Waterfall Defi Tranches (WDT)

Waterfall DeFi Tranches (WDTs) are a basket of DeFi assets grouped in a portfolio which is then “sliced”, whereby principal and yields are paid out based on seniority. Cashflows are paid out sequentially, first to the senior tranches and then to the junior tranches - hence the term “Waterfall”. If there are losses incurred on payments/principal, the most junior tranche would suffer the losses first. The last to lose any payments from losses is the most senior tranches. The yields that are offered in each tranche would be higher as the seniority in each tranche becomes lower.