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.

1

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 page.

2

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.

3

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.

4

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.

You can learn more about the tranche system in the Risk Management page.