Guide to Perpetual Yield Tranches

How Do Idle Perpetual Yield Tranches Work?

The product offers two classes of tranches, differentiated by the level of risk and the share of pool’s yield assigned to each class:
  • A Senior Tranche offers intrinsic protection on funds, given by Junior class TVL. Each pool is composed of yield-bearing tokens, and the pool’s NAV can only increase. The decrease of the NAV triggers the emergency shutdown in order to protect Senior liquidity providers.
    Senior Tranches intrinsically have a first lien on the underlying assets — they’re first in line to be repaid in case of default (hack, loss of funds). This product provides full-spectrum coverage, as the loss is covered regardless of the dependency or underlying protocol that caused it. Junior TVL will cover Senior TVL from a full spectrum of oracle/smart contract risks on:
    • Idle tranches;
    • Primary yield source;
    • Secondary and subsequent yield sources are used by the primary ones.
  • A Junior Tranche achieves a greater yield by dragging more risk, as Junior holders have a second lien or no lien at all in case of fund losses. This class of tranches is designed to receive a higher share of yield compared to the Senior class, which will proportionally compensate their Junior counterparts for taking such risks.

Protocols and Assets

Currently, Perpetual Yield Tranches are available for (protocol, asset):
Idle Best-Yield strategy
Lido
Convex
  • DAI
  • FEI
  • stETH
  • FRAX3CRV
  • MIM3CRV
LPs receive IdleCDO_AA_StrategyName (e.g. IdleCDO_AA_idleDAIYield) for Senior deposits and IdleCDO_BB_StrategyName for asset provision in the Junior class. Both tokens are fully fungible ERC-20.
Senior Tranches based on Idle Best-Yield strategy can stake the respective tranchesTokens to receive $IDLE governance tokens farmed by each Idle-based pool.

Yield and Loss Scenarios

These two classes of tranches have been designed and developed to meet different users' needs. Whether you’re an experienced risk-lover degen or a new joiner to DeFi amazed by its yields, this new product will offer something for you.
Given the nature of the two classes of tranches, which differ in terms of risks and gains opportunities, it is possible to explain their behavior through two scenarios: a Yield case and a Loss case
First of all, it is important to highlight that the interest earned in the pool will be split between the two classes according to a predefined ratio, which gives 10% of interests to Senior Tranches and 90% of interests to Junior Tranches.
Yield case vs. Loss case
Assume there is a pool with 1000 DAI in total with a 10% APY; these would be the scenarios:
  • In the Yield case, the interests generated in the pool (100 DAI in total) will be split as 90 DAI (90% of the interest) to Junior Tranche and 10 DAI (10% of the interest) to Senior Tranche. The current APY and the percentage of interest are higher in Junior Tranche because, as mentioned above, this class takes more risk than the Senior one and is rewarded accordingly.
  • In the Loss case, the only class of tranches affected by a possible loss will be the Junior one. Suppose, there is a 100 DAI hack loss, the Senior tranche will have the entire capital protected, while Junior tranches will bear a partial loss of the funds deposited.

Benefits Using Idle Perpetual Yield Tranches

There are some benefits that can be highlighted by using this product:
  • Cheaper transactions’ deposits and redeems;
  • Governance tokens (COMP, stkAAVE, LDO, CVX, CRV) automatically harvested to boost yields;
  • $IDLE liquidity mining activated on Senior classes based on Idle Best-Yield strategy;
  • Deposits and withdrawals are possible at any time due to no locking periods or epochs;
  • Only a 10% performance fee of the interest generated is applied.
Last modified 28d ago