๐ค Blockworks: How Onchain Tranching Splits DeFi Yield Into Senior and Junior Risk
A Blockworks deep dive maps how DeFi 'tranching' protocols split a single yield source into a protected senior tranche and a higher-yield, first-loss junior tranche โ borrowing the structure of traditional CLOs.
โข Onchain versions replicate CLOs' overcollateralization checks but still lack diversification and external credit ratings.
โข New entrant Reflect (Solana) uses permissionless slashing and fixed time-locks to protect senior depositors.
โข Note: this research was commissioned by Reflect.
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