As a leading vault curator, Avantgarde has always focused on marrying institutional-grade risk management with capital-efficient strategies. With the rapid growth of RWAs on-chain, the space faces a fundamental challenge: how to bridge less liquid, asynchronous off-chain assets with a DeFi ecosystem built for digitally native capital. 

As RWAs scale onchain, vault curators face a structural challenge: how to support assets with longer settlement timelines and constrained liquidity inside DeFi systems built for instant exit. Cork Protocol provides the risk infrastructure we believe is required to bridge that gap, introducing tokenized risk markets that allow liquidity and duration risk to be explicitly separated rather than implicitly absorbed by vaults or lending markets.

More broadly, this collaboration sits at the true intersection of DeFi and TradFi where the deep capacity and time tested risk premiums in traditional assets can be combined with the transparency, composability, and programmability of digital assets. Protected Loops allow RWAs to adopt DeFi-native capital efficiency without sacrificing the structural constraints that define traditional finance.

What Are Protected Loops?

Protected Loops are a new DeFi primitive introduced by Cork Protocol that make it possible to apply looping strategies to illiquid or long-duration assets by embedding liquidity protection directly into the vault design.

Looping is a well-established DeFi strategy that uses on-chain lending markets to amplify exposure to a yield-bearing asset. Protected Loops extend this model by introducing built-in liquidity protection and explicit risk transfer, allowing these strategies to be used safely with assets that cannot support instant liquidation.

This is how it works:

• A Cork pool is created using an RWA as a reference asset, which disaggregates the risks in the asset through Cork Principal Tokens (cPT) and Cork Swap Tokens (cST).
  
  
• A liquidity provider who is willing to take on the liquidity risk of the asset (in exchange for additional return) can hold the cPT, whilst a user looking to hedge that risk can buy the cST.
  
  
• A managed looping vault executes the strategy using the target RWA as collateral.
  
  
• The vault curator and liquidators can pair the RWA with cST, to enable immediate exit into liquid collateral where needed.
  
  

Crucially, Cork Swap Tokens provide a liquidity backstop for liquidators and looping strategies. We believe this mechanism represents a powerful new DeFi primitive - one that transforms the risk profile for looping strategies, and forms a foundation we’re excited to build on well beyond a single market cycle.

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Why This Matters

The RWA market is rapidly scaling, with billions of dollars of on-chain capital flowing into real-world instruments that historically haven’t fit classic DeFi mechanics. Without safe liquidity exits and protected liquidation pathways, looping these assets has remained impractical.

With Protected Loops, Avantgarde can now support a new class of looping-oriented vaults that:

• Enable less liquid and longer duration assets to interact with lending markets through decentralised on-chain risk decomposition
  
  
• Provide on-chain price discovery for new risk vectors via Cork Swap Tokens
  
  
• Allow non natively on-chain assets to fit elegantly within existing lending protocol designs
  
  

This collaboration marks a meaningful step forward in bringing institutional-grade, risk-aware DeFi infrastructure to a broader class of assets.

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What’s Next

We’re currently piloting Protected Loops within select vaults, working closely with Cork’s engineering and risk teams. If you’re an asset issuer, vault curator, or protocol team interested in leveraging Protected Loops with Avantgarde, reach out - we’d love to have a conversation!