PrimeVaults V2

A 3-tranche principal-first primitive for on-chain RWA and yield-bearing stablecoins, targeting institutional LPs. Senior principal denominated in USD with flat risk-premium routing, structurally protected by Mezzanine and Junior capital in a strict loss waterfall.

Prime Vaults V2 turns onchain savings into a configurable risk product. Capital is split across three tranches that share the same underlying yield source but absorb risk in strict order, letting depositors explicitly choose between principal protected exposure or amplified yield within one transparent system. Designed around the thesis that principal protection should be a verifiable structural property rather than an off chain promise, Prime Vaults V2 enables every depositor to opt into the risk profile that matches their goal, backed by real economic capital sitting below them in the waterfall.

KEY INNOVATION

1. The Principal Primitive

Senior depositors receive yield where principal is shielded by real economic capital in the waterfall, not by insurance funds or wrappers.

Mechanism: Junior and Mezzanine tranches absorb losses in strict order before Senior is touched. When the underlying yield is insufficient or the asset depegs, Junior gives up its yield first, then its principal, then Mezzanine yield, then Mezzanine principal, all before any impact reaches Senior. Protection is enforced at every settlement, observable on chain.

Outcome: Senior depositors get a structurally protected yield product whose protection level can be verified at any time.

2. Dynamic Risk Premium

Senior's payout to subordinates scales with capital structure thickness, creating self adjusting incentives.

Mechanism: When Senior dominates the pool, it pays a higher Risk Premium to compensate the thinner subordinate layer. As subordinates grow, the premium tapers. The system also distinguishes between the Risk Premium Senior commits to and what it actually delivers in any given epoch, so depositors see both the headline rate and the real yield being passed down.

Outcome: Subordinate yield self adjusts to market conditions, attracting capital when the protection buffer needs to grow and stabilizing when it is full.

3. Junior Priority Reward

The Risk Premium pool is distributed with a priority weight that favors Junior, reflecting its first loss role.

Mechanism: Junior receives a larger share of the Risk Premium than its TVL alone would warrant, governed by a configurable priority multiplier. Mezzanine receives its proportional share without an additional premium, consistent with its second loss position.

Outcome: A clean economic alignment where the tranche bearing the most risk earns the most reward, making Junior the most attractive yield position in the system.

4. Coverage Ratio Driven Cooldown

Withdrawal conditions for the subordinate pool tighten as Senior coverage falls, creating defense in depth around the protection buffer.

Mechanism: Subordinate withdrawals operate in three modes based on the Senior coverage ratio. When coverage is healthy, withdrawals are instant. As coverage thins, withdrawals enter a short cooldown where the asset value is locked at request time. When coverage falls further, the cooldown extends and the asset value floats until claim time. In critical conditions, Senior minting is paused to halt further compression of the buffer.

Outcome: The protection buffer cannot evaporate when most needed. Subordinate exit speed is governed by the same metric that defines Senior safety.