Tranchess Protocol Summary Recap with Shin Chan Community
We held a live AMA with Co-Founder of Tranchess Protocol, Danny Chong on 29th June 9:00 PM (UTC+8). Here’s the recap for those who missed it.
Introduction
Serene: Before AMA start, can you introduce yourselves and the team background?
Danny Chong: Sure! The Tranchess team hails from diverse backgrounds and experiences across — From the top universities in the world, including Oxford, LSE, UPenn, NTU to having work experiences within Tech giants such as Microsoft, Facebook, Google, And last but not least in investment banks such as Morgan Stanley, UBS, BNP Paribas, etc….
To elaborate, quite a handful of our C-Suite members are from investment banks, asset management firms and hedge funds, whilst our CTO is particularly experienced with cyber security in centralized crypto exchanges and DeFi protocols. We believe that the synergy from this diversity is what allows us to present to you today a new class of DeFI — The Tranchess Protocol.
As for me personally, my roles in investment banks spanning over the last 16+ years, includes trading, sales and management of teams across APAC. Once again, I am pleased to be here with everyone on this Tranchess AMA today organized by Shinchan.
Serene: Any latest/ update news about Tranchess Protocol you would like to share with our community?😀
Danny Chong: We have started our Guarded Launch last week. We invite everyone to have a look at what we currently have to offer at www.tranchess.com! More to come soon.
AMA Twitter Section Begin:
Q1: Can you please introduce your project and the problems you want to solve / Solutions you are proposing?
Danny Chong: With pleasure. Tranchess was first brainstormed in 2020 and developed into a tokenized asset management and derivatives trading protocol. Inspired by different tranches in a traditional fund set up that caters to investors with different risk appetite, Tranchess aims to provide a different risk/return matrix out of a single main fund.
The main fund Queen can track any crypto underlying and we have purposefully chosen BTC as the first crypto asset to track. Meanwhile, it also shares some of the popular DeFi features such as: single-asset yield farming, borrowing & lending, trading, etc..
To elaborate on the tokens in Tranchess a bit further — The main fund Queen currently tracks BTC and can be split into 0.5 token Bishop and 0.5 token Rook. Token Bishop purely earns more yield and does not track BTC at all, while Token Rook earns smaller yield but is essentially a 2x leverage token for BTC.
Simple Flowchart Explaining the General Process in Tranchess Primary Market
Tranchess hopes to be the benchmark in closing the gaps between asset management and DeFi space. It provides:
- Enhanced yield returns while avoiding impermanent loss issues
- Zero Lock-in Period for Queen holders
- Leveraged positions at low cost and no forced liquidation
- Prevention of Oracle Attacks using TWAP (Time Weighted Average Price)
Q2: For Tranchess token holders, what are the benefits of holding Tranchess tokens?
Danny Chong: Whether you are holding on to Tranchess’s token Queen, Bishop or Rook, there are 2 distinct ways for you to earn extra returns by virtue of you holding onto these tokens:
- Token Queen, Bishop & Rooks comes with a single-asset yielding feature, which allows you to farm extra yields in the form of token Chess.
- Enjoy Dividend Top Up with veChess Locked: Tranchess rebates 50% of all fees (excluding gas fees) collected on the platform and re-distributes to those with token CHESS locked-in. The amount yielded from this segment is correlated to the amount of veChess held and locked
Here is the link to our FAQ for further understanding.
https://docs.tranchess.com/
Q3: Cases of hacking are taking place every day. How is Tranchess effective in safeguarding its protocols and protecting users’ interests?
Danny Chong: Tranchess undertakes the highest standard in ensuring the security of its protocol. Top-notch global audit firms had been engaged to conduct smart contract audits for all our protocols. These firms include Certik, Peckshield, etc. To further strengthen the protocol, we had also worked with Immunefi, DeFi’s leading bug bounty platform, to uncover any vulnerabilities before our public launch.
One of Tranchess’s unique defense mechanism lies in its 30min TWAP (Time Weighted Average Price) method of trading the live prices of tokens. Many Defi Protocols have a reliance on trusted price feeds, and most protocols take a discrete tick price from the oracle’s price feed which is updated frequently. This is easily exploitable for oracle attacks, especially under extreme market fluctuation. The 30 mins TWAP window prevents any discrete outlier price from taking place and thereby eliminating such oracle attacks.
Q4: For Primary Market, what is the daily settlement time and how long does it take to settle creation/redemption of Token Queen?
Danny Chong: At 14:00 UTC every day, Tranchess protocol automatically calculates the NAV (Net Asset Value) of the main tranche based on the oracle’s price feed, processes all creation and redemption requests for token Queen received in the past 24 hours.
The Creation/Redemption function is designed for long-term crypto asset holders, (as compared to the Tranchess Exchange that is meant for quick buy/sell). The time buffer allows for smoothening of internal processing and to allow internal governance checks to take place. Also, when Rebalance is triggered, the Creation/Redemption function will be temporarily suspended； the longer period between settlements also acts as a buffer for this situation.
Q5: What does it mean to set a “premium or discount” when I submit a trade order?
Danny Chong: Tranchess Exchange adopts a Premium-Discount Orderbook system, which means that the premiums or discounts of a forward-starting 30-minute TWAP (Time Weighted Average Price) are traded. Tranchess defines each 30-minute trading window as one epoch, and users can place orders within each epoch at the premium or discount of the NAV calculated from the TWAP of the next epoch’s price.
For instance, at 9:45 am, Alice buys token QUEEN from Bob on the order book at +25bps premium. This transaction’s reference price will be the NAV of the next 30-min window, i.e., 10 am — 10:30 am, and Alice’s final purchasing price will be (the NAV of 10am-10:30am) * (1+25bps). One bps = 0.01%
(Tranchess Exchange will be available from 1st week of July onwards)
Telegram Live AMA Begin:
Q6: How is Tranchess different from other DeFi protocol?
Danny Chong: Tranchess can be considered as the first of its kind type of DeFi Protocol, it is designed to complement current DeFi protocols and to allow for it to track any crypto asset available, while allowing high yield returns and leverage positions to be established concurrently. It is a tokenized asset management protocol which can appeal to the DeFi community with its increased security & relative high yield but also appeal to current financial institution type of investors with its clear directives.
Q7: What is the correlation of QUEEN, BISHOP, ROOK and Tranchess in general?
Danny Chong: Tranchess is an asset management protocol designed to track any underlying crypto asset. Tranchess 1.0, which is the very first fund we issue with Tranchess protocol, is a fund that tracks the price of underlying BTCB/USDC
Token QUEEN is the token for the main fund. Each Token QUEEN represents one share of the main fund. Token QUEEN can be further split into/merge from two equal sub-tranches, Token BISHOP and Token ROOK.
QUEEN’s movement is in parallel with the price movement of BTCB. BISHOP yields a steady fixed return and is unaffected by changes in price of BTCB. ROOK is a 2x leveraged BTCB synthetics designed for aggressive traders.
Here is the link to our FAQ for further understanding.
https://docs.tranchess.com/
Q8: Tranchess Protocol has elements from a real world asset management set up, could you elaborate your plans on relevance to the real world?
Danny Chong: Tranchess’s first and immediate aim is to introduce the concept of tokenized asset management, offering a first of its kind preposition to the DeFi world. It is well documented on our white paper that Tranchess also addresses a few needs of the community such as : Enhanced Yield, Tracker for other Crypto assets, Steady returns, Reducing Impermanent losses, Leveraging positions with low margins, no forced liquidation, Prevention of oracle attacks and so on….
It is however true that the nature of Tranchess has also attracted a good level of interest from traditional finance types. There had been outreach to the core team to seek further understanding of the protocol as well as strong understanding of overall DeFi space. We remain committed to sharing our knowledge on Tranchess and DeFi space continuously, without bias, to any users keen on the protocol.
Q9: Instead of passively holding BTC, investors can now exchange their BTC for QUEEN tokens through the ‘creation process’ or buy from “Exchange” with USDC.” Is it more profitable to have passive $BTC than exchanging it for token QUEEN? Will the gas fees exceed the benefits of creating token Queen?
Danny Chong: It is one of Tranchess’s main key benefit — To allow users exchanging their BTC to Tranchess’s token Queen to acquire additional yield in the form of token Chess.
(Token Chess will reveal its value at pancakeswap IFO/Liquidity Pool at a later date) The longer token Queen is staked, the more token Chess would be yielded. The staking of Queen however has no lock up period and can be exited on a daily basis.
On top of this, token Chess can also be “locked-up” to enjoy a dividend from the platform’s earnings — 50% of it. Ie, Tranchess rebates 50% of all fees (excluding gas fees) collected on the platform and re-distributes to those with token CHESS locked-in. The amount yielded from this segment is correlated to the amount of veChess held and locked.
Q10: Why did you decide to audit your platform by more than one security company ie by CERTIK and PeckSheild, What exactly are you looking for?
Danny Chong: We agree and strongly believe that security is a determining factor in the success of any DeFi protocol. We take security very seriously and have undertaken the highest standard in ensuring the security of our protocol.
Q11: What are the expansion plans of Tranchess?
Danny Chong: Putting BTC as the first crypto underlying is Tranchess’s opening move. We plan to expand the underlying in the future to encompass other crypto assets; the underlying could be a single crypto asset or even a basket.
As Tranchess is a multichain project. We will continuously look to extend into various chains and networks to suit the needs of various users.
Q12: Say if Current BTC price is 30,000. And it drops to 20,000. How does it impact the NAV of Queen, Bishop & Rook?
Danny Chong: I’ll just put the questions again here… easier for everyone to follow up with the Q&A :)
”Say if Current BTC price is 30,000. And it drops to 20,000. How does it impact the NAV of Queen, Bishop & Rook?”
Hypothetically, assuming the investor has already created token Queen, the NAV of the newly created Queen would be around 1. If Queen is further split into 0.5 bishop and 0.5 rook, the initial NAV of each token would be around 1 as well. In the example, when BTC drops to 20,000 from 30,000, NAV of Queen would drop to around 0.67 whilst NAV of Rook would drop to around 0.33 NAV of Bishop would still remain around 1 as the nature of Bishop is agnostic to market volatility.
Q13: Why is it possible for queen’s NAV to drop below 1, isn’t Token Queen a BTC-enhancing product as you advertised?
Danny Chong: “Why is it possible for queen’s NAV to drop below 1, isn’t Token Queen a BTC-enhancing product as you advertised?”
As token Queen is a BTC-tracking token, as such, when BTC price rises and drops, Queen’s value will naturally follow in tandem.
If investors prefer a stable return, holding token Bishop earns token Chess on a daily basis as interest, regardless of BTC price fluctuations.
Q14: The DEFI trend is evolving too fast and we have seen some failures in this space. How can you be sure that Tranchess and its products will be on demand in the long term? How is Tranchess planning to contribute to the DeFi’s growth?
Danny Chong: “”The DEFI trend is evolving too fast and we have seen some failures in this space. How can you be sure that Tranchess and its products will be on demand in the long term? How is Tranchess planning to contribute to the DeFi’s growth? “”
Asset management has long been an integral part of the financial sector and an important one at that. Whereas there are interesting protocols in the DeFi space, Tranchess is the first of its kind product and we are excited about the future synergies it will generate in the DeFi space. Tranchess hopes to be a benchmark asset management solution for the DeFi space.
If investors prefer a stable return, holding token Bishop can be an option as it earns token Chess on a daily basis as interest regardless of BTC price fluctuation. This is an alternative token to hold as compared to other stable coins currently in the market.
Q15: Projects launched during bull runs are obviously more profitable than those during the bear cycles. In a bear run, where most of the projects fail and sometimes “disappear”, how does Tranchess plan to maneuver around such situations?
Danny Chong: “”Projects launched during bull runs are obviously more profitable than those during the bear cycles. In a bear run, where most of the projects fail and sometimes “disappear”, how does Tranchess plan to maneuver around such situations?“”“”
Well, first of all to put it into perspective, Tranchess is here to provide an Asset Management solution in the DeFi space for the long run. Whereas market runs can be cyclical, we prefer to look at it as “there’s no better time” than now to launch the protocol.
As Tranchess is effectively a tracker of other crypto asset underlyings, we believe the potential is huge. We can see the different dimension it is bringing into the DeFi space and this concept could also appeal to financial institutions who may be long familiar with the AM concept.
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