MAXI Falls - Maximizer

The degen play, fun stuff!

What is MAXI Falls?

MAXI Falls is a portfolio strategy that combines the stable and consistent yield from the DAI.e lending pools on Trader Joe and Benqi, along with the high yield, high reward farming on Maximizer. Just as with our other products, MAXI Falls will also be sliced into three tranches—Senior, Mezzanine and Junior—from the safest to the riskiest returns.

Users will be able to deposit DAI.e stablecoin into the tranching product, and MAXI Falls will then deploy the proceeds into Trader Joe, Benqi and Maximizer respectively.

On the Trader Joe and Benqi pools, the deployment serves exactly the same as the basic single-sided lending pool, which we detailed in the AVAX and DAI Falls above.

On the Maximizer deployment, $DAI.e will be used to mint $MAXI, then staked for further reward. In the case where minting $MAXI on Maximizer is not possible or financially unreasonable, we will swap the $DAI.e deposited into $MAXI for other protocols. At maturity, , $MAXI will be converted back to $DAI.e based on the prevailing market price. As it takes 5 days for the minted $MAXI to be fully vested on Maximizer, the strategy will receive a gradual increase of staking returns, and as such, will have the following return formula from Maximizer for our DAI deposits:

The cycle period of the MAXI Falls is 21 days—slightly longer than our previous product cycles. The rationale behind a longer period is that Maximizer has a supply rebasing mechanism that would adjust returns based on the price of $MAXI, versus its underlying backing, which is prone to high fluctuations. With a 21 day period, we allow ample time to farm the yields on Maximizer, aiming to cover and outpace potential price depreciation on the token. Junior tranches will take on the majority of capital risk and in exchange will receive a much higher leveraged yield premium that offers even higher returns than Maximizer Staking on positive market outcomes.

Why MAXI Falls?

With the increased price volatility on MAXI, we believe Waterfall DeFi is well positioned to leverage our tranching mechanism to serve the Avax community.

Since MAXI Falls package together a relatively high risk strategy (Maximizer) with a relatively stable strategy (Trader Joe and Benqi) - we are able to offer a truly unique value proposition to both our $DAI.e lending vault farmers or Maximizer frogs:

For $DAI.e lending vault farmers, Senior and Mezzanine tranches will offer a fixed rate return that will potentially outperform the yield of $DAI.e on Trader Joe, leveraging the high yield windfall from Maximizer to boost returns while isolating them from the market risk on $MAXI.

For our Maximizer frogs, the Junior tranche will offer a leveraged return that would outperform the yield earned from purely staking in Maximizer (unless the price of MAXI drops over 25% during a 21 day cycle).

MAXI Falls showcases the magic and strength of risk tranching - by packaging assets of different risk profiles, we are able to structure a fixed rate product that beats traditional lending pools in the market while offering protection through asset diversification and subordination, while having a leveraged product that turbo boosts returns of riskier farming models. There are still considerable amount of risks in the Junior tranche due to its implied first loss risk, but in exchange they will enjoy a significantly leveraged return should the market go the way they predicted. In the future we look forward to be providing native insurance to our tranches, even on Junior tranches, so the returns will yield a payoff curve similar to a long call option: limited downside, unlimited upside.

More details on our core tranching mechanics can be found on What is Tranching.