Yield Tranches

Products > Yield Tranches

In the financial world, a tranche represents a product split that carries specific features like risk, yields, duration. They are often arranged together to create pools of diversified products or a basket of investments with similar characteristics (risk-return related).

Based on this concept, Idle launched its own tranches primitive: Yield Tranches.

Each tranched asset has its own yield source, with two risk-adjusted investment profiles (Senior and Junior).

Taking the stETH Yield Tranche based on the Instadapp stETH pool as an example, stETH deposited into the Senior and Junior classes of that Instadapp-based strategy are aggregated into a single pool and then deployed into the Instadapp Lite market.

Tranches allow users to enjoy DeFi yields with built-in protection on deposits for Senior depositors or boosted yield for Junior ones.

Users can decide the strategy according to their risk profile: they can deposit funds into two different tranches (Senior or Junior) in exchange for a token indicating their claim.