposit. You can lend safely via the senior tranche without worrying about hacks and exploits OR you can boost your APY by taking the more risky side In the case of yield-farming, you can use tranching to hedge impermanent loss and sleep better by giving away some yield OR you can boost your yield even more by taking all the risks of the other side Today we are building Vyper with composability at its core, and we are actively integrating with the major DeFi protocols, starting with Serum and Solend Our vision is for Vyper to become a cornerstone of DeFi and build a prosperous ecosystem around it, enabling large-size institutional capital to enter DeFi more safely. In the future we plan to capture also all the tradFi use cases of tranching as they start moving on-chain, thus getting a slice of the huge $10 trillion market of tradFi tranching From tackling real-assets such as mortgages and loans, to create a defi-native merchant bank to originate and distribute tranches, to provide effective ways to do uncollateralized lending, on-chain tranching has endless applications TESTING INSTRUCTIONS 💻 Once a vault is initialised by the application admin, the users can deposit assets via the “deposit_asset” rpc entry point and withdraw via the “withdraw_asset”. Once an epoch switches from the pre-deployment phase to the deployment one, the “tick” entry point is called from an external crank to deploy assets to vyper core (the primitive) and redeem tranches. Users can then redeem their tranches closing their temp epoch account calling the “close_user_epoch” entrypoint. Finally when users need to redeem assets swapping tranches they can mark assets as to be withdrawn with the “withdraw_asset” entrypoint.
Useful links 🔥 Github: https://github.com/vyper-protocol/vyper Devnet: https://vaults.vyperprotocol.io/ Website: https://www.vyperprotocol.io/ Twitter: https://twitter.com/VyperProtocol Discord: discord.gg/khmEm8Ugd5 You Tube: https://youtu.be/tZd3Y11T3ac