We’re pleased to announce that BarnBridge’s first risk tokenization application, SMART Yield, now supports select stablecoin markets on both Aave and C.R.E.A.M. Finance. These integrations come after a successful piloting of Compound Finance’s USDC market which saw over $120M in unique deposits over the past two months and earned our DAO $600K in fee revenues.
SMART Yield now supports stablecoin originators totaling $13.6B in TVL. By integrating with Aave and C.R.E.A.M. Finance, BarnBridge users will have access to diverse yield profiles for USDC, USDT, DAI, and GUSD. Users depositing into the Aave markets will also enjoy passed-through rewards for the duration of Aave’s liquidity mining program.
The ability to “risk manage” deposits across the ecosystem will help normalize originator markets, making DeFi more efficient.
To bootstrap initial liquidity in each of these pools, the BarnBridge DAO has signaled its intent to approve the distribution of 180,000 BOND over the next 10 weeks to participants in the junior tranches of these new pools. This vote will be conducted on-chain over the next 12 days. The distribution across pools will be as follows:
- USDC: 10,000 BOND / week
- USDT: 4,000 BOND / week
- DAI: 2,500 BOND / week
- GUSD: 500 BOND / week
- USDC: 500 BOND / week
- USDT: 250 BOND / week
- DAI: 250 BOND / week
With these integrations in place, we look forward to deploying on Polygon (formerly Matic Network) via Aave in the coming weeks.
SMART Yield allows users to tranche out the yield from the debt pools of other projects, such as AAVE or C.R.E.A.M. Finance, to normalize the risk curve with derivatives for risk mitigation. It aggregates user deposits into these underlying money markets and allocates the yield generated on the sum between different risk profiles which we refer to as tranches. This is exactly what SMART stands for: Structured Market Adjusted Risk Tranches.
Senior tranche depositors lock in a fixed-rate yield upon entering their side of the pool. This fixed rate is determined by the underlying market rate, as well as the ratio between existing seniors and juniors. Seniors’ yield is generated by their principal when the underlying market rate is at or above their fixed rate. When the market rate is below their fixed rate, the yield is derived from that being earned by the juniors, or even from the juniors’ principals themselves.
Junior tranche depositors are willing to subsidize senior yields as they have the opportunity to benefit from levered yields. Because seniors are only entitled to their fixed yields, any excess yield generated by their principal goes to the junior side. This excess yield can be thought of as two-dimensional: how much excess yield is being generated, and how large is the senior pool relative to the junior one? So while juniors are indeed risking their yield and potentially their principal, an equilibrium forms at the point where the relative volume of juniors is sustainable given the potential for excess senior yield.
Aave is a decentralised non-custodial liquidity market protocol where users can participate as depositors or borrowers. Depositors provide liquidity to the market to earn a passive income, while borrowers are able to borrow in an overcollateralised (perpetually) or undercollateralised (one-block liquidity) fashion.
It currently holds ~$20B in deposits across its v1, v2, AMM, and Polygon-based markets.
C.R.E.A.M. Finance is a decentralized lending protocol for individuals and protocols to access financial services. The protocol is permissionless, transparent, and non-custodial. C.R.E.A.M. Finance’s smart contract money markets are focused on longtail assets — with the goal of increasing capital efficiency for all assets in crypto markets.
It currently holds ~$1.3B in deposits across its Ethereum, Binance Smart Chain, Fantom, and Iron Bank markets.