The Gro Products: PWRD and Vault.
Hey guys !
It’s another Gro moment and for this article, we shall be looking at the two main products that Gro has to offer. For the new timers, this will be an introduction to the Gro packages available to you, and for those fans that have been with the Gro Protocol for some time now, this can be a refresher for you. Without further ado, let’s get in !
PWRD
First on the Gro menu is PWRD. You can think of PWRD as a protected savings product that provides low-risk access to high DeFi yields. This product is tokenized as a stablecoin with its own built-in yield and security. The intrinsic value of the product is backed by three of the most commonly traded stablecoins on the market — DAI, USDC, and USDT — but it is also immune to problems with any of them. Here, the risk for your investment is spread out over different portfolios and as such, it is much lower than other products you can find in the market.
That’s just one way of protecting your investment. Another way PWRD reduces the risk is by being protected by the capital pool in the Vault. This is another Gro product that we shall be looking at shortly. With this method, fluctuations in the stablecoins that PWRD is backed up in are first absorbed by Vault, leaving PWRD more stable than other stablecoins.
PWRD is a great product because it can be used as a substitute to a savings account and offers some of the best interest rates on the market. Furthermore, PWRD is designed to be secured from capital loss up to the full amount through risk tranching, with no caps like other savings products.
Vault
The second Gro product we are going to be looking at is Vault. Vault was created by the Gro team to be a long-term, high-yielding investment that requires no upkeep from the holder. This makes it the best option for users who are not in the best position to manage funds in risky but high-yield products due to lack of time or just the patience to monitor the products everyday.
Vault functions by partnering with PWRD in such a way that PWRD users effectively buy deposit protection from Vault holders through a profit-sharing mechanism. This means that, while Vault holders absorb market failures, they stand to gain a higher percentage of yields. Vault yields are determined by the utilisation ratio, so higher utilisation generates higher Vault yields but also increases the risk of loss if an underlying protocol or stablecoin fails. When utilisation exceeds 80%, Vault holders are compensated more and can generate nearly twice the yield they would if their assets were in the same strategies and exposed to the same risk but outside of the Gro protocol.
So, as you can deduce, PWRD and Vault work hand in hand to ensure the best yield for the users of Gro strategies. One as a savings product and the other as a protector of the savings product. The protector ensures that the savings remain stable and give off the best yields, while the increased deposits in the savings product results in increased rewards for the protector.
You may be wondering why you should engage with any of these two Gro products or how they differ from all the other products being offered by other protocols. Here are some points you might want to check out:
- Optimized Yield
Gro maximizes yield through a portfolio of USD stablecoin yield farming strategies that leverage lending, automated market making, and protocol incentives. The strategies are updated on a regular basis to ensure that funds flow to the best strategies available and that total yield is maximized. - Risk Tranching
This means that, depending on your preferences, you can choose between higher yield and greater protection. In exchange for protection, the yield from one tranche (PWRD) is transferred to the other (Vault). When utilization is low, PWRD becomes more appealing due to the low cost of protection. Vault becomes more appealing when utilization is high due to higher yields. - Risk Balancing
The protocol cannot be overexposed to any one protocol or stablecoin with Gro’s Risk Balancer. If a stablecoin or protocol smart contract fails, the loss to the protocol is reduced. The protocol’s loss will always be less than the level of deposit protection (via Vault) in place for PWRD users, indicating that their funds are secure.
Summary
PWRD and Vault are the two main products of Gro Protocol. You can use Vault to get leveraged returns by taking on more risk, or you can save with PWRD to get both protected savings and yield.