Decentralized Finance, But Structured — A Deep Dive Into Skyrim Finance
This is the start of a new journey. The name of this journey is Skyrim Finance.
So what is it if condensed into a nutshell?
From when the term was coined back in August 2018 to today. Decentralized Finance has seen explosive growth and no apparent sign of slowing, especially after the institutional adoption kicks in.
Like everything else, if an industry wants to continue to evolve, it must stratify into myriads of smaller, more defined sectors to ramp up the efficiency. The DeFi market is no exception.
Decentralized Finance has grown from a tiny space with single-digit applications to a diverse ecosystem of financial applications, from identity, custodial services, payments, investing, to stable-coins, prediction markets, insurance and credit, and lending.
DeFi, in our minds, epitomizes what cryptocurrency and blockchain really stand for. It is the most lego-like and open sector of this space, which underlies its well-known popularity and potential.
However, we believe the current DeFi market is yet to reach its true greatness when it comes to serving its users. The Decentralized Finance market consists of at least two types of DeFi investors. Many crypto holders are seeking the fixed-rate APY without standard risk and there are also many seeking higher yield farming APY with high leverage.
With that, we aim to create a synergy between the gap of these two target markets.
So the objective of Skyrim Finance is to create a Multichain Decentralized Structured Finance Protocol or a blended product that fits between these two target markets so that participants can have a single-touch hedged approach to DeFi.
So what is it if delineated in detail?
Let’s break it down one by one.
The Decentralized Finance Status Quo
It is hard to give it a once for all definition on the constantly evolving DeFi space. For different people, the perception can drastically vary. However, it won’t be surprising if people find it is all about YouTube ads talking about disruption or hot shot retail traders talking about their 3,000% baggers.
However, Decentralized finance refers to digital, cryptography-protected peer-to-peer financial services technologies that allow crypto trading, loans, interest accounts, and many more services. They are all reliant on public blockchains like Ethereum and other chains as well.
At the time of this writing, the current market cap of the entire countable decentralized finance market mounts to $132.47 billion, a 5.98% increase over the last day according to https://coinmarketcap.com/view/defi/.
In 2020, the explosion of new decentralized financial protocols created on Ethereum was on the headlines of nearly every news outlet.
Some of the most talked-about names are those involved in decentralized exchanges including Uniswap, 0x, Aave, MakerDAO, Yearn Finance, and numerous investment Decentralized Autonomous Organizations.
The DeFi is here to stay because, compared with traditional money markets, there are still a lot more opportunities for retail investors, especially when it comes to creating profits. Token holders can deposit/stake their funds into a liquidity pool to earn a passive income (LP reward). There are some more established DeFi lending and borrowing protocols like Aave where users get to earn staking rewards, loan interests, and improve loan-to-value ratios.
But what is Structured Finance?
Ok, so, Structured Products (SP) are a combination of financial derivatives. It is usually a structured product that derives from a series of derivatives, with a purpose to achieve a certain return. In the real world, it is typically designed for mostly extensive corporations who have highly specific needs that a simple loan or another conventional financial instrument will not satisfy.
When applied to DeFi, its flexibility and customizability perfectly fit the DeFi space where most decentralized finance projects are created leveraging each other’s open-source technology, algorithm, and user base.
One of the most distinctive advantages of this tool is that it can supplement the known investment vehicles of the current market. It can pack multiple vehicles into a product that anyone can purchase without worrying about the underlying complexity of its structure. In a broad sense, you can understand it as a financial product that is customized for all and different clients.
Why will it take DeFi a step further ?
As mentioned above, due to its flexibility and customizability, this tool has witnessed massive growth and has become a powerful tool for asset management. We believe that is where the magic and imagination of Structured Finance lies.
And although users are flowing into the DeFi world every day, not one project can cater to all investor profiles. And there must be one to mediate the market needs.
Skyrim Finance aims to create a blended product that fits among target markets so that participants can have a single-touch hedged approach to DeFi.
The Skyrim Finance Yield Pool will generate customized DeFi products to help investors of different profiles reach their desired profit goal by integrating the well-established DeFi markets, off-chain revenue streams, asset originators, underwriters and investors.
What does the product look like ?
The core of Skyrim Finance is dTRANCHE
The purpose of our first product is to satisfy investors’ different risk preference or financing needs.
dTRANCHE can be deployed with a two-token structure that allows investors to invest in two different kinds of fungibles, interesting bearing tokens: SENIOR and JUNIOR.
JUNIOR, known as the “risk token”, takes the risk of “defaults” (real yield < expected yield) first but also receives higher returns.
SENIOR, known as the “yield token”, is protected against defaults by the JUNIOR token and receives lower returns. This is similar to common Junior/Senior investment structures.
The Loan Market Maker deposits collateral to mint two kinds of fungible tokens SENIOR token and JUNIOR token in exchange of their deposit. MMs can choose to sell the fungible token(s) to earn a premium, or provide liquidity in Uniswap pools with the fungible token(s) and earn fees with liquidity rewards. Both senior and junior investors can choose the interest rate with adjusted risk and leverage they need.
The workflow consists of five main components: Collateral Deposit/Withdraw (Deposit/Withdraw), Yield Tokenization (Invest), Vault of Yield (Vault). Yield Clearing Process (Settlement) and Liquidity Pool Reward (Pool).
References:
- https://coinmarketcap.com/alexandria/article/what-is-decentralized-finance#:~:text=The%20term%20DeFi%2C%20short%20for,and%20Brendan%20Forster%20of%20Dharma
- https://www.forbes.com/sites/kenrapoza/2021/03/21/whats-the-big-deal-about-defi-and-how-do-you-invest-in-it/
- https://www.investopedia.com/terms/s/structuredfinance.asp#:~:text=Structured%20finance%20is%20a%20financial,obligations%2C%20are%20non%2Dtransferable.
- https://en.wikipedia.org/wiki/Structured_finance
- https://docs.skyrim.finance/getting-started/background
About Skyrim Finance
Skyrim Finance is the First Multichain Decentralized Structured Finance Marketplace. Skyrim Finance aims to build the Robo-Advisor of the DeFi ecosystem. The objective of Skyrim Finance is to help investors of different profiles have risk-adjusted returns through fixed-rate and leveraged-yield DeFi products.
Contact Us
Telegram: https://t.me/skyrimfinance
Twitter: https://twitter.com/SkyrimFinance
Email: contact@skyrim.finance
Medium: https://medium.com/@skyrimfinance
Website: https://skyrim.finance
