Fixed Pools and Dynamic Vault
➖Fixed Pools and 〰️Dynamic Vault
Pool mechanisms
Investors usually have different risk preferences. Some investors are comfortable with less liquidity for higher returns. Many other investors are content with relatively stable returns knowing that they could withdraw their positions at any time. For those investors, Konkrete will soon introduce Dynamic Vaults which will allow for more flexibility when it comes to liquidity. For now and until the protocol reaches a significant size, Konkrete will solely provide investors with the possibility to provide liquidity to Fixed Pools as detailed in the following part.
➖ Fixed Pools - (main feature of Dapp V1 currently in Beta)
Fixed Pools are investment pools for specific Asset Originator’s Deal. A Fixed Pool is a smart contract that encodes a set of financing terms for a Borrower, including the interest rate and repayment schedule, proposed by the Asset Originator, and through which the Borrower can borrow capital and repay it by those terms. Fixed Pools don’t accept new capital inflow after the pool is successfully launched with the targeted amount of capital raised, and as a result, feature a fixed interest rate. When using this pool, users will need to lock their capital for the announced period and until maturity.
Let’s take the following example to explain the functioning of a Fixed Pool.
Konkrete launches a Fixed Rate Pool targeting a fundraising amount of $100k, and featuring an interest rate of 9%. The fundraising period starts on March 1st, and runs for the whole month until March 30th. The asset is a private real estate debt with a maturity of 24 months. From Mar 1st onwards, investors can start to deposit USDC into the pool. Whenever the size of the pool reaches $100k, it will no longer accept new capital deposits. If on Mar 30 the amount raised is smaller than the soft cap, the capital will be returned to investors and the pool is canceled. If deployment was successful, it will be invested into the private debt as promised.
Main characteristics of Fixed Pools :
Strategy: Development projects with high APY
Assets: Fixed Pools finance construction projects commonly called Development. This pool will be composed of real estate loan for a Borrower.
Let’s take a practical example to explain what Real Estate Development means:
On our currently active pool, the initial asset originator is Homunity, a 100% online real estate crowdfunding platform based in Paris, France with $560 million EUR capital raised for real estate projects. The average maturity of assets is 18 months.
APY: estimated around 9-12%.
Maturity: The period can vary between 18 to 24 months, depending on the specific characteristics of the project presented. The community of Investors can expect the repayment of principal or principal and accumulated interests at the end of the period.
Liquidity: A secondary market Over The Counter (OTC) will be integrated, meaning that investors can resell their tokens to other investors willing to enter the pool.
Note that the OTC will be the first priority feature to focus on after the end of the private Alpha.
Composability: The adoption of a standard ERC20 token, specifically IEP 4626, enables the Konkrete protocol to have compatibility with other Decentralized Finance (Defi) protocols, which is a crucial aspect of the value proposition to the Konkrete network.
As Investors are entitled to receive interest payments at maturity, which can be a prolonged period, some may choose to receive these payments in advance, even if it entails a reduction in yield. To name some, this service is offered by Defi protocols, such as ApWine and Pentle.
Disclaimer: In no way, Konkrete is responsible to find another buyer neither is liable for the actualized performance. Deals are validated following predictions and cannot guarantee the yield.
〰️ **Dynamic Vault (**the new feature for Dapp V2)
As opposed to Fixed Pools, dynamic vaults allow for new capital inflow even after their initial launch. Investors have the option of continuously investing into the Pool, but the Pool will maintain a targeted utilization rate, meaning that any additional capital inflow will be invested into new real world assets (RWA) debt. Upon the expiration of the purchased assets, cash is obtained and reinvested into the same asset based on the difference between the current utilization rate and the targeted utilization rate.
Main characteristics of a Dynamic Vault :
Assets: The Dynamic automatically allocates that capital across the pools. Thereby the Dynamic Vault provides diversification across Pools.
APY: variable APY
Maturity: perpetual
Liquidity: All the funds in the vault are not deployed. The liquidity available for redemptions is determined by the liquidity in the Reserve, which is the funds in the vault not deployed to finance assets ("~cash" in traditional finance). It is available for redemption by Investors and Automated Market Makers.
The advantages of this approach include access to liquidity through both the primary market, where Investors can withdraw their investments as long as there are sufficient funds available, as well as a fully decentralized secondary market, referred to as an Automated Market Maker (AMM), without incurring the risks associated with small pools such as price slippage.
One potential disadvantage is that the capital utilization rate may not always be 100%, meaning that a portion of the funds may not be actively generating interest.
Tokens
There are two types of tokens involved on the Konkrete protocol. There are Pools’ tokens and Vault’s tokens.
➖ Fixed Pool Token
Each Fixed Pool issues a unique serie of tokens. When Investors decide to lend to one of the Fixed Pools, they receive the token equivalent of each USDC deposited to the Pool. This Fixed Pool Token is the standard ERC20 token, specifically IEP 4626, enabling the protocol to have compatibility with other Decentralized Finance (Defi) protocols, which is at the core of the mission supported by the Konkrete Community.
The following section Liquidity is empty due to the Konkrete core contributors being currently working on editing a new version of this Litepaper. To follow the team’s progress visit the Konkrete site and sign up to get Private Beta Access. The Konkrete team will also provide all news and announcements directly on Discord. You can refer to the Verify your address section, to understand how to identify you with Persona.
〰️ Vault Token
Each Vault issues an infinite supply of the standard ERC20 token, specifically IEP 4626.
The following sections Characteristics and Liquidity are empty due to the Konkrete core contributors being currently working on editing a new version of this Litepaper. Please refer back to the text above.
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