Products > Yield Tranches > Overview
The product offers two classes of tranches, differentiated by the level of risk and the share of underlying yield assigned to each class.
This class of tranche offers intrinsic protection on funds, given by Junior class deposits. Each pool is composed of yield-bearing tokens, and the pool’s NAV is meant to only increase. A decrease in the NAV triggers the emergency shutdown to protect YTs 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 or 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:
- Yield Tranches themselves;
- Underlying yield source;
- All the dependencies of the underlying yield source.
This class of tranche achieves a greater and leveraged yield by dragging more risk, as Junior holders have a second lien or no lien at all in case of fund losses.
Junior tranche is designed to receive a higher share of yield compared to the Senior class, which will proportionally compensate for the higher risk taken by Junior depositors.
The Adaptive Yield Split is the mechanism that computes the APY split between Senior and Junior Tranches. It is dynamically conditional to the liquidity deposited on each tranche side. This mechanism lets:
- Senior Tranche receives most of the underlying yield when liquidity is low on the Junior side (i.e. low coverage on Senior funds), or receives a guaranteed minimum portion of the underlying yield when Junior liquidity is high (i.e. high coverage on Senior funds);
- Junior Tranche receives outperforming APYs on the Junior Tranches, no matter what the amount of deposited liquidity on the Senior is.
Returns examples vs a Base APY of 10%
More technical details regarding this split mechanism can be found in the dedicated section.
Yield Tranches are available on Ethereum and Polygon for multiple protocols and underlying assets.
stMATIC YTs accept MATIC as the deposited asset to give users a seamless experience by staking their tokens in a few clicks. When users want to redeem, stMATIC YTs generate an NFT representing the underlying capital. After 2–3 days, the average waiting period for stMATIC unstaking, users can finalize their withdrawal.
Euler vauts are sunsetting and in withdrawal-only mode