The Multi-Tranche LP Vault & Waterfall
The AMM is powered by the Nunchi LP Vault, a sophisticated, tranched system for managing protocol liquidity and risk. It employs an "inverted" waterfall structure that prioritizes settlement liquidity.
Junior Tranche (Dynamic Risk Buffer): Composed of highly liquid stablecoins (USDC, USDT), this tranche acts as the first-loss absorber for net PnL fluctuations. Its function is to provide immediate liquidity for settling trader profits. LPs in this tranche receive the highest share of variable returns.
Mezzanine Tranche (Stable Collateral Base): Holds yield-bearing, tokenized RWAs like T-Bills. It provides a stable, self-yielding collateral base and absorbs losses only after the Junior tranche is depleted.
Senior Tranche (Institutional Deep Backing): Intended for less liquid, higher-yielding institutional credit assets. This is the most protected layer, absorbing losses only in severe, systemic scenarios.
This structure protects the less liquid RWA capital by using stablecoins as the first line of defense, while allowing the protocol to be backed by deep, institutional-grade assets.
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