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WaterFall DeFi grading products and token economics introduction

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Waterfall DeFi aims to bridge the gap between traditional financial products and DeFi products with its risk grading products

Written by: WaterFall DeFi

Waterfall Defi releases its first structured grading product, BUSD Falls

As the cryptocurrency industry continues to grow, Defi's offerings are becoming more mature and diversified. Over the past year, we can witness the rise of DeFi in derivatives such as on-chain lending, liquidity pools, leveraged trading, equity tokens and indices. However, there is still a gap that needs to be filled in the cryptocurrency industry: the absence of structured traditional financial instruments; The representative of structured financial products is risk grading products.

Waterfall DeFi aims to bridge the gap between traditional financial products and DeFi products with its risk grading products

We are pleased to be able to introduce Waterfall Defi's first risk rating product: BUSD Falls. In this article, we will describe BUSD Falls' main product features, classification mechanism, product planning, and how it will improve the revenue model of traditional DeFi mining.

What is BUSD Falls

BUSD Falls is a portfolio of three carefully selected BUSD Stablecoin lending vakers on BSC (Binance Smart Chain) including Alpaca Finance, CREAM Finance and Venus, According to the risk levels, there are three levels of Senior Tranche, Mezzanine Tranche and Junior Tranche. (For more information on how "Risk stratification /Tranches" works, see "Risk Tranching in Defi," written by Tom Cheng, the head of Waterfall Defi's project.)

All three risk levels now have fixed seven-day maturities. Both the advanced and intermediate tiers get fixed APR, while the junior tiers get dynamic APR.

The maximum amount of deposits (TVL) allowed in each product cycle is fixed to ensure ideal product returns, providing investors with a true risk-return tiered product.

BUSD Falls

Waterfall DeFi offers three risk-grading products with different yields; The DeFi portfolio behind the three tiered products is the same, but with different risks and rewards.

1. The senior grade has the first priority to obtain cash flow from the portfolio; Earn a fixed weekly APR and enjoy 40% capital subordination from the lower two tiers (intermediate and lower). This means that in the adverse event of asset losses or lower-than-expected portfolio returns, the lower portion (representing 40% of portfolio deposits) can cover any potential losses from the senior tier. In essence, an advanced tier with the highest cash flow payment priority and potential loss protection provides a relatively safe investment option for users wishing to avoid risk.

2. The intermediate level has the second priority of cash flow and gets a fixed APR every week, which is higher than the advanced level. Users who invest in the middle tier will enjoy 10% capital subordination from the lower tier.

3. The primary tier has the last priority on cash flow and will earn the remaining cash flow in the portfolio after paying the capital and returns of the senior and intermediate tier investors. The APR for the junior tier segment is dynamic given the liquidity of the entire DeFi asset class. In an ideal world, users invest in the primary tier and get highly leveraged returns.

BUSD Falls deployment cycle

Each BUSD Falls deployment cycle is fixed at one week. There is a deposit period before each deployment cycle, and users can deposit their funds into a tier of their choice. After the deposit limit is reached in all tiers, the deposit funds will be locked up for 1 week and the smart contract will automatically execute the fund deployment cycle (starting from cycle 1).

At the end of each deployment cycle, users can redeem their funds and revenue earned during the deployment cycle. If users wish to continue investing their funds during the next deployment cycle, they can choose to re-deposit some or all of their principal and proceeds into any level of Waterfall DeFi product, thereby further achieving compound returns.

Let's take you through some of the key features that set us apart from other DeFi protocols on the market:

Portfolio diversification

Our portfolio strategy packages multiple DeFi assets and income mining pools to ensure diversification of risk and return, rather than risk grading individual DeFi assets or income mining pools. Our first product, BUSD Falls, has allocated a portfolio of three BUSD Stablecoin lending vaults, Alpaca Finance, CREAM Finance and Venus on BSC, specifically selecting them for their high TVL, sustainable yield and reliable codes. We aim to offer a range of diversified portfolio strategies, including multi-asset liquidity (LP tokens), a wide range of DeFi products (underlying assets), and multiple tiered products that optimize user mining strategies.

There are three risk levels

Unlike other risk grading platforms that offer only advanced and primary tiers, we split our portfolio into three tiers.

The three-tier tier allows us to provide a higher capital subordination ratio for the senior tier and a higher leverage return for the junior tier, while creating an additional tier (intermediate) that provides a fixed APR close to the average portfolio APR.

Unique grading mechanism

In most of the existing classification platforms, the classification mechanism is heavily biased towards the primary level in the depth of the capital pool. This unbalanced distribution results in excessive protection of the capital of the senior tier, while the junior tier has little leverage and ultimately fails to allow its users to enjoy the real advantages of the tier.

The tiered TVL limits in our product, BUSD Falls, will always maintain the ideal pool depth for the different tiers of the product, ensuring that each tier mechanism is unique and brings unique product advantages from different levels.

For example, our advanced tier mechanism -- fixed one-week term, fixed weekly APR and highest priority -- is a very solid investment strategy that allows DeFi users to invest in fixed income products similar to those found in traditional finance. And our primary tier -- fixed one-week term, dynamic APR and lowest priority will allow DeFi users to invest in high risk/high return products with the advantage of diversification and high leverage returns.

Future Product Plan

Although grading is a fairly old concept in traditional finance, in DeFi, the concept is just beginning to be understood by users. We have seen the launch of multiple tiered products over the past year, but we believe none of these platforms provide true risk-adjusted returns for users.

With the launch of our first product, "BUSD Falls," we want to demonstrate the true benefits of grading and give our community a different risk-adjusted return. In the near future, we will add other staboins and mainstream cryptocurrencies to the DeFi portfolio we support. Waterfall DeFi team is very passionate about designing innovative DeFi products and we will continue to offer a unique graded investment product to the DeFi community.

Waterfall DeFi's token economy

The launch of THE WTF token will enable users to better participate in the Waterfall DeFi agreement. Users can put their WTF tokens into the pledge pool and receive governance/voting rights and a share of platform fees.

This article will share more information about the economics of WTF tokens and the role of WTF tokens in the protocol. The first section will give a brief overview of WTF's token economics and elaborate on the allocation of tokens under different classes. The second section covers common use cases for WTF tokens.

An overview of

Token name: $WTF

Total token supply: 100,000,000 pieces (100%)

Initial token circulation: 5,000,000 coins (5%)

Token percentage distribution

WTF token supply will gradually increase in the next 5 years:

WTF token allocation:

1. 45% of WTF tokens are allocated to the community

Community-specific WTF token allocations have helped boost Waterfall DeFi's user numbers and user engagement. WTF tokens allocated to the community will be awarded to users through different liquidity mining projects.

, & have spent45% of WTF tokens (45,000,000) will be allocated to the community.

, & have spentAll WTF tokens under this category will be released weekly after the issue. 50% of the total amount of this portion of tokens will be unlocked in the first two years, with the amount halved every two years thereafter (e.g., only 25% in years 3 and 4, 12.5% in years 5 and 6, and so on). The community Distribution program is designed to reward early platform participants while ensuring a long-term sustainable mobility mining program.

2. 20% of WTF tokens are allocated to partners and product development teams

We reserve a portion of WTF tokens for partners and product development teams and will ensure the continued expansion of Waterfall DeFi's ecosystem through strategic cooperation, token grants, financing and product development planning.

, & have spent20% of WTF tokens (20,000,000) will be allocated to partners and product development.

, & have spentAll WTF tokens under this category will follow a fixed release schedule, with 10% of WTF tokens unlocked upon launch and the remaining 90% unlocked linearly over 104 weeks thereafter.

3. 10% of WTF tokens are allocated to strategic investors

The tokens will be distributed to strategic investors and early backers of the project. Our investors will use their expertise and experience in DeFi to help us realise Waterfall DeFi's long-term vision.

, & have spent10% of WTF tokens (10,000,000 pieces) have been allocated to Waterfall DeFi's partners, who will assist in expanding the Waterfall DeFi ecosystem.

, & have spentAllocation of tokens with partners and product development. WTF tokens under this category will follow a fixed release schedule, with 10% of WTF tokens unlocked upon launch and the remaining 90% unlocked linearly for 104 weeks thereafter.

4. 10% of WTF tokens are allocated to the team

Team allocations for WTF tokens will be reserved for existing and future Waterfall DeFi team members. Our team has extensive and comprehensive expertise and work experience in cryptocurrency, finance, commerce and technology.

, & have spent10% of WTF tokens (10,000,000 pieces) will be allocated to the existing (and future) Waterfall Defi team.

, & have spentAll WTF tokens under this category will follow a fixed release schedule, with 10% of WTF tokens unlocked nine months after launch and the remaining 90% unlocked linearly within 104 weeks after launch.

5. 13% of WTF tokens are allocated to Treasury

, & have spent13% of WTF tokens (13,000,000) are locked up in Treasury. Once the DAO is live, WTF token owners can propose and vote on the use of Treasury funds.

, & have spentAll WTF tokens under this category will be 100% unlocked and sent to Treasury upon issue.

Note: Treasury tokens will not be part of the initial circulating supply and will be locked up in the multi-SIG account for future use.

6. 2% of WTF tokens are for public sale

2% of WTF tokens will be used for the public sale of WTF tokens prior to the official launch. As a decentralized agreement, Waterfall DeFi understands the importance of having an actively engaged community. This distribution allows supporters of our projects to become part of the community prior to going public.

, & have spent2% of WTF tokens (2,000,000) will be available for public sale, please refer to Medium for details of public sale.

, & have spentAll WTF tokens under this category will be unlocked at 100% at TGE (IE0).

Practical application of WTF token

WTF token is the main governance token issued by Waterfall DeFi platform. WTF tokens play a major role in facilitating platform governance, rewarding platform users, adjusting incentives, and capturing fee income generated by the platform.

Functions of WTF tokens:

1. Governance through THE DAO: The DAO will play a key role in determining key features of the agreement, including issuing new or changing existing share structures, voting on the eligibility of DeFi assets, voting on changes to WTF income distribution, and determining rates.

2. Platform revenue share: The Platform will charge a redemption fee at the time of withdrawal. A portion of the redemption fee collected by the platform is distributed to WTF token holders. For more details on WTF token pledges, see the article here.

3. Dynamic incentive: Some Waterfall DeFi portfolio will adopt a dynamic share graded thickness model (where the thickness refers to the amount of funds deposited in different shares). To ensure the ideal thickness of each tier's share and strengthen risk diversification, the platform will reward users who deposit funds in the tier with the largest thickness deviation with more WTF tokens to ensure that the final tier's thickness is close to the ideal ratio.

4. Structured fees: We envision the future Waterfall DeFi platform to be a fully decentralized risk grading platform, meaning users can participate and create their own product strategies. Users with a certain number of WTF tokens will be able to come up with their own grading policies. Once the DAO is approved, the author can earn a structured fee for a percentage of the total deposit for the policy.