Further expanding our product offerings, we proudly introduce our community to our latest risk-tranched product, BNB Falls.
In this article, we aim to cover the key product features and how our community can choose which tranche to invest in based on risk tolerance.
What is BNB Falls?
BNB Falls is a portfolio of carefully curated $BNB yield strategies on BNB-Chain, that includes but is not limited to lending and validator delegation. This portfolio is then sliced into three tranches: Senior, Mezzanine and Junior. (For more information on how “tranching” works, click here for our deep dive.)
All three tranches have a fixed maturity period of 2-week. The Senior and Mezzanine tranche earn a fixed APR in $BNB tokens, while the Junior tranche earns a dynamic APR in $BNB tokens.
The max deposit allowed (TVL) in each tranche is fixed to ensure each tranche offers an ideal risk-and-return balanced product to the DeFi community.
How to choose which tranche to invest in?
Users can choose between Senior, Mezzanine and Junior tranches based on risk tolerance and return expectations. Expected risk-return profile and functioning of each tranche is covered below:
Senior Tranche: Safe, Total expected APR — 22% (Fixed APR of 1.85% in $BNB + 20%+ APR in $WTF tokens).
The Senior tranche has the first priority to receive cash flows from the portfolio, earns a fixed APR, and enjoys 40% capital subordination from lower tranches. That means that the lower tranches (representing 40% of the portfolio deposit) cover any potential losses of the senior tranche during an adverse scenario where a capital loss is incurred or in a situation where the portfolio yield is less than expected. Essentially, the senior tranche, with the highest cash flow payment priority and the potential downside protection, provides a relatively safer investment option for our risk-averse users.
Mezzanine Tranche: Medium Risk, Total expected APR — 27% (Fixed APR of 2.85% in $BNB + 24.25%+ APR in $WTF tokens).
The Mezzanine tranche has the second priority to cash flows and will earn a fixed weekly APR higher than the Senior tranche. Users investing in the mezzanine tranche will enjoy 10% capital subordination from the junior tranche.
Junior Tranche: High Risk, Total expected APR — 50+% (Variable APR of 9.95% in $BNB + 48.5%+ APR in $WTF tokens).
The Junior tranche has the last priority to cash flows, hence earning the remaining cash flows in the portfolio after paying off the Senior and Mezzanine tranche investors. Given the fluidity of the entire DeFi asset class, the APR for the Junior tranche is dynamic. Under ideal scenarios, users investing in the Junior tranche will earn a high leveraged return.