In the current rapid development of decentralized finance (DeFi), traditional financial institutions are increasingly interested in this emerging field. However, due to the unique operating logic of DeFi, its high-risk characteristics, and the lack of familiar investment frameworks, many traditional financial institutions are still observing. As an innovative platform focused on DeFi fixed income, Treehouse has built a bridge for traditional financial institutions to enter the DeFi world with its unique fixed income strategy, making it an ideal entry point for their participation.
Traditional financial institutions usually rely on mature investment logic and risk assessment systems when making investment decisions. Fixed income assets occupy an important position in traditional finance, as they can provide relatively stable returns, serving as a 'safety net' for asset allocation. Traditional financial institutions have a complete analytical framework for fixed income investments, covering credit assessments of bond issuers, interest rate trend analysis, and duration management. When choosing bond investments, they will carefully examine factors such as the issuer's ability to repay debts and financial status, while closely monitoring macroeconomic indicators and monetary policy trends to judge interest rate volatility trends, thereby optimizing the risk-return characteristics of the investment portfolio by adjusting the duration of bonds.
The emergence of Treehouse cleverly aligns with the thinking patterns of traditional financial institutions regarding fixed income investments. First, Treehouse has constructed a Decentralized Offered Rate (DOR) system. This system is similar to benchmark interest rates in traditional finance, such as the U.S. federal funds rate or the London Interbank Offered Rate (LIBOR). DOR provides a stable and referential interest rate anchor for the DeFi market, establishing a unified standard for pricing DeFi fixed income products. When evaluating investments, interest rates are one of the key factors for traditional financial institutions, and the existence of DOR allows them to reasonably expect and compare the returns of DeFi products based on benchmark interest rates, just as they would in traditional markets.
Secondly, Treehouse has launched unique tAssets (Treehouse assets). When users deposit crypto assets such as ETH or stablecoins, they receive corresponding tAssets, like tETH. These tAssets can automatically collect and unify returns from multiple DeFi protocols and will automatically optimize returns and arbitrage operations based on changes in market interest rates. This mechanism is similar to fund investments in traditional finance, where investors do not need to seek high-yield opportunities in a complex market themselves but have a professional platform to operate. Traditional financial institutions have large amounts of capital, and looking for yield opportunities in every corner of DeFi is neither realistic nor free of risks; the emergence of tAssets solves this problem, allowing them to participate in DeFi investments in a relatively familiar way.
To illustrate with a simple example, suppose a traditional bank wants to participate in DeFi investments. In the past, it would have needed to invest a lot of human and technical resources to research numerous DeFi projects, assess the risks and returns of each project, and constantly monitor market dynamics for operations. With Treehouse, the bank only needs to deposit funds in the form of ETH or stablecoins to receive tAssets. Treehouse automatically utilizes its smart contracts and algorithms to arbitrage between different DeFi lending protocols and staking platforms, bringing stable returns to the bank. The bank can monitor and manage this DeFi investment just like managing traditional fixed income investments, based on the return data and risk assessment reports provided by Treehouse.
From the perspective of risk management, Treehouse also provides protection for traditional financial institutions. Traditional financial institutions are extremely sensitive to risk, and managing risk is of paramount importance when entering new markets. Treehouse has powerful risk management and monitoring capabilities, able to track the risk status of investment portfolios in real-time, providing investors with detailed risk analysis reports. This aligns with the rigorous risk control processes of traditional financial institutions, enabling them to better manage risk when participating in DeFi investments.
The emergence of Treehouse has allowed traditional financial institutions to see the feasibility and safety of participating in DeFi. By combining the innovations of DeFi with the mature investment logic of traditional finance, Treehouse provides a perfect entry point for traditional financial institutions to enter DeFi. As more traditional financial institutions step into the DeFi field with the help of Treehouse, it will not only bring a large amount of capital and professional investment ideas to the DeFi market but is also expected to promote the entire financial industry towards a more integrated and innovative direction, opening a new chapter in the financial market.
