Ask Me Anything with Waterfall at ICO Speaks: Summary
October 20-th held an Ask Me Anything session at ICO Speaks telegram chat. From the Waterfall side there was:
💻 Tom Cheng | Project Lead | @Yosemite_0x
Hi guys! Tom here, I am the Project Lead of Waterfall DeFi, the risk tranching protocol offering structured risk products to the DeFi space…I started off my crypto journey back in 2017, my buddy was at MIT Lab and was using the lab to mine ETH, so I kinda joined on his bandwagon, and have been on and off since then.
Gradually during last year’s DeFi summer I decided to put more attention into the space, looking into yield farms and applications of derivatives, and finally earlier this year decided to go all in, and take on the Project Lead role for Waterfall DeFi.
Before going full time in crypto I was working in management consulting, operations and strategic planning, having worked at McKinsey & Co, before moving to a food delivery tech unicorn Deliveroo. As the Project Lead in Waterfall DeFi I am basically in charge of handling everything and making sure Waterfall gets to become one of the projects that stands out across the space and offers what the DeFi community needs especially in terms of risk management options in yield farming.
Let’s get started!
Q: Introduce the project please
A: 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!
Q: Introduce the idea of risk tranching, what are the advantages and disadvantages of each tranche?
A: 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.
Q: Why does the market need Waterfall, what makes it unique and how does it stands out from it’s competitors?
A: 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.
Q: What’s the status of the project right now and what will be the first tranched portfolio?
A: So right now, as I said earlier, we just had our public sale auction concluded about 25 minutes ago – the official listing will happen <24 hours later (1pm UTC tomorrow) – We had a great auction (5 mins sold out on capped auction, uncapped auction went 4x) and saw strong support from the community – so we are super excited about that!
Apart from the token listing, we are now hard at work to get everything ready for testing, 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 testing product soon – stay tuned!
For mainnet launch, it will depend on our testing process. Once we get the feedback from the community and adjust based on the suggestions, we will be ready!
Q: Introduce the token, if can be staked, farmed, benefits of holding and is it listed already?
A: First of all – listing is tomorrow 🙂
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
Q: When will there be a testnet/mainnet launch so we could try it, what’s the stage at the current roadmap of Waterfall?
A: We are working hard now to put a product out – internal QA/Testing is nearly done, and audit is all concluded waiting for mainnet deployment before they can finalize the report.
Everything is moving smoothly – we will soon be announcing our testing whitelisting, please follow our social for the latest announcements and updates.
IF you want a quick glimpse on the product – can take a look at this!
Q: Is your platform suitable for crypto beginners? Or does it only limited for professional users ?
A: We aim to serve the widest range of audiences, just like risk tranching, where the range of tranches would provide different options for all of us
Yes I agree – risk tranching is not a super straight forward concept, but it is not something like rocket science. Traditional finance likes to hide this behind fancy jargons and complicated numbers, but in fact it is some basic math related to how users could hedge against each other.
The team is passionate about this, and would like to introduce the concept to our community, working with them to bring new ideas to this space, and innovate with the help of our community. With a gradual approach in launching our protocol, I invite all our community to embark on this journey with us!
Q: What is the meaning of the name of the project and why did you name it that way?
A: Waterfall is a pretty well known terminology in TradFi to describe risk tranching products. Let’s try to visualize this, imagine every risk tranching 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.
Q: Еell us a little bit about security? Have you done an audit of the platform? Are the smart contracts error-free? What are the test results?
A: 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 vigilant 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
Q: Do you have tutorial videos so we can get to know your project more clearly or do you have a YouTube channel or something? can you share it with us?
A: Actually – we recently JUST pushed out a youtube video that goes over the basic details of the project, its background and some other useful details, I will fwd the message here
✨Check out our latest in-a-nutshell explainer on YouTube for what we are building at Waterfall DeFi!!
🤝Special thanks to @chadgelina for walking everyone thru our protocol!
💫We would also like to present a quick, in-a-nutshell article about our protocol!
It could serve as:
🏃Crash course for new #WTFGang members
🔔Warm reminder for the OGs
Check it out👇
Going forward we will start to produce more videos and hope to engage a wider audience
Q: Revenue is an important aspect for all projects to survive and maintain the project / company. What is the way to generate profit / revenue of token? What is the income model?
A: So like many other Crypto platform – our protocol will charge a very small amount of transaction fee for every time the users use our protocol. The goal is hoping with the growth in TVL, our fee revenue will also increase at the same pace.
The fee we collected, a portion of it will be used to support the daily operation of the project, as well as pushing out new updates and strengthening the team.
The rest we actually will reward back to the community, so for anyone who staked our WTF token, will be receiving our governance token veWTF – apart from some governance functions, the token is also allowing its holder to earn into the pool of the transaction fee on a weekly basis – making sure we are rewarding our community with the success of the platform
ICOSpeaks hosted an AMA Session with the Waterfall Team. That’s all for today.
Thanks to all users who participated.
Thanks, Waterfall for being with us
Thanks, all and see you soon😉