Strata：DeFi为何终于准备好进行风险分层 | DeFi Frontier

I think the one thing that's still missing is building products that actually let users transfer this risk. Those who want safer yields or protected yields can transfer the underlying risk to someone who wants that risk and wants to be fairly compensated with higher yields.

That's what risk tranching does, and that's what we do at Strata as well. We brought this risk-tranching concept from TradFi and built everything on-chain. Everything is enforced by smart contracts on-chain: the yield-split mechanism, how the yield should be distributed between senior and junior tranches, and the programmable risk-coverage part. Nothing is enforced by off-chain policies or anything like that.

Vish, thanks for joining us. How are you doing?

Yeah, we're excited to talk more about Strata and tranching in general. It seems like tranching is going to be one of those huge new frontiers in DeFi. You can already see it forming.

1. Founding Strata

So today we want to talk all about how tranching exists in traditional finance. We're going to talk through how junior and senior positions work, tranching versus insurance—which is something I'm really keen to learn more about—and pick your brain about that. How does this all work with RWAs? Why are these well-suited for RWAs? And then we want to know everything that's coming next with Strata—what you're cooking behind the scenes.

Why don't we just start out with a bit of background about you, Vish? Tell us what you were doing before and what led you to Strata.

I'm very well, and thanks for inviting me. It's really great to be here.

Personally, I have been in the DeFi space for the last 4 to 4½ years. I started working on Strata in April last year with 3 other co-founders. Before that, I was working as a consultant on ecosystem growth and product strategy with multiple projects in the EVM as well as Solana ecosystems. I worked with Polygon on the EVM side and Neon EVM in the Solana ecosystem.

Prior to that, I spent almost 3½ years in traditional finance, on both the buy side and sell side of the business. I started my career with a U.S.-based bulge-bracket investment bank and then moved to a UAE-based single-family office focusing on quantitative investment strategies across all asset classes. Since early 2021, when it was really difficult to ignore digital assets, I have been full-time in DeFi.

2. What is tranching?

Vish, I first learned about tranching because of DeFi. There were early builders in the DeFi space trying to figure out how to bring tranching on-chain. I don't take for granted that all of our listeners understand what that means, so can you talk a bit about what tranching is in traditional finance and what problem it solves?

Risk tranching is not really a new concept. It has existed in traditional finance for decades. All these securitized products, like CDOs, CLOs, and MBS, are essentially risk-tranched products that repackage the cash flows arising from loans or asset-backed securities into senior and junior tranches. These types of products already have almost $15 trillion in AUM today, which is almost 10% of the global fixed-income market.

Traditionally, these products have been accessible in traditional finance only to very sophisticated investors—either those who qualify for accredited status or institutional investors. Even these investors have diverse risk-reward profiles because they have different types of investment mandates.

To give an example, large asset managers like sovereign wealth funds, pension funds, and insurance companies are looking for a few hundred basis points over the risk-free rate—basically, T-bill rates. They prioritize principal safety over alpha. On the other side, we have hedge funds and family offices whose investment mandate is to generate alpha. They have a higher risk appetite and want higher returns.

Basically, the senior tranche is designed for the first kind of investors I mentioned—sovereign wealth funds, pension funds, and insurance companies—and the junior tranche targets hedge funds and family offices. Simply put, risk tranching helps these investors express their risk-reward preferences, which fits their investment mandates.

This concept has existed in TradFi forever. It's quite big there, and in DeFi, it's emerging. I think Strata was one of the first few protocols to come up with this concept and build everything on-chain.

3. Why tranching products make sense to now take off in DeFi?

Yeah, I want to ask you a bit more about this. DeFi Dad alluded to the fact that tranching had been attempted in DeFi previously. I think he's probably referring to something like BarnBridge, but what we're curious about is why conditions are correct right now for it to really take off and proliferate. Why does it make sense now in DeFi when maybe it didn't 4 to 5 years ago?

Yeah, you correctly pointed that out. There were a couple of attempts at risk tranching in the last cycle, around 2022 or so. Back then, it didn't really make much sense from either the demand side or the supply side of the underlying yield.

Back then, users were just caring about high yields driven by incentives. Everyone was talking about headline APYs, and capital was not really interested in talking about risk. So that was one reason it didn't really make much sense on the demand side. It was really difficult to target a user base that was interested in the senior tranche.

From the supply side, there weren't many yield sources. Mostly, they were overcollateralized lending markets like Aave and Compound. Since they are overcollateralized, the underlying yield is safe enough, and tranching something that is safe doesn't really make much sense. So it was really difficult to build something like this from both the supply and demand sides.

But today, I think we are living in a different world.

The market is maturing. We are seeing more sophisticated users coming on-chain. The user base is heterogeneous in DeFi—more heterogeneous than what we see in traditional finance—because of the permissionless, global distribution nature of the products. Institutions and consumers moving on-chain are more risk-averse than the kind of capital that has existed in DeFi forever, which is more risk-tolerant.

What we realized is that, from the demand side, it makes perfect sense. All this conservative capital sitting in DeFi today, or the new capital moving on-chain, wants products that can provide some sort of safety. They prioritize safety and are ready to give up a portion of yield for that. On the other side, risk-tolerant capital wants high yields and is ready to take on the extra risk that comes with them.

We believe that all the yield sources that exist today offer a single product that is not really able to meet the demand from the different kinds of users we have, with different risk-reward preferences. In summary, something like Strata lets these users express their risk-reward preferences through a senior tranche that offers protected yields against DeFi-native risks. On the junior side, it attracts risk-tolerant capital, like yield farmers and DeFi-native hedge funds, that are looking to maximize yield and are ready to take on the incremental risk that comes with it.

4. How Strata tranches risk for DeFi yields

To add one more thing, because I mentioned both the supply and demand sides: on the supply side, there are so many exotic yield sources out there. To start with, Ethena is tokenizing the carry trade. For example, Neutral is tokenizing an OTC trade. Then there are emerging projects like Access [?], which are tokenizing cross-exchange arbitrage.

There are also arbitrage strategies that exist only in CeFi, and those are being tokenized as well. There is a lot of new stuff coming on-chain, like private credit and RWAs. Some are offering financing against credit-card receivables.

There are so many exotic yield sources, and they come with a variety of risks at different layers. All these yield products are becoming more like risk products as well. Collectively, all of DeFi has done a good job assessing and trying to mitigate these risks, but I think the one thing that is still missing is building products that let users transfer this risk.

5. Screenshare demo of real Strata market

Those who want safer, protected yields can transfer the underlying risk to users who want that risk and want to be fairly compensated with higher yields. That is what risk tranching does, and that is what we do at Strata as well. We brought this risk-tranching concept from TradFi and built everything on-chain, with everything enforced by smart contracts.

The yield-split mechanism—how yield should be distributed between senior and junior tranches—and the programmable risk-coverage component are all on-chain. Nothing is enforced by off-chain policies or anything like that.

Okay, so Strata allows us to get exposure to either a senior tranche or a junior tranche of different popular on-chain yield sources. If I’m looking at the Strata markets page, you’ve got a pool for Ethena’s USDe, one for Neutral’s nUSD, and an mHyper pool from Midas.

Let’s talk through a real example here. What happens when depositors deposit something like USDe? I want to understand what we’re supposed to be considering as users when we look at the Ethena USDe pool for senior versus junior tranches. What can you tell us happens under the hood?

6. How Strata splits yields into junior vs senior tranches

Before I walk you through a live product, maybe I can spend some time explaining how everything works under the hood with all these markets that we have live on Strata. Strata is a fully on-chain, general-purpose risk-tranching protocol designed to offer structured yields through tokenized senior and junior tranches, as you mentioned, on diverse on-chain and off-chain yields.

Think of it as infrastructure, or a distribution layer, very similar to Pendle, but for risk-optimized yields. As part of our go-to-market, we are currently focused on dollar-denominated yield strategies. Users deposit stablecoins in one of the markets that are live on Strata today. Then all these stablecoins are deposited into the underlying yield-bearing asset or strategy, depending on the underlying market.

For the USDe market, the underlying is staked USDe, or sUSDe. For the Neutral product, it is staked nUSD. For the mHyper product, it is the Midas mHyper tokenized fund, which offers a multichain stablecoin yield strategy managed by Hyperithm.

We pool the deposits and deposit them into the underlying yield-bearing asset or strategy. The protocol generates the yield, and it is distributed based on a dynamic yield-split mechanism between the senior and junior tranches. This dynamic yield-split mechanism references exogenously set risk parameters, very similar to how Aave’s interest-rate curve works.

You have to set initial risk parameters around how the yield should behave around the kink and how the slope should look. Then, depending on the underlying yield and how liquidity is distributed between the senior and junior tranches, the yield is split between them.

The output of all these parameters is what we call a risk premium. The senior tranche pays this risk premium to the junior tranche. Essentially, the senior tranche is paying a portion of the underlying yield to the junior tranche. The junior tranche gets the base yield from the underlying plus the risk premium that is foregone by the senior tranche.

The junior tranche takes on different types of risk. It acts as first-loss capital, provides risk coverage, and protects the senior tranche against these risks, which varies depending on the market.

For Ethena’s product, the junior tranche provides risk coverage against the underperformance risk of Ethena’s yield going below a benchmark. The benchmark is currently the lending rates for USDC and USDT on the Aave V3 Core Market. Essentially, it is a supply-weighted average, plus Ethena’s insolvency risk. If something goes wrong with USDe, the junior tranche underwrites that risk as well.

I can share my screen and walk you through one of the markets. Currently, you are looking at Strata’s app.

We have 3 markets live at the moment, and we are launching more. We expect to launch another 5 or 6 markets in the next 4 to 5 weeks, so we are expanding very aggressively from here.

We launched our first market, Ethena USDe, which is built on top of Ethena’s yield-bearing dollar, sUSDe. We launched this in October last year, and it is still our biggest market. The other markets are going more slowly.

To walk you through how the mechanism works and how the yield between the senior and junior tranches looks right now, let’s look at the overall mechanism. If you look at this Ethena USDe market, as I was saying, we have a benchmark to let the junior tranche underwrite the underperformance risk as well. This is the supply-weighted average of lending stablecoins on Aave.

Right now, you can see that the current APY the senior tranche is getting is around 2.8%, roughly 70 basis points below Ethena’s sUSDe. You can call that 70 basis points the current risk premium, which depends on how the liquidity is deposited on each side. Essentially, the risk premium stays relatively stable, but as the senior TVL ratio, or the coverage for the senior tranche, increases, the risk premium starts to increase as well, although it remains relatively stable.

They are paying a 70-basis-point risk premium to the junior side. The TVL split between senior and junior right now looks like 75% to 25%. The current yield that the junior tranche is getting is around 6.6%, which is roughly twice Ethena’s yield. This is funded by the risk premium that the junior tranche has forgone, plus the underlying base yield coming from sUSDe.

If you look at the historical APYs, I want to show some scenarios, or actual events, where the junior tranche was slashed. We launched our product on October 10 last year, which was arguably the biggest stress event for Ethena and probably for the broader market as well. We launched on October 13, and Ethena was yielding 0%. It was yielding below the benchmark, so the junior tranche took the hit and was yielding negative.

Then Ethena’s yield picked up again. Since then, it has been consistently yielding, I would say, at least 2 times Ethena’s yield. You can see 8.6% since October, which is more than what Ethena has yielded since that time. On the junior side, it has yielded 3.5% since October, which is relatively close to Ethena’s yield.

You might be asking: The senior tranche is paying this risk premium to the junior side, so it should be less than Ethena’s yield. It is slightly less, but it is comparable. The reason is that we have a redemption fee, and part of the redemption fee is shared with the existing tranche holders. Whenever someone leaves and redeems the senior tranche, they pay a fee that is distributed to the existing tranche holders. So part of the yield is funded by that redemption mechanism as well.

7. Balancing senior vs junior TVL

When we have this split between seniors and juniors in this example for the Ethena USDe pool, there are 75% of deposits held by the seniors and 25% by the juniors. Is there some sort of cap that kicks in if more and more people are depositing into the senior side? You only have so much junior liquidity to guarantee them that first-loss coverage and minimum base yield. How does that work? Would we ever see seniors capped, with deposits no longer allowed?

We have something called a minimum coverage threshold that we require for the senior tranche to be minted. Below that threshold, senior tranche minting is stopped, and junior withdrawals are temporarily suspended as well. Once the coverage is above that minimum coverage threshold, everything is normal again.

For Ethena’s market, that coverage is 105%, or you can call it 5%. The maximum senior tranche that can exist is 20 times the junior TVL. The idea is to always have a minimum level of coverage available for the senior tranche, providing the protection that the junior tranche offers.

This minimum coverage threshold varies depending on the underlying market. For Ethena’s market, we see the insolvency risk as very minimal, especially after the way they got out of the stress event on October 10. I think that type of risk is very minimal. Since the coverage right now is almost 120% or 125%, the minimum coverage threshold is quite low compared to that.

To answer briefly, there is a cap on the senior tranche, which is a multiple of the minimum coverage threshold.

8. Tranching vs insurance: what’s the difference?

Vish, I want to frame all this around what we have seen play out over the last few weeks in DeFi. We have had a few exploits, with the Resolv one top of mind. What has been going through my mind is: How does tranching work versus something like insurance? What is covered, and what is not covered, in one of these loss scenarios?

Can you walk us through what the junior tranche would actually be covering for the senior tranche? What sorts of scenarios would that coverage actually work for?

We get this question a lot: the difference between risk tranching and insurance. The whole market is talking about these insurance products versus risk tranching. Broadly, there are some similarities. Both offer protected yields on one side, and on the other side there is some type of risk coverage.

Fundamentally, though, they are different. Risk tranching focuses more on providing risk coverage against financial or economic losses arising from something related to the underlying strategy. Insurance, on the other hand, focuses more on smart contract hacks or risks arising from external factors that are very difficult to price.

Based on my understanding, most of these insurance products provide coverage against smart contract hacks. Recently, we saw some technical failures related to operational security, but I do not think any of those events were actually covered by these insurance products.

Another difference between risk tranching and insurance is that insurance relies on some sort of off-chain policy. Risk tranching is 100% on-chain: programmable risk coverage. All the rules, the yield split, and the slashing of the junior tranche are enforced on-chain.

It is transparent, fully priced by the market, and cleared in a composable and programmable way. As I mentioned, it is better to give an example of where insurance and risk tranching diverge, and the types of events or products where they converge as well.

Let’s say Strata is building on top of some yield-bearing stablecoin, and something goes wrong: they lose the underlying collateral backing this yield-bearing dollar. It could happen because something goes wrong with the underlying centralized exchange to which they have exposure, or with the custodian itself. Allocating which centralized exchange and which custodian to choose is part of the allocation strategy, and the junior tranche underwrites this strategy risk, or what you can call underlying credit risk or counterparty risk.

In this case, if something goes wrong with the underlying collateral and there is a NAV loss on the yield-bearing dollar, the junior tranche is slashed. It takes the hit because it underwrites the underlying strategy risk. But let’s say there is a hack, or the admin key is compromised, leading to illicit minting of the stablecoin. This also leads to a drop in NAV, but the event arises from external factors that are not part of the strategy.

The junior tranche is covering anything related to the underlying strategy, so it would not take any NAV loss arising from a scenario like illicit minting of the stablecoin. To give another example where insurance and risk tranching converge, we recently launched senior and junior tranches on top of a managed yield vault, mHyper.

In this case, the vault is exposed to multiple assets and protocols, and on our side we track the NAV of the vault. Let’s say something goes wrong with an underlying protocol to which the vault has allocated funds. It could be a hack, a smart contract issue, an operational-security issue, or whatever else, and there is a realized loss. This leads to a NAV loss at the vault level, so the junior tranche is slashed as well.

Essentially, as I mentioned earlier, the junior tranche underwrites the strategy risk, and allocating to this protocol or asset was part of the strategy. Since it also covers the smart contract risk of the underlying protocol, I was saying that it behaves like an insurance product as well, underwriting the smart contract risk or anything related to the operational security of the underlying protocol and assets.

9. How Strata works with RWAs

Vish, you touched on the benefits of tranching earlier, and I want to talk a bit more about tranching with RWAs. Anybody following DeFi is seeing RWAs come into this space in full force. How does Strata integrate or work with RWAs?

What we have right now is what we call a single-strategy tranching mechanism. Essentially, both the senior and junior tranches are allocated to the same underlying asset. This structure is able to underwrite the credit risk, strategy risk, counterparty risk, and so on of these RWAs.

I think the majority of RWAs are not really facing a credit-risk problem, especially if we are talking about some triple-A-rated, tokenized private credit, like A credit or something like that. There is essentially no credit risk, but what is inhibiting their adoption across DeFi is mainly duration risk.

All these RWAs, even if they are triple-A-rated, have liquidity or duration risk. They are redeemable once a month or once a quarter, while DeFi relies on instant liquidity. If they want to be accepted as collateral, they need to be liquidatable instantly. If an underlying asset takes a month or a quarter to redeem for stablecoins, it is difficult to increase its adoption as collateral and build even more utility around it through looping and leveraged carry.

We are coming up with a new mechanism in the next 3–4 weeks called isolated-strategy tranching. Essentially, the senior and junior tranches will have exposure to different underlying assets—isolated underlyings. The senior tranche will be backed by an illiquid, triple-A-rated RWA, while the junior tranche will be backed by some liquid, yield-bearing source, such as USDC, Sky USDC, or USDC lent on Aave.

To give an example of how this mechanism solves the liquidity and redemption, or duration, risk of the underlying RWA, whenever the senior tranche is redeemed, it is redeemed from the liquidity backing the junior tranche. That liquidity is liquid and yield-bearing, while the junior tranche is redeemed from the underlying RWA.

Essentially, the junior tranche takes on the duration risk and liquidity risk, while the senior tranche is instantly redeemable using the liquidity backing the junior tranche. This is not really something new. It has been offered by market makers and prime brokers, which take on the duration risk of these RWAs and provide liquidity for liquidations or wherever liquidity is needed.

We are just doing it in a more transparent, fully on-chain way, compared with how these market makers do it in a more opaque way.

10. Strata is addressing DeFi’s big issue: mispriced yields

I was just reading an article that was being reshared by a lot of reputable people in DeFi. Forgive me—I think the author’s name is Luca, and he might be the founder of M^0. Nomatic, am I getting that right? Is that the person who put out that great article?

Luca Prosperi or something like that.

Something like that. Anyway, he put out a great post, and my takeaway from it—and, to be totally transparent, a lot of it goes way over my head—was that RWA lending on-chain is very suboptimal right now and is mispriced. Dumbing that down further, folks lending against RWA collateral are not getting paid enough.

What I love about Strata, and what got me excited about it, was thinking about the senior-tranche protections. That is exactly what I think some of these lenders are looking for. A lot of DeFi yields have dropped since the October 2025 market top, so I think there is a mispricing of many different yields on-chain.

What you have built as a primitive is addressing some of those mispricings, capital inefficiencies, and perhaps poor decision-making in general. I have definitely mispriced certain yields myself at times. I would love to see this primitive grow.

I also do not want to overlook or fail to inform listeners that there are quite a few Pendle pools with Strata tokens in them as well. Not only can you be a senior-tranche depositor, but you can also express your view of the markets through a PT on Pendle.

I think that is really cool because you can then lock in a fixed yield. You are getting all of the protections of being a senior-tranche depositor on Strata while locking in a fixed yield. In rare cases, I think you might then have the ability to loop that with the PT.

It all depends on what liquidity is out there on something like Morpho. This is the power of DeFi composability. But again, there's been this lack of protection that we've been able to seek when we're lending in different yields on-chain.

11. How builders can get started with Strata

I do want to segue into what builders can do in terms of plugging into Strata's infrastructure. If they have a yield, want to build a protected yield, and want to offer the amplified exposure—the leveraged exposure—that junior tranche holders seek, how can they start to build that with Strata? Is this permissionless? Can we build different markets onto Strata without getting in touch with the team, or should they be getting in touch with you as a team?

Yeah, it's not permissionless at the moment, but eventually we want to be more semi-permissionless, like Pendle. If any yield source wants to distribute to a diverse user base and offer senior and junior tranches on its underlying yield, they can reach out to us.

In terms of our GTM, we want to tap into novel yield sources and products that offer different kinds of risks and different kinds of infrastructure, so that we're ready to tranche everything as quickly as possible. Eventually, we want to be strategy-agnostic, chain-agnostic, and soon, infrastructure-agnostic as well, as we build on different types of yield sources and different kinds of vaults. So if you need risk-transfer products, you can reach out to Strata, and we can build from there.

12. Closing

I think this is a great place for us to wrap up. Vish, thanks so much for your time. Congrats on all of the traction you have so far. I think there's around $120–$130 million deposited into Strata as of this recording. I'm sure that will grow tenfold in the next year. But is there anything else you'd like to share before we go?

Yeah, some really exciting products are coming to Strata. I've hinted at most of these in the conversation, but one product that we're personally very excited about—I won't really name it—sort of realizes Michael Saylor's vision of digital money backed by Bitcoin. So, stay tuned. I think we'll be launching this product by the end of this month.