Crypto Wizards AMA With Waterfall DEFI

Introduction:

Ans:So Waterfall DeFi is a yield aggregator protocol that aims to bring true risk tranching to the DeFi landscape.

We are built on BSC initially, and would develop portfolios that include different farms. Instead of just offering a yield aggregation product, we actually would slice the portfolio into different "tranches" - essentially each tranche represents a risk/reward combo that would allow the users to select

The senior tranche would receive a reduced yield return, in exchange for first lost protection. Junior tranche would receive a much higher, leveraged yield return, but their capital is used to cover any losses suffered from the portfolio.

For example - a portfolio with 10% expected yield, after we slice it into 2 tranches, the senior tranche will receive 5% return, while the rest will flow to the junior tranche. So in a perfect world, the junior tranche will get 15%

The senior tranche is essentially using their future return to buy protection against any capital lost

So in this example - if the farm underperform and the return is only 3% - senior will still get their 5% (as they are being paid out first), while junior might see a 2% lost in their capital

Like I mentioned earlier, we are launching first on BSC, with the first portfolio focusing on 3 BUSD farms. Going forward, once we are more matured and the community is more educated to the product, we will be pushing out not just safe, sustainable return package with major farms and high TVL, but also risky leveraged products and new farms with high APY

Goal is to create different types of investment options and risk factors that users can select based on their preference!

Ans:So there are mainly three parts of our product suite: the tranched products themselves, the staking/liquidity mining page and the Waterfall dashboard:

Tranched products -- The core of our protocol. Our tranched products will be multiple vaults (falls) each equipped with three depositable pools: Senior, Mezzanine and Junior. From Senior to Junior the pool risk goes from low to high and the returns goes from fixed to leveraged, under normal yield market situations your return in Junior pools are higher than what you can gain than yield farming by yourself, as the yield are transferred by the Senior pool deposits since they only receive a fixed yield, however they face a lower risk as their capital pooled in are insured by the Junior tranche pool. Essentially in Waterfall you can leverage and earn extra yield that it is possible just by yourself, or you could receive a stable and predictable cash flow that DeFi farms usually difficult to offer. You either protec or attac! First tranched product will be the BUSD Falls where we will have the above three tranches deployed to the BUSD pools in Alpaca Finance, C.R.E.A.M Finance and Venus Protocol at Binance Smart Chain

Staking/Liquidity Mining Page -- Two models of WTF rewards program will be available for our DeFi community: First is the WTF lockup staking, which users will lockup WTF to receive ve-WTF, an interest bearing token redeemable for WTF tokens after a designated lockup period and users can claim WTF staking rewards generated overtime as they accumulate. Second is the liquidity mining program, which elites like you guys already know the drill already...pool liquidity for the WTF-BUSD pair on Pancakeswap to receive Pancake LP, stake the LP tokens and receive WTF token rewards plus trading fees.

The Waterfall Dashboard -- The dashboard is simply and is used to supplement our tranched products offerings, you will be able to view the overall status of our structured offerings and glimpse the yield offered to our users across the tranches. Dashboard also comes along with some other fundamental statistics of our protocol such asTVL, latest announcements etc.

There are a few similar concepted protocols in the space now, and Waterfall is a bit different from them due to the following four features:

1.Diversification
Our portfolio strategies package multiple DeFi assets and yield farms to ensure risk and return diversification
In the future, we aim to include more diversified assets to ensure an abundance of options for the community.

2. Clear tranche differentiation
A TVL limit is set initially for each tranches in the initial launch to ensure clear tranche differentiation
Going forward will lift the limit but will introduce dynamic reward to incentive optimal user behavior

3. Three tranche approach
We will launch with a three-tranche product, expanding the optionalities for the community.

4. Fixed income product
Will introduce a fixed income product by locking up the user deposit for a fixed period of time (seven days) during the deployment period

Ans:The first milestone for us is to decide which blockchain to focus on, and we decided to go with BSC, due to its negligible gas fee and presence of high TVL farms with sustainable return.

Then the second milestone would be launching our first product - which would include 3 BUSD farms. Going forward, once we are more matured and the community is more educated to the product, we will be pushing out not just safe, sustainable return package with major farms and high TVL, but also risky leveraged products and new farms with high APY

Goal is to create different type of investment options and risk factor that users can select based on their preference!

We are now hard at work to get everything ready for test net, which is a few weeks away. We are working with our auditor to review our smart contract, finalizing our DAPP's interface and likely will launch our testnet soon - stay tuned!

For mainnet, it will depend on our test net process. Once we get the feedback from the community and adjust based on the suggestions, we will be ready!

And finally, and upcoming milestone is that we are working hard to confirm our public sale, which we will have more information in the coming days - please stay tuned to our channel for updates!

In terms of roadmap, here are our rough timeline:

2021 Q3 - initial funding, product development, initial marketing
2021 Q4 - public sales, test and v1 product launch, with BUSD stablecoin farm introduced
2022 Q1 - v2 product launch, introduce DAO, expand selection of DeFi assets in the portfolio, and user originated portfolio
2022 Q2 - v3 product launch, introduce variable and perpetual expiry tranches

Ans:Yes, security is a key issue and we take it seriously. For our protocol we can classify risk in two different segment
1. The risk thats with our protocol's code
2. The risk thats associated with the underlying pools that in our product portfolio (3rd party)

For the first one, we take measures and work with a renowned auditor (Slowmist) to review our code base right now, they gave us some feedback (thank god its relatively minor) and we are now working hard to revise the code based on their suggestions. We will soon have the auditor report done and can't wait to share with the community to boost their confidence in us. Meanwhile, going forward we soon launch our bug bounty program and continue to work with different auditors and other developer friends we have to peer review the code, making sure that we are always vilgant about checking and reviewing the security

For the second one, We usually would evaluate the risk involved in different crypto assets based on a couple of factors, including: the reputation of the team/protocol, amount of TVL committed by the community, the sustainability of the yield return, etc.

That's why we introduce 3 BUSD stablecoin farms that all have high TVL and sustainable yield, which is the most secure / safe approach to engage with our first ever product launch. We will also limit the TVL for our first product to ensure we can plan for a smooth launch

Ans:Our project is fully committed into making the protocol as decentralized as possible. Even our team members are formed across the world of yield farming strategists and DeFi OGs.
As in our tokenomics, we have committed 60% of the tokens allocated to our community, via user incentives like staking, liquidity provisioning, public sale and our treasury — the usage will be decided in our future DAO.

For more information about our tokenomics, can refer to this article: https://medium.com/waterfall-defi/waterfall-defi-token-metrics-aead80c89627

There are three major use cases for our tokens:
1. You can stake our token to earn the governance token, which in terms would allow you to vote on upcoming protocol decisions such as approving new portfolio strategy
2. Holders of our governance token would have the right to earn a portion of the transaction fee we charged from users
3. Going forward, users with our governance token can propose their own risk tranching products and earn structuring fees

Twitter Segment:

Ans:In the Tradfi world, any structured products that have been:
(1) backed by a pool of income-generating assets;
(2) repackaged into different risk classes based on their repayment seniority known as “tranches”;
(3) then sold to investors,
would have leveraged the practice of “Risk Tranching”.

Risk tranched products are further categorized as “senior” tranches and “junior” tranches. Interest and principal payment is first paid back to the most senior tranches as they carry the least risk. Junior tranches on the other hand generate a higher yield to compensate for undertaking a higher default risk, and will receive the remaining principal and interest.

To visualize this, imagine every risk tranched product as a series of waterfalls. The senior tranches are the beginnings of the stream, starting at the mountain tops and taking their fixed percentage yield while the junior tranches will receive the remaining runoff. When the market is doing well, yield increases; like a rainstorm overflowing the river banks the junior tranches receive a higher cut as senior tranches are only entitled to their fixed percentage yield. Vice versa, when the market is in decline, yield decreases, like a drought where senior tranches remain entitled to their fixed cut as junior tranches are left with only droplets.

As for how much to invest - we recommended users to select based on their investment strategy :)

Ans:Thanks for the question - and yes we will have a DAO structure where the community holding our governance token would be able to vote on user originated products

So for users who want to get involved, first they need to go in and earn some WTF tokens first and stake them in our protocol to earn the veWTF token (our governance token). Once they have enough, they will be able to propose strategy and portfolio combination, and decide how to tranche them. Once it has garnered a lot of community upvote, he can then proceed to bring this to the team for review, to assess on the operational feasibility, risk factors, etc. - once thats passed, it will be brought to the DAO for approval to launch

This is on our roadmap, so after we launch the first few successful products - we will be working with the community to start building on this

Ans:Yes - we actually have the whitepaper here, its now living in a gitbook format: https://waterfall-defi.gitbook.io/waterfall-defi/

And for following us on Social - here are the links that you can get our latest updates!
💬Telegram: https://t.me/waterfalldefi
💬 Discord: https://discord.gg/gS9Gda4sez
🐦Twitter: https://twitter.com/Waterfalldefi
📖 Medium: https://medium.com/waterfall-defi

Ans:Sure thing - Actually I mentioned the competitive advantages earlier - in this thread about the 4 special features

We believe the team's experience and background in the space (both trad- and de- fi) would be a tremendous asset in helping us to gain a leg up in the market.

Ans:Good question!

All projects need a sustainable model to make it run, and the beauty of DeFi is that with the power of blockchain technology, we can easily scale up the operation with very limited degree of difficulties - trust me, I worked in a fast grew tech unicorn Deliveroo before, and I know how much it cost to scale up a physical logistics based business

The source of revenue for the project after our launch would be from the transaction cost we charged the community redeeming their positions from the portfolio. The fee % would be very limited - and you all will soon see the number during the test net launch. This fee % would scale up with our TVL, and thus provides a very scalable revenue model for the protocol. Which is one of the reasons that we decided to return some of those fee we earned to the community, in true decentralized fashion.

Users who stake our tokens ($WTF) into the staking part of the protocol, would earn our governance token veWTF. Part of the use of the governance token, other than voting right in various community decisions - is it is eligible to earn a portion of the platform's transaction fee. This we are offering our supporters / believers in the community a mean to earn additional financial reward, while holding our token and staying with us along the way.

Live Q&A:

Ans:In the traditional market, a significant portion of the financial products is fixed rather than variable. On the other hand, DeFi lending protocols are currently 100% under the variable rate regime, which lacks the environment for DeFi to cross over with the traditional market. And bring the money into this open, permissionless financial world on the blockchain.

Under the variable rate regime, the introduction of risk-related products to the DeFi space will bring further development in the already growing sector, and structured products are the next big thing to emerge on the DeFi horizon.

Structured products (options, futures, etc.) allow users to better control their investment portfolio, finesse their risk tolerance, and min./max. their trading strategy to further leverage their positions. Among structured products, the concept of risk tranching is particularly well positioned in the current DeFi market — relatively simple to grasp, it introduces a fixed income product that provides attractive yield options to investors with different risk appetites. In the DeFi space where everyone is seeking a good yield — especially if they’re in a bear market — attractive rates offered by risk tranching products is a strong option for anyone looking to delve deeper into the DeFi community.

Ans:So Let me use a very simple example to explain how tranching works:

Think of this: Alice and Bob are two big whales. They both love yield farming and enjoy the high APY offered in the DeFi space. Alice is very aggressive with her capital: she likes putting her money into the latest yield farms that offer crazy high APY. Bob is conservative with his capital: he prefers having a guaranteed return of yield that endows him a stream of fixed cash flows over time.
The thing about yield farms is even DeFi’s biggest farms contain a certain risk of a full loss of capital due to protocol attacks, and the returns in yield farms often vary so that a guaranteed and predictable return is difficult to achieve.

To solve this, we ask Alice and Bob to bundle their capital together as a whole and deploy into farms, so they are now a farming fund which Alice and Bob have 50% of ownership to the fund respectively. Suppose the predicted APY is 20%, Alice and Bob should be splitting the yield half-half, getting half of the yield each. However, as Alice is looking for high yield and doesn’t really care about risks, while Bob is looking for low risk and predictable return, Alice and Bob can negotiate a deal: As the yield starts getting farmed, say 20%, Bob will receive a fixed amount of yield first, say 8%, and the rest of the yield, 12%, goes to Alice. This doesn’t seem fair right? Both contributed the same amount of capital however Bob is getting less yield than what he deserves. However, imagine now the yield farms perform poorly and the yield generated is only 15%. Bob will still get his fixed payment: 8%, while Alice’s only getting 7%.

Now you see the idea: Bob is sacrificing his some of his fair share (8% vs 12% under 20% APY situation) plus potential extra yield gains (8% vs 16% under 24% APY situation) to Alice in exchange for maintaining the stability of his yield returns, and hence Bob transferred his portion of yield volatility risk to Alice, which Alice accepts taking on the extra risk in exchange for higher returns under situations when yield is equal to or better than expected. If Alice did not enter such agreement, her share of yield will be split equally, getting only 10% instead of 12%.

Tranches, as a concept came from TradFi, can be viewed as categories of risk and rewards in a pool of capital: a senior tranche in Waterfall DeFi is the fixed yield return side with the highest priority to receiving interest payments (a pool of many Bobs); while a junior tranche is the variable yield return side with the lowest priority to receiving interest payments (a pool of many Alices). Through tranching a pool of capital put into DeFi yield farms, users will have the autonomy to choose their desired balance of risk versus rewards, or essentially, insure their capital against yield volatility without upfront payment.

Ans:To me the ultimate vision of yield farming will go beyond getting protocol utility token rewards through participating in liquidity mining activities that relies on an inflationary token release model...if we think about the core meaning of yield farming, that is to reward liquidity provisioners that facilitates trading activity by being a LP at AMMs, and so yield farming is essentially a task for channeling the money flow, which is what humans' financial world has been doing it for centuries. Farming then can be interpreted as the rewards provided for financial services and in DeFi's case liquidity provisioning...

There's still a lot of financial concepts yet to be achieved and implemented on blockchain, for example the tranched products we are building in DeFi restructures the risk and reward combinations and offer them to different users with different risk appetite. The transformation of risk can therefore be thought of a way to "yield" "farm" as well, since you, the decentralized users, are getting paid extra rewards for being in a Junior tranche covering Senior tranche's risk. So my vision of yield farming will eventually become the rent collection part in the process of providing financial services in the decentralized blockchain, all done across the DeFi legos of immutable smart contracts.

Ans:Yes - we are opened to the world, but of course due to recent regulation, we would set up Geo-fence to meet with certain locations' local regulations.

Meanwhile - besides our English main TG group, we also have multiple language TG groups around to engage communities with different languages

中文🇨🇳
Korean 🇰🇷
Portuguese🇵🇹
Spanish🇪🇸
Turkish🇹🇷
Vietnamese🇻🇳

Please make sure to follow us!

Ans:So yes - thank you for following us and we are doing a lot of AMAs right now, and the key is to engage more people during our initial phase, making sure we spread the word about what the team and the protocol is about - working with community such as Crypto Wizard - is a good way for us to do the outreach and engagement

As I stated earlier, our protocol dedicates ~60% of the token to the community, meaning we really think this is a community-driven project, and the community will play a critical role in the long term success of Waterfall

Community can engage in our protocol and use a more fine-tuned approach to adjust his/her risk regarding yield farming - meanwhile those who stake our project will have the governance token that would not only give them power to vote on new products, create their own tranches, but also take a share of the transaction fee from the platform - ensuring that our supporters will have real utility by holding on $WTF and engaging with us

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