About 4 weeks ago, we recorded this new podcast with Royco Founder Jai Bhavnani, right as their first real stress test began playing out on the platform. The timing couldn't have been better, a chance to fully demonstrate Royco’s design as a new DeFi primitive for risk tranching onchain.
Since early June, Apyx apxUSD has dropped from $1 down to a low of $0.72 when STRC hit its own yearly low around $72. STRC has recovered a bit and is now trading at $82, still well below its $100 par, while apxUSD is now around $0.83.
Royco Dawn offers a market just for apyUSD lenders, the yield-bearing form of apxUSD. When you lock apxUSD, you receive apyUSD in return and earn 15.4% APY as of this post, but the problem lately is apxUSD being backed by STRC while STRC is below par at $100, meaning apxUSD has depegged, affecting the underlying value of apyUSD as well.
With Royco, apyUSD holders could have opted into the Senior or Junior tranche. Seniors would earn yield with downside coverage (15% for this market) while Junior capital would absorb losses before Seniors were ever impacted.
Juniors are always promised higher yield by serving as first-loss capital and therefore receive a risk premium paid by Seniors.
However, this whole design is now being stress-tested in real time by apyUSD’s issue with STRC, but so far, the Royco market design appears to be holding up!
In a new episode of DeFi Frontier, Jai walks through how Royco evolved into a risk tranching protocol connecting RWA issuers with both institutions and DeFi users. We get a live demo of the Royco Dawn markets, and then spend more time screensharing this real stress test with the apyUSD drawdown triggering a 21-day observation period.
We also get a first take on what to expect from Royco Dusk, a new app for extending credit to senior tranche holders through an AMM-backed liquidity pool. Listen to the latest episode of The Edge Podcast for more details below on Royco!
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🔗 Guest Links 🔗
► Royco website: royco.org
► Royco on X: x.com/roycoprotocol
► Jai Bhavnani on X: x.com/jaibhavnani
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DISCLAIMER: Nothing said on The Edge Podcast is a recommendation to buy or sell tokens or securities. This content is for educational and entertainment purposes only. Nothing shared here is financial advice. Any views expressed by hosts or guests on the show are solely their opinions. Always do your own research. DeFi Dad, Nomatic, and guests may have positions in the assets or other matters discussed in this podcast. DeFi Dad invested in the Royco seed round in 2024.
