Quick Takeaways
- Tranchess will become a validator on BNB Chain with the launch of the BNB fund.
- BNB fund will receive an additional Alpha yield of a minimum of 8%*.
- More yield, but no added steps. Similar creation and redemption process with minor timeline adjustments. Creation starts on January 11, 2022.
- BNB fund comes with extra CHESS incentives.
2021 has been an exciting year for Tranchess. We released our first asset tracking protocol because we saw the need in the market, and the recognition it had received was beyond our expectations. The recognition also challenges us to take Tranchess up a notch and be a better version of ourselves — this was the inspiration to Tranchess’s new year’s resolution. And out of the many things we’ve penned down, the upcoming BNB fund is the item on the top of the list. The coming BNB fund marks the beginning of a new chapter to our alpha generation capacity, which — spoiler alert — would also be replicable on any other POS chain in the future.
How is the BNB fund different from the previous two funds
Compared to the first two funds Tranchess had released previously, the BNB fund comes with an added layer of yield: The validator reward from the Binance Smart Chain. Tranchess stakes all BNBs in the fund to its validator node on BNB Chain and distributes the APR rewards it obtains from the BNB Chain network back to all BNB fund users who have created nQUEEN+ with their BNBs.
Being a leading POS chain, BNB Chain has one of the most robust traffic and booming ecosystems. These translate to significant returns in terms of validator node staking yield. Active validators on BNB Chain gain APRs ranging between 8% ~ 16%, depending on how stable the validator nodes are. A stable validator node captures more block rewards and generates higher APR for its delegators.
This is one of the main reasons we’ve decided to run our own validator node — so that we can actively manage the node and maximize a consistent and sustainable validator reward from BNB Chain. The technical infrastructure is demanding in its needs, but after many rounds of tests and simulations — We deemed it a worthy effort.
How to earn the alpha (α) return
Create nQUEEN+ with BNBs. The process is just the same as the previous two funds: Go to Primary Market, select “BNB” under “Create,” and claim your nQUEEN+ after the settlement at 2 pm UTC.
An alternative and a slightly more aggressive route, is to buy nROOK+ with USDC on Tranchess Swap. Let’s not forget that ROOK is the leveraged tranche, which means nROOK+ gains a leveraged alpha. Specifically, if nQUEEN+ is gaining 12% APR in alpha return, with a leverage ratio of 2, nROOK+ would be earning 24% in APR. Of course, ROOK still needs to pay a daily interest to BISHOP for the leveraged position, but the return is still impressive.
The redemption process for nQUEEN+ is a little different from the other two funds. Frequent staking and unstaking of BNBs from the validator nodes generates fees which would negatively impact the actual APR rewards. Also, BNB Chain has a built-in “Unbonding Period” of 7 days for the undelegated BNBs to be returned from the node. In order to meet the needs of both “timely redemptions” and “maximized alpha returns”, Tranchess adopts an “auto-balancing” algorithm when handling redemption requests. Redemption requests are still settled daily at 2 pm UTC. All settled BNB requests would be claimable as soon as there are “floating” BNBs in the fund, that is, BNBs from other users’ creations, or BNBs from the last undelegated transaction. Though we have established an upper limit of 14 days with regards to redemption waiting time, we are confident that the “auto-balancing” algorithm would enable most redemption requests to come through in a much shorter time span, as compared to the default seven days based on BNB Chain’s standard “unbonding period”.
So far, we have only covered the alpha return, but that’s not the only return the BNB fund generates. Sharing a similar structure to its predecessors, the BNB fund still has the familiar single-asset farming feature for all staked Q/B/Rs. In fact, the BNB fund will launch with an additional CHESS emission bonus!
Besides the regular emission, starting from Jan. 13, there will be an additional amount of CHESS distributed to all Tranchess users who have staked their tokens for mining. The bonus will last for five weeks. Detailed schedule as below:
(Overall CHESS emission schedule has been extended for another 10 weeks in conjunction with the current distribution plan.)
BNB Fund Creation starts on January 11, 2022. CHESS emission begins at 2 pm UTC, January 13, together with a temporary Bonus Alpha! Starting from January 13, Tranchess will incentivize all created nQUEEN+ with an 8% Alpha return from its treasury until all the BNBs in the fund are staked into the validator node and the actual alpha starts to appear. The Bonus Alpha is estimated to last for around four days. Users will be able to see more details on the status of the BNB fund on the “BNB Fund Fact Sheet” page, including the staking APR from the validator node, and the fund utilization rate.
The BNB fund has a baseline 2% protocol fee and 20% of the alpha generated from the BNB fund will go into Tranchess protocol income. The incremental income generated will translate into a higher weekly rebate for all veChess holders who have enrolled in the weekly rebate.
We see the BNB fund as another excellent depiction of Tranchess’s goal and the DeFi spirit. With intricately designed structured financial instruments, everyone can enjoy a meaningful and sustainable active return with minimal entry barriers — A transparent and “black box free” Alpha return not limited only to the privileged few. Users will collect an appealing return on their crypto assets even if they are holding only 1 BNB.
Happy 2022 Tranchess community — We hope you like the new year present, and we wish to see everyone even more often in this brand new year.
*: Calculation based on past data from BNB Chain network.
