This is the starting point for the low-risk DeFi protocol KNOX.

Intro

What is Knox?

Knox lets you choose exactly how much risk you want to take on DeFi yield.

Every Knox pool takes a single yield source (such as a Morpho vault or Aave market) and splits its returns into a menu of risk/reward positions. You pick the one that matches your appetite:

• Want safety? Deposit into the senior tranche and lock in a guaranteed fixed rate (e.g., 5% APY). You get paid first, no matter what happens to the market. You only lose money in a catastrophic scenario where even junior and spectrum depositors are fully wiped out.
• Want moderate risk with the potential to capture surplus upside in a bullish market? Pick a spectrum tranche, say 8% or 12% APY cap. You earn that rate, with downside protection proportional to your position on the risk ladder. Lower caps are safer; higher caps offer more upside but absorb more losses. In strong markets where yield exceeds all caps, Surplus Participation can activate, distributing excess yield to Spectrum depositors proportional to their collateral factor, so your cap is not necessarily the ceiling on your total return.
• Want maximum upside? Deposit into the junior tranche. You absorb losses first, but you capture a larger share of the excess yield. When Surplus Participation is enabled, Junior earns a defined hurdle rate first, then competes for remaining surplus alongside Spectrum, with the highest collateral factor and therefore the largest participation multiplier.

How it works in practice: A pool opens, you deposit into your chosen position, and your capital goes to work in the underlying market. When the pool matures (e.g., after 30 days), the protocol runs a waterfall: senior gets paid first, then spectrum tranches from lowest to highest cap, then junior gets their portion. If surplus participation is enabled and the market significantly outperforms, a third phase distributes excess yield across the stack proportional to the risk each tranche absorbed. You withdraw your share. That's it.

Your position is an ERC-20 token, so you can transfer it or trade it on secondary markets before maturity, even though you can't withdraw from the pool early.

Use our comprehensive simulator to explore the behavior of KNOX Spectrum Vaults.

How it works?

At a high level:

1. A pool is created with:
   • An underlying yield strategy (e.g., Morpho vault, Aave market, Strata/Ethena)
   • A maturity date
   • A spectrum grid, a configurable set of capped APY rates sitting between Senior and Junior
   • Target capacity for Senior, Spectrum, and Junior tranches
   • Surplus participation parameters, optional configuration that determines how excess yield is shared across tranches in strong markets
2. Users deposit into Senior, a Spectrum tranche of their choice, or Junior.
3. The pool deploys capital into the underlying strategy and accrues yield.
4. At maturity, returns are distributed by the priority waterfall:
   • Senior gets priority and receives its fixed/defined yield (when possible)
   • Spectrum tranches are paid next, from lowest cap to highest cap, each up to their rate ceiling
   • Junior absorbs first loss (if any) and receives their share of residual upside after Senior and Spectrum are satisfied
   • Surplus Participation (when enabled): if yield exceeds all caps, excess is redistributed across the capital stack proportional to each tranche's collateral factor. See the Surplus Participation section below.

Using Knox: