Tranchess co-founder on splitting DeFi risk into Queen, Bishop and Rook tokens

Ashton Addison: How did you get into blockchain, and how did that lead to co-founding Tranchess?▶ 00:22

Danny Chong: In a sentence, Tranchess is a structured asset tracking protocol with varied risk returns for users of different risk appetites. I have 16 or 17 years of experience in investment banking on the global markets side, in trading, sales and structuring. I led a team for Asia Pacific, mainly on FX and emerging markets. In structured products we were always coming up with new things that retail, corporate and financial institutions could use to engage the markets better. DeFi started with a brief chat with friends, including my CTO, about what we could do differently. We wanted to take the best of what we know in traditional finance and bring it into DeFi. Our tech people come from Microsoft, Google and Facebook, and more than half of our C-suite comes from investment banks, hedge funds and asset managers. We were already DeFi users ourselves, and we wanted to solve a few problems. Yields were plummeting. There was impermanent loss from being in pools with two or more assets. And with leverage products, liquidation is always an issue. That is what gave birth to Tranchess.

Ashton: Who is Tranchess built for, and how do its tokens cater to different risk appetites?▶ 04:23

Danny: We know the pain points of DeFi, and we wanted to offer something the world of TradFi would also understand. So Tranchess caters to users with different risk appetites, and that comes down to three tokens. Queen tracks the underlying asset one-to-one, or close to it, minus fees. Queen can be split into 0.5 Bishop and 0.5 Rook. Bishop is like a USDC stablecoin-type token, so it has no market risk. Rook is our leverage token, with close to two times exposure to the asset. Half zero delta plus half 2x delta is equivalent to Queen. As a fun fact, in chess the queen moves in every direction, the bishop only diagonally, and the rook only vertically and horizontally. Add the bishop and rook together and you get the queen.

Ashton: How would different kinds of users use these tokens?▶ 06:39

Danny: If you're new to crypto or DeFi and just want to try your hand with stablecoins, you'd use Bishop, where the yield is between 20 and 40% at Tranchess APY. You can keep it there and earn interest while you figure out how crypto works. You could also change BTC, ETH or, in our newest fund, BNB into Queen. You track the underlying one-to-one and still get an attractive yield, between 15 and maybe 40% if you're staking BNB. And for sophisticated players who are already used to leverage, there's Rook, at around two times leverage. A lot of people are saying we have finally hit the bottom and it's time to buy coins, and Rook is one way to leverage that view.

Ashton: Is the product useful for institutions as well as individuals?▶ 07:57

Danny: Yes, financial institutions would find it useful too, because it's an ecosystem you can manage across the tokens to handle different market directions, troughs or peaks. At the highest point, if you were holding Queen, you could sell it and revert to holding Bishop. When the market goes lower, you can exchange your Bishop into USDC in our swap market and get into Queen or Rook to enjoy the upward movement, while still earning an attractive yield. Being in the ecosystem lets you manage your risk while producing attractive yield year after year.

Ashton: Why did you build Tranchess on Binance Smart Chain?▶ 09:33

Danny: When we were starting, we discussed within the team which blockchain to build on. Ethereum has the biggest TVL and is the number one out there, so we definitely had our sights set on it. But gas fees were massively high, and we wondered whether it made sense for our users to constantly pay them. We also came to realize that Binance Smart Chain was pretty robust as a network. Fellow protocols told us it was reliable, and it has had very little downtime, at least from what we've seen.

Ashton: What has the BSC ecosystem given you beyond low fees?▶ 10:52

Danny: The chain has very attractive programs. We started in June last year and were awarded Most Valuable Builder in August, which was good recognition for me, my team and the community. After that we were given a kind of Hall of Fame status, which motivated us to do better. It might sound like the Grammy Awards, but they also give real help. We were introduced to senior protocols who shared openly about their successes and failures. There's also extra protection: if we're covered for 200k in bug bounty, BSC gives another two times that coverage, so white hat hackers are more engaged in protecting the protocol. There are also liquidity pool subsidies and other rewards. Low gas fees, a robust support structure and an efficient chain are what keep us going with BSC.

Ashton: What is planned for Tranchess in 2022?▶ 13:52

Danny: Continuous innovation is something we pride ourselves on, so you'll see more of that. We just introduced our BNB fund. It's unique because it isn't just emission of our native token, CHESS. It comes with extra alpha because we do validator staking on BSC. We put users' BNB onto a validator node, which helps BSC decentralize the network, and in return we get a yield in BNB on top of the base yield. This is the first step in moving from native token emission to gaining alpha, which also means we get protocol income in a different format. Being a validator on BSC also opens the possibility of moving cross-chain and reproducing this approach on other networks. We're also working on a new structured fund that I can't reveal much about yet. We know there is demand for stable tokens, so we're looking at expanding what Bishop does for users. The swap is already being used increasingly, and we hope the new fund will increase swap liquidity and demand for Rook and Bishop.

Ashton: How can people follow along and get involved with the community?▶ 17:28

Danny: Start with our docs, which have detailed explanations, and our FAQ, where we've tried to anticipate community questions and keep the answers bite-size. We also have Medium articles that work as a quick fact sheet on our seed investors, what we do and the key people at Tranchess. We're on Telegram, Twitter and Discord, and we're looking at another channel for more connectivity and information sharing, but that's a work in progress. If you have questions, go to the Telegram group and ask. No question is too simple or too difficult. In DeFi, that's how we're unique: it doesn't have to be the official group or moderators who reply. Anyone in the community can help you.