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How Tranching Turns Yield Into Tradable Markets Without Liquidations
šļøWhat if leverage did not require liquidations at all and yield became something you can actually trade in real time?
In this episode, Alex sits down with Alan from Covenant Finance to unpack a different way to think about DeFi markets. Instead of isolated positions and liquidation driven risk, Covenant treats risk like a banking system does through tranching, turning the āequity sideā into a fungible leverage token that anyone can hold and trade. Alan connects this to how banks create liquidity on top of long duration assets, and why tranching can be a cleaner mental model for crypto yield markets.
They also go deep on the mechanics that make Covenant feel āself balancingā including how the market targets specific leverage ratios, why yield changes create instant trading opportunities, and how denomination choices change the need for fast oracles like Pyth (and potentially Chainlink streams). The conversation lands on the most eye opening part: Covenantās leverage design can avoid the liquidation game entirely, which reframes how people think about safety, solvency, and ārobust leverageā on chain.
Host:
Alex Watts
X: ā @ThogardPvPā
Founder&CEO at ā @0xFastLaneā
Guest:
Alan Hampton X: ā @ahampt0n
Founder & CEO at ā @covenantFi
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By The EndofunctoršļøWhat if leverage did not require liquidations at all and yield became something you can actually trade in real time?
In this episode, Alex sits down with Alan from Covenant Finance to unpack a different way to think about DeFi markets. Instead of isolated positions and liquidation driven risk, Covenant treats risk like a banking system does through tranching, turning the āequity sideā into a fungible leverage token that anyone can hold and trade. Alan connects this to how banks create liquidity on top of long duration assets, and why tranching can be a cleaner mental model for crypto yield markets.
They also go deep on the mechanics that make Covenant feel āself balancingā including how the market targets specific leverage ratios, why yield changes create instant trading opportunities, and how denomination choices change the need for fast oracles like Pyth (and potentially Chainlink streams). The conversation lands on the most eye opening part: Covenantās leverage design can avoid the liquidation game entirely, which reframes how people think about safety, solvency, and ārobust leverageā on chain.
Host:
Alex Watts
X: ā @ThogardPvPā
Founder&CEO at ā @0xFastLaneā
Guest:
Alan Hampton X: ā @ahampt0n
Founder & CEO at ā @covenantFi