# Fund Protection Layers

Avant Protocol has a multi-layered capital structure designed to prioritize the protection of user funds. In the event of a loss from a yield-generating strategy, capital buffers are utilized in a specific sequence. This multi-layered model ensures that protocol and governance-level funds act as the first lines of defense.

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### Reserve Fund

The very first line of defense in a loss scenario is the protocol's own **Reserve Fund**. This dedicated pool of capital is used first to cover any deficit. This unique approach means protocol-owned capital is put at risk before any user-staked funds, demonstrating an exceptional commitment to user protection.

> You can learn more about its funding and purpose on the [Reserve Fund](/security/reserve-fund.md) page.
> {% endstep %}

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### Governance Backstop (Future)

If a loss event is significant enough to deplete the **Reserve Fund**, the next layer of protection will be the Governance Backstop. In this planned future system, capital from staked governance tokens would be utilized as a secondary, protocol-level insurance layer.
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### Junior Tranche

Only after the protocol's **Reserve Fund** and the **Governance** **layer** have been utilized would the Junior Tranche (e.g., `avUSDx`) be impacted. While this tranche functions as risk capital for the system, its position in the hierarchy means it is structurally protected by two preceding layers of protocol-level funds.
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### Senior Tranche

The final and most protected asset in the Avant ecosystem is the Senior Tranche (e.g., `savUSD`). The Senior Tranche is only affected after all three prior layers of defense, *the Reserve Fund, the Governance Backstop, and the Junior Tranche,* have been fully depleted. This defense-in-depth structure is engineered to provide maximum security for `savUSD` holders.

`avAssets` (e.g., `avUSD`) holds the same Senior Tranche position as `savAssets` (e.g., `savUSD`) and is protected by the same layers.

> You can learn more about the tranche system in the [Risk Management](/security/risk-management.md) page.
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