DeFi Protocol Struct Finance Closes $3.9M

Avalanche-based DeFi protocol Struct Finance is developing the first permissionless protocol for on-chain structured products.

The protocol is designed to help users create custom interest rate instruments and combine them with other yield-generating options to assemble unique financial products.

Struct users can effectively construct an investment vehicle adjusted to their risk tolerances by leveraging smart contract functionalities.

With the development work advancing, the Struct Finance team is gathering support and backing from investors and crypto communities. The platform has now added $3.9 million in capital from its seed round from a consortium of venture capital firms and angel investors, including Blizzard Fund, AVentures Dao, Bison DAO, Keychain Capital, Infinity Ventures Crypto, 0xVentures, and FBG Capital, to name a few. 

The emergence of derivatives in the crypto markets slowly allowed structured products to emerge. By design, structured financial products are “traditional financial solutions” that have a yield profile dependent on the performance of underlying assets, such as stocks, bonds, or other securities that have been packaged together. 

Structured products are typically issued by banks and investment houses and come in many shapes and sizes. Still, they all have one thing in common: they are designed to offer investors returns that match their risk profiles, often to achieve higher returns than those available from investing in traditional securities.

Structured products hold a significant position in the traditional finance (TradFi) ecosystem and are estimated to total more than $7 trillion. They have begun to gain traction in decentralized finance (DeFi) as well, primarily in the form of cash-margined puts and covered calls. 

While there are many benefits of structured products, the existing range of DeFi protocols and platforms isn’t well equipped to support them. Most derivative instruments in DeFi are currently static, with rates and benefits predominantly set by the protocol developers. 

On top of it, the DeFi ecosystem is heavily fragmented. As a result, structured products within the current DeFi sector are subject to fragmented liquidity, leading to higher slippage or significant changes in discount rates if the user transacts larger volumes under low market depth.

Struct Finance addresses these problems while enabling institutions to easily customize their interest rates and compose them with other options to build structured products that suit the investment profiles of different investors.

The platform aims to help investors maximize their returns while minimizing uncertainty in DeFi through diversified features, including tokenized risk strategies, asset management tools, customizable instruments, and capital efficiency.

Jingcheng Li, managing director at FBG Capital, stressed the importance of structured products in DeFi.

“As Defi goes to the next level, the market for derivatives will grow significantly in the future, and the Struct Finance team has the right products to fit the market needs,” he said. “We are delighted to support this very promising team.”

Download the TipRanks mobile app now

To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.