One major hope of early crypto adopters is that the world of cryptocurrencies will eventually be as viable as traditional financial markets. Among the hurdles to jump before getting to that point is risk. The value of individual coins—and thus the value of loans and financial products based upon them—fluctuates much more drastically than that of legacy currencies. This can make crypto investments unattractive to banks or more conservative traders, but Barnbridge aims to solve this problem by offering collections of investments (called tranches) that allow users to choose their own preferred risk profile. It’s just like a traditional bank, only instead of ETFs and CDs, Barnbridge offers higher-risk tranches for traders who want to speculate in price movements, and lower-risk tranches for conservative investors, institutions, or people who want to hold their positions long-term.
Barnbridge pools lending opportunities from all over the crypto ecosystem into simple investment opportunities, allowing traders to calibrate the level of risk to which they’d like to be exposed. Users can choose to enter a Barnbridge investment as either “seniors” or “juniors.” Although they pay higher fees, seniors are somewhat protected from loss by the pool of money contributed by the juniors. As a reward for their extra risk tolerance, juniors receive any extra money left over after the seniors have been paid their (slightly lower) fixed yield. For users who choose the safer “senior” investments, Barnbridge can reduce risks of inflation, market price volatility, and interest rate volatility.