Tokenizing Yield
Last updated
Last updated
As mentioned in Getting Started, the fundamental concept of tokenizing yield means that the future yield generated is separated from the underlying principal asset. So if a yield of 3% is generated on 100 USDC after 1 year, the 3% yield (3 USDC) is the yield, and 100 USDC is the principal.
Each Principal Token is associated to an Interest Bearing Token (IBT) and has a specific duration (a specific expiry date).
PTs are designed to operate with any ERC4626 Tokenized Vault token.
Each IBT is associated to an underlying. The underlying assets of the IBT are verified using ERC4626.asset()
Available ERC4626 Vaults on the relevant network can be found at https://erc4626.info. Additionally, new Principal Tokens for any Interest Bearing Token that complies with the ERC-4626 standard can be deployed without the need for special permissions, see how to deploy PT and LP Vault in a permisionless manner.
Explore the APY of any ERC4626 with Vision.
Make informed decisions and visit vision.perspective.fi to gain access to the Vision API and dashboard, and to explore the historical interest rates of any ERC4626.
To find a relevant PrincipalToken:
All Principal Tokens deployed using the Factory can be accessed through the Registry. The number of tokens deployed is determined using Registry.pTCount(). The PT at each index from 0 to ptCount is retrievable using Registry.getPTAt().
The correctness of the address for the Interest Bearing Token (IBT) tokenized in the PT contract is ensured by using the getIBT() method. , and the yield rate is ascertained either by visiting https://vision.perspective.fi or by examining the conversion rate over the last few blocks using IBT.convertToAssets().
The maturity and duration of the PT are checked using PT.maturity().
Deposit either the underlying asset (e.g. USDC) or an Interest Bearing Token of the underlying asset (e.g. aUSDC).
The relevant allowance of the token must be approved for the associated PrincipalToken contract before depositing.
If depositing the underlying asset, use PrincipalToken's deposit().
If depositing the interesting bearing token, use depositIBT().
During the deposit, the depositor receives:
Principal Token (PT): This represents the original amount deposited, i.e. the principal amount. This is also referred to as 'shares' of the PrincipalToken.
Yield Token (YT): Minted by the PrincipalToken contract, the Yield Tokens represents the generated yield from the deposited principal. YT holders can claim the yield generated by the corresponding deposited IBTs over time as they hold the token.
Before the expiry/maturity, a YT/PT holder can:
Claim the yield generated by the YT, see claimYield()
Trade or sell YT to hedge interest rate risks.
Trade or sell PT, speculating on interest rates without exposure to the principal asset.
Earn additional yield by providing liquidity to the IBT-PT pairs on AMMs. See Providing Liquidity.
Withdraw the equivalent assets in proportion to the amount of PT and YT they currently hold, i.e. convert their PT and YT to the underlying asset (e.g. USDC) and exit their position. See withdraw() and redeem() .
Before expiry a user needs the same amount of PT and YT to be able towithdraw() or redeem().
After expiry/maturity, the token holder could:
Redeem the underlying assets of the PT, see redeem() and withdraw()
Claim the remaining yield of the YT see claimYield().
The token holder after expiry does not need to be the same as the depositor. Both PT and YT are transferable tokens.
E.g. they could have purchased the PT at a discount and waited for expiry, earning a fixed yield since all PT are redeemable to the underlying asset at expiry.
