DeFi flexible layout + token yield combo, interpreting the chessboard wisdom of Tranchess

Author: Deep Tide TechFlow

Introduction

The turbulence in the crypto market has never ceased, and the DeFi sector continues to advance amidst this turmoil. The global economic expectations of interest rate cuts are quietly changing investors' risk preferences and return demands.
In the face of a drying market narrative, discussions about DeFi have once again gained momentum. DeFi projects that have experienced a complete cycle of bull and bear markets are no longer satisfied with simply replicating traditional financial models; instead, they are beginning to think deeply about how to better meet market demands.

From the brand reshaping of MakerDAO to the emergence of various novel yield strategies, the entire ecosystem is undergoing a profound transformation. Meanwhile, industry giant Binance is also actively seeking change. The meme craze on BNB Chain and the high-frequency listings of projects within the ecosystem… all these actions are sending positive signals to the market.

In the midst of the ever-changing tide of reform, the OG DeFi protocol Tranchess stands out among its peers with its unique structured fund architecture. By cleverly combining the concept of structured funds with DeFi innovations, it provides investors with a unique DeFi experience. As market demand evolves, Tranchess continuously advances product iterations, collaborating with multiple projects to match market needs.

This article will delve into the multiple innovations of Tranchess, analyzing how it leverages inherent advantages and mechanism innovations to carve out a unique path for investors in the current market environment. Whether you are a DeFi veteran or a newcomer to this field, this article is sure to provide you with new insights.

Why DeFi?

In the face of a diverse crypto ecosystem, not only external users but even seasoned crypto players may ponder: with so many new ideas emerging, why is DeFi still worth focusing on?

Andre Cronje provided some relevant insights in a recent article titled “Why DeFi is Key to the Future?”.

The article points out that DeFi is essentially a hub for liquidity and a carrier of trading demand. In every chain ecosystem, DeFi plays an indispensable role, providing necessary liquidity support to the market while meeting diverse financial needs ranging from simple token swaps to complex derivatives trading.

AC mentioned, "Anyone willing to try can participate, which is an important cornerstone of economic growth." The openness and composability of DeFi make it an ideal testing ground for financial innovation. Whether in a bull market or a bear market, DeFi is the core engine that maintains ecosystem vitality.

Tranchess, a Good Move in DeFi Through Bull and Bear Markets

Tranchess was born during the DeFi wave of 2021, coinciding with the peak of the crypto market bull run. However, Tranchess has not only demonstrated strong vitality throughout the long cycle but has also injected new energy into itself through continuous iterative innovations, fully showcasing its deep strength as an "old OG."

According to the latest data from DeFiLlama, as of September 2024, Tranchess's TVL on BNB Chain reached $183 million, growing nearly 500% within the year.

Professional Team

Tranchess's ability to maintain vitality through deep bear markets is closely related to its professional team strength. Tranchess is composed of a team with rich backgrounds in blockchain and finance. Core team members have extensive traditional financial experience, including investment banking, asset management, and hedge funds.

Co-Founder Danny Chong graduated from Nanyang Technological University and has over ten years of experience in the banking industry, including trading, sales, and management in the Asia-Pacific region.

The technical team also possesses impressive experience in network security for centralized exchanges and DeFi protocols, with team members coming from tech giants like Google, Meta, and Microsoft.

Inspired by the Concept of "Tranches" in Traditional Finance

The birth of Tranchess was inspired by the concept of "Tranches" in traditional finance, innovatively providing tiered and multi-structured asset investment solutions for investors with different risk preferences.

Tranchess offers two core services:

Liquidity Staking Services: Tranchess's liquidity staking services are primarily represented by the staking tokens nQUNEE on BNB Chain and qETH on the Ethereum mainnet. For example, with qETH, users can stake ETH on the Ethereum mainnet to receive qETH. While enjoying staking rewards within the protocol, qETH can also be used as collateral in external DeFi protocols, enhancing capital efficiency.

Tiered Return Products: Tranchess also offers diversified risk-return solutions based on the main fund QUEEN, splitting QUEEN into two derivative tokens, BISHOP and ROOK, according to different risk-return profiles, aiming to meet the needs of investors with varying risk preferences. Today, Tranchess has further optimized its product structure, upgrading it to a more flexible Turbo&Stable architecture.

No Fixed Strategy, From Structured Funds to Turbo & Stable

From the tiered model to Turbo & Stable, Tranchess's iteration is like an exciting chess game, with each move being a precise response to market changes.

Opening Move: Structured Funds Responding to Tiers

The structured design is the core innovation of Tranchess's design philosophy. It involves splitting a single asset into derivatives of different risk levels. This structure allows investors to choose suitable investment strategies based on their risk preferences. Specifically, Tranchess divides assets into three levels:

Main Fund Token QUEEN

QUEEN is the base asset, pegged 1:1 to the underlying crypto asset. It serves as the primary fund unit within the entire structure, allowing users to hold QUEEN directly for complete exposure to the underlying asset. QUEEN can be minted, redeemed, and split into BISHOP and ROOK. The returns from QUEEN come from price fluctuations of the underlying asset, staking rewards (if the underlying asset supports staking), and protocol revenue distribution.

For example, with BTC, QUEEN holders not only benefit from the price fluctuations of Bitcoin but also earn additional CHESS governance token rewards through staking. Investors can directly exchange BTC for QUEEN or purchase it with USDC in Tranchess Swap.

Derivative Tokens: BISHOP and ROOK

The two derivative tokens, BISHOP and ROOK, split from QUEEN represent different risk and return characteristics.

BISHOP is a fixed-income token with lower risk, providing stable returns similar to fixed-income products. Its returns come from a fixed QUEEN yield rate, which the protocol adjusts periodically based on market conditions. BISHOP offers relatively stable returns during market fluctuations, suitable for risk-averse investors.

ROOK is a leveraged token with higher risk, providing leveraged returns and being more sensitive to price fluctuations of the underlying asset. ROOK's returns come from the total remaining yield of QUEEN (i.e., total yield minus the portion paid to BISHOP). During market uptrends, ROOK can achieve excess returns but also faces greater downside risks.

The structured fund design allows investors to flexibly adjust their positions based on their risk preferences. Investors can switch between QUEEN, BISHOP, and ROOK at any time, achieving personalized risk management strategies. For example, when expecting a market uptrend, they can increase their holdings of ROOK for higher returns; when expecting a market downturn, they can increase their holdings of BISHOP for stable returns.

The flexible tiered architecture allows Tranchess to expand into more crypto assets in the future, providing investors with broader market participation opportunities. Whether it's BTC, ETH, or BNB, Tranchess has the potential to create corresponding structured products to meet the needs of different investors.

Turbo&Stable: Tactical Innovation on the Chessboard

With Tranchess launching liquidity staking products qETH on the ETH mainnet, the concept of "Turbo&Stable" has also been introduced into Tranchess's product ecosystem.

The Turbo & Stable model is essentially a refined upgrade of structured funds, with Turbo and Stable concepts understood as enhanced products of ROOK and BISHOP.

• Turbo (Enhanced ROOK): A high-leverage, high-return offensive tool

Like a rook advancing boldly on the chessboard, Turbo products offer higher leverage and potential returns, suitable for investors willing to take on greater risks. It is akin to a bold offensive move in a chess game, potentially yielding significant returns but also facing greater risks.

• Stable (Enhanced BISHOP): A defensive stronghold for stable returns

Similar to a flexible bishop, Stable products provide more stable returns, becoming the defensive core of a portfolio. It offers an ideal choice for investors seeking stable returns with low-risk preferences, akin to building a solid defense in a chess game.

Detailed Explanation of Turbo&Stable: Using StakeStone's STONE Fund as an Example

Discussing concepts can be somewhat abstract, so let’s take the Turbo&Stable product STONE Fund, developed in collaboration with StakeStone, as an example to illustrate how this architecture works.

Simplifying Complexity: Flexible Token Splitting into Two Types

The core of the STONE Fund lies in the token splitting mechanism based on the Turbo&Stable architecture. Users can exchange STONE for stoneQUEEN at a 1:1 ratio, and each stoneQUEEN can be split into 0.1 turPSTONE (Turbo Point STONE) and 0.9 staYSTONE (Stable Yield STONE). This process is reversible, allowing users to combine 0.1 turPSTONE and 0.9 staYSTONE back into 1 stoneQUEEN.

staYSTONE-STONE LP Diverse Returns

Tranchess also introduces staYSTONE-STONE LP tokens, providing additional earning opportunities for ecosystem users.

These LP token holders can not only earn CHESS tokens and 0.05% trading fee rewards but also enjoy part of the interest from staYSTONE and a 2x StakeStone points multiplier (for the STONE portion in the LP). Additionally, Tranchess provides an extra reward of 150,000 CHESS weekly for LPs in the STONE Fund.

Different Points Rewards and Earnings Structures

The total staking period for the Tranchess STONE Fund is 6 months, ending on October 8, 2024. At that time, different types of tokens can be exchanged back for STONE based on their fair value, while Tranchess allows STONE holders on Scroll to earn StakeStone points while also earning Scroll Marks points.

• stoneQUEEN can be exchanged for STONE at a 1:1 ratio, and holding stoneQUEEN can earn the same multiple of StakeStone points as holding an equivalent amount of STONE. However, splitting stoneQUEEN into staYSTONE and turPSTONE while holding both can yield double points without loss, while also earning Scroll Marks points based on holding value.

• turPSTONE not only has a fixed leverage ratio of 10x but also earns a 2x points multiplier from StakeStone, meaning it can ultimately earn 20x StakeStone points. After deducting the cost of paying a fixed interest rate to staYSTONE, at the fund's maturity, turPSTONE:STONE < 1.

• staYSTONE provides a fixed annual interest rate of 6% for investors seeking stable returns, but without StakeStone points rewards, earning Scroll Marks points based on holding value. At the fund's maturity, staYSTONE:STONE > 1.

Additionally, Tranchess will charge a 3% fee from the points earned from Turbo & Stable fund products as extra revenue, which will be 100% distributed to veCHESS holders, enhancing the yield for veCHESS holders.

PS: The exchange ratios of turPSTONE, staYSTONE, and STONE mentioned in the text are rough estimates, and the exact ratios will be announced based on the specific fair value as the fund approaches its end.

Efficient and Fast: A Precision Architecture That Can Be Quickly Replicated

Not limited to the STONE Fund, other currently launched Turbo&Stable products include the weETH Fund in collaboration with eth.fi, the Staked ETH Fund in partnership with LIDO, SolvBTC in collaboration with SOLV, and slisBNB in partnership with Lista DAO, as well as the recently launched SolvBTC.BBN Fund.

Turbo&Stable not only provides diverse earning strategies but also supports the rapid launch of any LST narrative chain, while flexibly adapting to the yield changes of corresponding assets. For instance, the recently launched SolvBTC.BBN, as the project with the most BTC staked in the early Babylon ecosystem, is currently also the LRT with the highest Babylon points yield. This advantage will also be retained in the Turbo&Stable structure, fully reflecting the flexible characteristics of this precision architecture that is "efficient and fast."

The Key Pieces of Tranchess: CHESS & veCHESS

Recently, the launch of CHESS on Binance contracts has drawn attention once again. As the governance token of Tranchess, CHESS and veCHESS are not only the key links connecting the entire Tranchess system but also grow in value alongside the project itself.

Governance Token CHESS

CHESS has a total supply of 300 million tokens. In addition to direct purchases, users can obtain CHESS through various means, primarily by participating in liquidity mining or staking QUEEN, BISHOP, and ROOK tokens to earn CHESS.

Once locked, CHESS transforms into veCHESS, unlocking various use cases within the ecosystem: veCHESS holders enjoy governance rights such as voting, weekly protocol dividends, and 3% Turbo & Stable points income.

In addition to liquidity and governance functions, CHESS currently supports cross-chain operations on BNB Chain, Ethereum, and Scroll.

Locking Transformation: veCHESS Activation!

Locking CHESS for Exchange

Users can choose to lock CHESS for a period ranging from 1 week to 4 years, with the exchange ratio increasing linearly based on the lock duration. The specific calculation for veCHESS quantity is the number of CHESS multiplied by the lock duration (in years) divided by 4.

For example, locking 100 CHESS for 4 years will yield 100 veCHESS, while locking 100 CHESS for 2 years will yield 50 veCHESS. Meanwhile, the quantity of veCHESS will decrease linearly over time, but users can increase their veCHESS balance by extending the lock duration or quantity.

Tranchess also supports batch locking of CHESS, with each lock creating a new locking position. For easier management, users can merge multiple locking positions into one.

Layered Additional Earnings

In addition to the 3% points income return from the aforementioned Turbo&Stable fund products, veCHESS holders will also receive 50% of Tranchess platform's weekly earnings as additional staking rewards, while the other 50% goes into the Treasury.

Rich Governance Rights

Users holding veCHESS can participate in important decision-making processes on the Tranchess platform, with voting power proportional to the amount of veCHESS held, ensuring that users with long-term commitments to the platform have a greater voice in decision-making.

Recently, the Tranchess community passed Governance Proposal 9, proposing that the voting governance rights of veCHESS can be expanded to decisions regarding the launch of all new Turbo&Stable projects in the future. This proposal further expands the use cases of veCHESS while showcasing the rapid replicability potential of the Turbo&Stable architecture.

A Value Gap Beneath the Hype?

As the exploration of the Tranchess ecosystem deepens, it becomes evident that CHESS is not just a simple governance token but a core value carrier within the Tranchess ecosystem.

The veCHESS obtained from locking CHESS not only brings substantial revenue sharing but also grants holders the power to participate in major platform decisions. The dual attributes make CHESS an attractive value storage and appreciation tool.

With the continuous growth of the platform's TVL, the official launch of perpetual contracts, and several Turbo&Stable fund products nearing maturity, CHESS may very well be at a value point. The earning potential of veCHESS could be sufficient to cover the current market's price perception of CHESS. The true potential value of CHESS lies not only in the market's speculative expectations for the DeFi sector and the short-term "lottery mentality" regarding single token listings but also in the long-term, valuable-supported product earnings.

Innovate to Gain the Upper Hand

From structured funds to the Turbo&Stable architecture, the veteran player Tranchess maintains excellence and flexibility in the fiercely competitive DeFi arena, ensuring diverse earnings for users while providing more solutions for various ecosystems, embodying the true DeFi Native spirit.

The development trajectory of Tranchess proves that only through continuous innovation and maintaining a critical edge can one remain undefeated in the grand chess game of crypto.