# Strata — Phase 2

> *"Stop losing sleep over hacks. Take the Senior tranche."*

Strata is Dawn Labs' next product: a tranched yield vault on Solana designed for institutional depositors. By splitting a single underlying strategy into Senior and Junior tranches, Strata structurally separates risk and return — putting institutions into the protected tier and risk-tolerant LPs into the high-yield tier.

***

## Why Now

Since the Drift hack (2025), institutional capital has largely stayed out of DeFi vaults. The common objection: *"We can't get internal approval when total-loss risk exists."* Strata answers this directly. Junior depositors absorb losses first; Senior depositors are protected until Junior NAV reaches zero. This is the on-chain equivalent of a CLO (Collateralized Loan Obligation) — a structure that has worked in traditional finance for decades.

***

## Two Layers

### Layer 1 — Risk: Senior / Junior Tranche

|                   | Senior Vault                       | Junior Vault                          |
| ----------------- | ---------------------------------- | ------------------------------------- |
| **Return**        | 8% fixed (capped)                  | Variable — all residual upside        |
| **Loss priority** | Last to absorb                     | First-loss buffer                     |
| **Withdrawal**    | Instant                            | 7-day lock                            |
| **Target**        | Institutions, stable-yield seekers | High-yield seekers, risk-tolerant LPs |

**Accounting Waterfall (exit priority):**

```
Senior payout = user_senior_share × min(total_nav, senior_total_deposits)
Junior payout = user_junior_share × max(total_nav - senior_total_deposits, 0)
```

* **Profit scenario**: Senior receives 8% fixed first → remaining distributed to Junior
* **Loss scenario**: Junior NAV is drawn down first → Senior is protected until Junior is fully wiped

### Layer 2 — Strategy: Base / Alpha / DN

|                | Base Layer        | Alpha Layer        | DN Layer                           |
| -------------- | ----------------- | ------------------ | ---------------------------------- |
| **Strategy**   | Kamino Lending    | Kamino Multiply    | SOL Delta-Neutral                  |
| **Yield**      | \~5–7% (stable)   | \~14–16% (primary) | Variable (funding rate dependent)  |
| **Activation** | Always (overflow) | Always (primary)   | SOL funding rate > 10% for 3+ days |
| **Risk**       | Low               | Medium (leveraged) | Medium (hedged)                    |

Capital allocation priority: concentrate in Alpha (Multiply) → overflow excess into Base (Lending) → activate DN conditionally.

***

## Architecture

```
[Dawn Senior Vault]     [Dawn Junior Vault]
        │                       │
        └───────────┬───────────┘
                    ▼
        Dawn Tranche Program (Anchor)
        · NAV tracking
        · Waterfall accounting
        · Withdrawal priority enforcement
                    │  (single capital pool)
                    ▼
        Ranger Vault (execution layer)
        ├─ Kamino Multiply adaptor  (Alpha Layer / primary)
        └─ Kamino Lending adaptor   (Base Layer / overflow)
```

**Tech stack:**

* **Anchor** (Dawn Tranche Program): Issues Senior-LP / Junior-LP tokens, applies waterfall math at withdrawal
* [**Ranger Finance**](https://docs.ranger.finance/) (Vault-as-a-Service infrastructure)
  * `withdrawal_waiting_period` natively implements the 7-day Junior lock
  * CPI: `deposit_vault` / `request_withdraw_vault` / `withdraw_vault` / `instant_withdraw`
* **Kamino Finance**: Multiply + Lending adaptors

**Key design insight:** Ranger manages a single asset-per-share ratio across all LPs in a vault. The Tranche Program sits between Ranger and end users — it holds Ranger LP tokens as an intermediary, then applies its own waterfall math at withdrawal to distribute unequally to Senior vs. Junior depositors. Senior gets the protected slice; Junior gets what's left.

***

## Junior Bootstrap

Initial Junior capital is provided by **Dawn Labs itself**.

* Puts Dawn Labs' own money at first-loss, signaling skin-in-the-game to Senior LPs
* As track record accumulates, external Junior LPs seeking high yield can be onboarded
* At hackathon demo stage, Dawn Labs capital fully covers the Junior tranche

***

## Competitive Landscape

### TradFi Precedents

* **CDO / CLO**: Mortgages and leveraged loans tranched into AAA (Senior) through Equity (Junior). Strata is the on-chain CLO equivalent.
* **Real estate preferred/subordinate structures** (common in Japan): Priority investor (principal protected) / subordinate investor (absorbs losses first, captures upside). Identical structure.

### Crypto Precedents (Failed)

* **Barnbridge** (Ethereum, 2021): SMART Yield split Compound yields into Senior/Junior. $178M TVL → collapsed when low interest rates made the fixed Senior rate unsustainable.
* **Saffron Finance** (Ethereum, same era): Same structure, same failure mode.

### Direct Solana Competitor

* **Kormos** (Cypherpunk Sep 2025, DeFi 2nd place, C4 accelerator)
  * Structure: Liquid depositor (Junior-like) / Locked depositor (Senior-like)
  * Narrative: "Fractional reserve banking on DeFi"
  * Key difference: **Locked = first-loss** — the tranche direction is inverted. Not targeting institutions or explicit total-loss protection.

### Strata's Differentiation

1. **Narrative**: Directly responds to the Drift-hack-era "total-loss risk kills institutional approval" pain point
2. **Target customer**: Institutions in the Senior tranche — designed to pass internal investment committees
3. **Yield headroom**: Kamino Multiply (\~16%) provides enough raw yield for Senior 8% fixed to be sustainable — the failure mode of Barnbridge
4. **Operating track record**: Dawn Labs runs Phase 1 Vault on live capital; strategy and risk management credibility already exists

***

## Open Questions / Todo

* [ ] Anchor program detailed design — how much NAV calculation lives on-chain vs. off-chain
* [ ] Ranger Vault Owner registration and adaptor configuration steps (to confirm with Ranger team)
* [ ] CPI routing feasibility — can a single Anchor program hold Ranger LP tokens for two separate depositor pools?
* [ ] Resolve potential conflicts: locked profit degradation timing vs. Senior 8% payout, HWM fee accrual vs. Tranche-side accounting
* [ ] Junior external onboarding: timing, eligibility, and minimum size design
* [ ] Pitch deck creation


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