Investment Strategy: Tranching Model for YieldNest MAX LRTs

MAX LRT Strategies
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Investment Strategy: Tranching Model for YieldNest MAX LRTs

:brain: Core Concept

Introduce a dual-tranche system for each MAX LRT that separates risk exposure and yield potential:

  • Senior Tranche: Safe, auto-compounding default for all holders. Receives base yield.
  • Junior Tranche: Opt-in staking vault that underwrites strategy risk. Earns boosted yield by absorbing potential losses first.

:brick: Architecture

Each MAX LRT splits into:

  • ynETHx → [ynETHx-Senior, ynETHx-Junior]
  • ynBTCx → [ynBTCx-Senior, ynBTCx-Junior]
  • ynUSDx → [ynUSDx-Senior, ynUSDx-Junior]
  • ynBNBx → [ynBNBx-Senior, ynBNBx-Junior]

:green_circle: Senior Tranche (Default Layer)

  • Asset: Base MAX LRT (e.g., ynETHx)
  • Risk: Protected from strategy drawdowns (junior covers losses first)
  • Yield: Stable, lower APY (auto-compounded)
  • Target Users: Passive DeFi users, institutions, DAOs
  • Design:
    • Receives priority claim on asset value
    • Can be unstaked anytime (subject to cooldown)

:red_circle: Junior Tranche (Staked Risk Layer)

  • Asset: Staked MAX LRT into YieldNest Tranche Vault (e.g., synETHx)
  • Risk: Absorbs any loss from strategy underperformance
  • Yield: High APY from:
    • Strategy rewards
    • Yield spread from Senior tranche
    • Optional protocol incentive emissions
  • Target Users: Degens, advanced users, yield chasers
  • Design:
    • Junior stake pool collateralizes Senior stability
    • Can be slashed for strategy losses
    • Lock-in period (e.g., 7-14 days)

:repeat_button: Flow Mechanics

  1. User mints ynETHx via depositing supported strategies.
  2. Default state = Senior Tranche.
  3. User opts to stake ynETHx into Junior Vault (synETHx) to underwrite risk.
  4. Vault logic auto-distributes yield:
  • Senior gets priority fixed rate (e.g., 4–6% APY)
  • Junior earns all surplus (e.g., restaking rewards, MEV, incentives)
  • Junior absorbs losses if TVL < expected

:bar_chart: Risk Management

  • Cap junior size vs. senior (e.g., max 1:3 ratio) to ensure solvency
  • Backtest loss scenarios per MAX LRT profile
  • Protocol-controlled circuit breakers for emergency halts
  • Hypernative AI risk engine monitors strategies, triggers early warnings

:money_bag: Use Case Example: ynETHx

  • Senior: ETH, wstETH, sfrxETH → 4.5% APY, fully auto-compounded
  • Junior: Restaking AVSs (EigenLayer, Karak), MEV boosts → 8–20% APY
  • If an AVS slashes, junior pool absorbs the hit, senior protected

:puzzle_piece: Modular Deployment

  • Each tranche vault uses ERC-4626 wrappers for integration
  • Optional LP pairs: ynETHx-Senior / synETHx Curve pool
  • Integrate with MAX LRT DeFi legos (lending, swaps, farming)

:chart_increasing: Benefits

  • Senior: Attractive for DAOs, funds, LPs seeking secure ETH/BTC/USD exposure
  • Junior: Tailored for active users looking for high upside
  • YieldNest: More TVL, protocol revenue, and user stratification

:wrench: Next Steps

  • Define tranche math & ratios per MAX LRT
  • Simulate worst-case slashing events
  • Design Vault UI: “Stake for higher yield / Hold for safety”
  • DAO vote to bootstrap junior tranche incentives (YND emissions)

Should we explore this model?

  • Yes explore Tranching Model for YieldNest MAX LRTs
  • No it’s to risky
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