> For the complete documentation index, see [llms.txt](https://docs.prl.one/buttonwood/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.prl.one/buttonwood/learn/tranche/deposit-flow.md).

# Deposit Flow

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

![Diagram of a user depositing into an AMPL bond in return for tranche tokens](https://2960531599-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2F-MkOcHevGAkolQq9Te-Z%2Fuploads%2F4wbNBa0qRIICx3OLAzqP%2FDeposit%20Flow%20Diagram.jpg?alt=media\&token=1e040737-18e1-4249-8eb5-3ea5663ac55f)

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

![](https://2960531599-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2F-MkOcHevGAkolQq9Te-Z%2Fuploads%2F7jBpbZFvDWPacapfS0WI%2FDeposit%20Flow%20Diagram%202.jpg?alt=media\&token=0e266d1c-b889-4d84-a6fd-0b88b82ef97f)

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.