Deposit Flow

Users deposit collateral and receive "Tranche" tokens. How does this work?

In order to tranche their collateral, a user can deposit it into a TrancheBond. The bond goes through its configured tranche ratios, minting tranche tokens proportional to the ratio and the amount of collateral deposited. For example:

  • Tranche ratios: 20/30/50

  • Collateral: AMPL

  • User deposits 1000 AMPL

    • User receives (1000 * 0.2) = 200 AMPL-A Tranche

    • User receives (1000 * 0.3) = 300 AMPL-B Tranche

    • User receives (1000 * 0.5) = 500 AMPL-Z Tranche

After this interaction, the user's position value is still equivalent to holding their original AMPL. However, they now have separate assets which represent different parts of AMPL's risk:

  • The A-tranche represents the safest 20% of AMPL's value

  • The B-tranche represents the middle 30% of AMPL's value

  • The Z-tranche represents the top 50% of AMPL's value and all of its future upside

The user can now sell some of these tranches to change their risk profile.

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