The DeFi Investment Bank Ondo Finance has introduced Curve and Convex Vaults to its suite of products and services.
Curve Finance is a decentralized exchange platform. Its automated market maker provides deep liquidity (the platform has over $20 billion in liquidity) and low slippage for traders. This feature makes the platform suitable for stableswaps.
Convex Finance allows staking of coins and auto-compounding of the yield thereby, boosting an investors annual percentage yield.
The integration of these vaults with Ondo Finance will allow consumers the following features:
Multi-Pair Vaults
Before this integration, investors could only invest in one pair of DEX liquidity provider tokens (LP) in one vault. Incase of de-pegging, that is when a stablecoin loses its value in an LP, the overall value of the LP decreases, rendering the principal of both tranches meaningless.
This new integration allows investors to invest in multiple LP pairs in a single vault, particularly stableswap pairs. Even in the case of de-pegging, since the funds are invested in different LP’s, the underlying diversification prevents the loss of the fixed funds from tranches.
Diversification improves risk-adjusted returns for all investors.
Flexible Tranche Ratios
The new Curve vaults of the bank will allow the investment of different amounts in each tranche, a feature previously unavailable.
The bank will also be able to customize a service according to the clients needs. They can dictate how fine tuned the tranche is and how levered the variable tranche is, allowing for formation of sophisticated strategies for seasoned investors.
Before launching such a big integration, the bank is currently conducting internal audits and has hired ABDK for an external audit. The launch of these vaults will take place in the following steps:
- A USDC vault with a conservative cap will be deployed.
- The two tranches of the bank will accept USDC upto their caps, with the investors deciding their risk levels.
- The strategy will deposit the funds in Curve to mint 3pool LP tokens, and deploy them on multiple high-yield stableswap pools.
- The returns will be staked on Convex to boost yields.
- The auto-compounding feature of Ondo will then boost the investors annual percentage yield.
- Investors will be able to claim their returns (principal and yield) after the vault expires.
The bank will gradually increase the vault caps and also offer vaults that accept other tokens.
Ondo Finance was founded by former Goldman Sachs traders. The bank finds investments across traditional and decentralized finance to provide investor-friendly risk/reward balanced offerings.
The bank, before this integration, offered two prime features. One of them was risk tranching, Fixed Tranche and Variable Tranche. The vaults for these tranches were provided by Uniswap V2 and Sushiswap.
The other feature was auto-compounding, wherein the bank themselves re-deposited the investors yield. This saved the investor several hundred dollars as manually yield compounding in DeFi is a taxing and laborious process.
Ondo Finance intends to keep releasing innovative strategies for their investors, both institutional and retail.
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