Tue, 22 Mar 2022 07:12:20 +0000
The world of structured products is set to undergo tremendous changes. Decentralizing these investment vehicles introduces modularity that would otherwise remain inaccessible. Struct Finance has secured $3.9 million in seed funding to usher in the era of decentralized structured products.
It is no secret that decentralized finance remains one of the most appealing concepts of blockchain and cryptocurrency today. The industry has grown from small beginnings and now represents over $220 billion in Total Value Locked. Users are drawn to these protocols, products, and services in search of high yields, composability, and the removal of intermediaries. However, there is a need for ongoing innovation in the space, especially for institutional-grade products.
Decentralized structured products may be the next catalyst to fuel broader mainstream DeFi participation. Unlike their traditional counterparts, the products under the Struct Finance banner give users customization options. For example, a user can customize interest rate instruments and compose various options in the ecosystem to create more complex products. In addition, there are numerous investment options, which users can custom-tailor to their risk appetite.
Lancer Capital Managing Partner Candice Zhao comments:
“Investors and institutions are forever faced with large swings in yields and token prices, or uncertainty and unquantification created by overly complex derivative protocols. Struct Finance is bringing structured financial products to DeFi, providing investors with attractive and simplified stablecoin yields. I am an admirer of their team, and I believe that fixed-income related products will become the first choice for institutional investors.”
Core benefits of Struct Finance include:
Struct will initially launch on the Avalanche blockchain but will scale into other networks with EVM compatibility to improve asset availability and composability options.
The desire to decentralize structured products comes at a crucial time. Decentralized finance is a booming industry, and pressing problems with traditional derivative products remain present. It is impossible for users to precisely determine the products they want to invest in when dealing with conventional providers. Instead, customers have to choose from the available options determined by the provider.
One may think this lack of personalization prevents industry growth, but that is not the case. Instead, structured products represent a $7 trillion industry, with further expansion on the horizon. Moreover, the concept is now gaining momentum in decentralized finance, primarily through cash-margined puts and covered calls. Struct Finance intends to take this opportunity and give investors more options than ever before.
Decentralizing financial vehicles can result in better liquidity, low slippage, and a lack of significant changes to discount rates if larger volumes are present during low market depth. Those are all essential aspects when dealing with liquidity across various assets and multiple maturity dates for derivative products.
The vision by Struct Finance strikes a chord with many crypto and blockchain investors. The team’s recent seed funding round attracted $3.9 million from two dozen top-tier investors and firms. Participants include Arcanum Capital, Finality Capital Partners, Infinity Ventures Crypto, Keychain Capital, lancer Capital, Lucibblue, MC Ventures, Wintermute, etc. Such strong support from investors confirms Struct Finance and decentralized structured products are a frontier worth exploring.
Arcanum Capital Founding Partner Karthik Bupathi adds:
“We decided to support Struct Finance because we feel they are creating a much needed cross-chain solution for both institutional and retail participants to launch their own structured products with fewer design limitations, allowing for more innovative investment products.”
The seed funding enables Struct Capital to build out its tools for institutional clients. These tools will help users customize interest rate products and allow for constructing next-generation structured products playing to different investor profiles’ strengths.