Analyzing the risk-graded derivatives agreement BarnBridge: Will DeFi “risk-free” products give birth to new blue chips?

To help huge amounts of funds in traditional finance enter DeFi, risk grading products may become the main direction of DeFi innovation.

Original title: “BarnBridge—Will “risk-free” products give birth to the next blue chip?”
Written by: Kriss

DeFi’s narrative and development direction

When we think about the value of DeFi products, we will simplify all complex products into two major categories: lending and trading, and experience the product itself from the most simple indicators, such as interest rates, yields, depth, etc. When we return to the most essential form of the business, we can first consider why funds will flow into certain potential DeFi products, and why the TVL (that is, precipitation funds) that we track every day is such an important indicator, and of course a good product It is also indispensable for the team’s innovation, a good token model (Farm distribution innovation) and convincing narrative ability.

When history is attributed to the details, we will marvel at how DeFi can stumble but grow exponentially into today’s giant driven by the macro narrative. How was it stacked and triggered by a series of innovations. If there is no Metamask plug-in for Chrome browser? What if Sythetic first proposed token mining, and then the token economy beautifully supported the value of the product, until YFI caused the Fairlaunch frenzy? What if there were no such amazing innovations as AMM and Flash Loan?

When we are looking for innovations in DeFi’s product capabilities, we are also thinking about how narrative and intrinsic value push the industry back to some inevitable paths, thereby guiding our investment mainline. When Ethereum starts from the “imaginary world computer” When the revolution returns to the “business-driven DeFi” valuation reconstruction, we have to think about how the main line of financial evolution on the blockchain occurred and how it will continue to develop.

Imagination and narrative abilities are the driving force behind the development and progress of human civilization. This kind of imagination is the “creation of credit” in the economic field. Finance is essentially the risk pricing of the credit created. Credit can be:

1. The imagination of the purchasing power of a certain currency can come from the credit of a sovereign country, or it can come from a consensus mechanism;
2. The imagination of asset value can come from the discounted future cash flow, but also the narrative value, there is an expected difference;
3. The imagination that a certain debt can be repaid can be derived from future cash flow or collateral, etc., which has advantages and disadvantages;

And we may now be experiencing the third underlying logic change in the Crypto field. When BTC brings the endogenous value of digital assets, when Ethereum brings the infrastructure that can carry business and value, it was originally a centralized transaction. The expected spread trading business and the spread lending business of traditional finance were impacted by DeFi.

The maturity of DeFi makes it possible to approach a zero point that breaks the dimensional wall. A large number of traditional funds have gradually established trust in the process of watching the development of DeFi, but the funds have not yet a “risk-free” mature entrance. On the one hand, fixed income and risk exchange are equivalent to the source demand for loans, transactions, and assets. They are also an extremely large market in traditional finance. On the other hand, risk-grading products are also the main directions of DeFi product innovation.

And this is BarnBridge’s vision:

1. Help traditional financial investors to obtain DeFi products and services more easily and safely;
2. Structured risks provide high returns to those who can bear high risks and stable returns to the majority of investors;
3. Solve the pain points of the “protocol homogenization risk” of the instability of interest rates in the DeFi field;

What is BarnBridge

BarnBridge is a graded derivatives agreement that uses fixed rate of return and volatility to mark product risks. The products include:

1. Smart Yield Bond, a fixed-rate and floating-rate product secured by DeFi revenue;
2. Smart Alpha Bond, a derivative instrument that can hedge against any ERC20 token market price fluctuations

Its development process is:

1. On September 11, 2020, complete the seed round of 1 million USD financing;
2. On October 14, 2020, liquidity mining will be launched, with a 12-hour TVL of 120 million U.S. dollars; nearly 500 million U.S. dollars in two weeks;
3. In 2021, on November 16, launch Bond pledge mining;
4. On February 5th, 2021, BarnBridge DAO will be launched;
5. BarnBridge has launched Smart Yield products on March 15th

Products of BarnBridge

Smart Yield Bond

It can be simply understood as the currency in the Pool obtains revenue from various protocols, and is then classified into two revenue derivatives

1. Senior Tranche (sBONDs) priority tokens: fixed income
2. Junior Tranche (jTokens) inferior tokens: higher interest rate fluctuations

example:

There are 1000DAI pools, among which Senior 700DAI and Junior 300DAI

1) Senior income:

Lock in 5% fixed interest rate

2) Junior income:

If Pool’s income is 10%, Junior’s income (1000 10%-700 5%)=65DAI, and the 65/300 rate of return is 21.6%

If Pool returns 3%, Junior returns (1000 3%-700 5%) = -5DAI, -5/300 return rate -1.6%

BarnBridge just launched SMART Yield on March 15th, and first launched the compond pool:

Smart Alpha Bond

Various ERC20 tokens can be placed in the pool to reclassify risk exposure:

For example, in ETH Pool

1) jETH (A junior tranche of ETH price exposure) bears 70% of large risk exposure:

If eth rises by 10%, jETH enjoys a high rise of 17%

2) sETH (A senior tranche of ETH price exposure) assumes a small risk exposure of 30%

If ETH drops by 10%, sETH will only have to bear a lesser drop of 3%

BarnBridge’s token structure

BarnBridge uses 1/3 tokens for mining and 1/3 tokens for future communities:

BarnBridge mining will last 100 weeks:

In the early stage of chip allocation, there were more than 500 million locked positions, indicating the high expectations of the market for BarnBridge:

BarnBridge’s team background

Supported by mainstream investment institutions:

The team has been in the industry for many years:

The technical team is from Digital MOB, a blockchain technology company with a background of ConcenSys;

The operation team has Proof Systems, which provides marketing services to ConcenSys;

Among them are from the Proof Systems team base in North Carolina, Florida, and Ukraine, with Co-founder Tyler (main) and COO Mark

The team from the blockchain technology companies Digital MOB and ConcenSys Base is in Romania, with Co-founder Bogdan and Tech Lead Stefan

The team base from Rude Labs is in Arizona, USA, with Co-founder Troy

Comparison of “risk-free” products

Type comparison

1. Zero coupon bonds: Yield, Notional
2. Interest rate market: Horizon, Swivel
3. Risk classification: Barnbridge, Saffron

In the early stage, we followed the principle of giving priority to the ease of use of products. For example, zero-coupon bond products and interest rate market thresholds are high, and the rules are more complicated, while risk-grading products only need to choose products with different returns based on risk tolerance.

data analysis

BarnBridge was launched on March 15th. There is only a compond pool. The data is not enough for analysis. We borrow some data from the similar product Saffron for analysis.

Saffron’s locked position:

1) Tranche accounted for 36.4%, indicating spontaneous demand for core products

2) S:A=7 in Tranche, most of which are still low-risk requirements, indicating that “risk-free” requirements have great potential

BarnBridge has the potential to become a new blue chip

1. Have a first-mover advantage in the direction of hierarchical derivatives, forming a network effect; team innovation and execution are very good;
2. The team has maintained good relationships and contacts with many DeFi top projects. It has been funded by AAVE founder Stani and Synthetix founder Kain, and has been continuously recommended by the two on Twitter.
3. It is possible to go out of the circle and expand the fund pool (TVL 500 million dollars in two weeks of excavation); give full play to the combinable line of DeFi, and it is expected to become a “hedging blue chip” with blue chips such as AAVE and Uniswap

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