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Functional Components

Mint

By marking the interest-bearing tokens, the tokens will be generated into two types of tokens, dOT and dYT. dOT represents the ownership of the underlying asset. dOT has an expiration date, which means the underlying assets can not be transferred during this period (transfers will be allowed in the future, and will also support dOT trading pool & re-mint). dYT represents the future yield in the same period.

Swap

The market allows the exchange of dYT and USDC to maximize the revenue and capital efficiency. The exchange function adopts the order book and AMM combined.
Order Book: Allows the seller to place orders of dYT in their expected price for fixed income. After the transaction, the sellers will get their expected revenue. The buyer or investor can purchase any position according to their revenue expectation, which can effectively control the risk.
The order book model provides customization and high capital efficiency for all participants in the market (liquidity providers and receivers)
AMM: The transactions between both parties of AMM are interacting with liquidity pool on the chain. The liquidity pool allows users to swap tokens on the chain in a fully decentralized and non-custodial manner. Meanwhile, liquidity providers receive earnings in dYT and in transaction fees. Transaction fees are based on the percentage of their contribution to the pool. In a way, the AMM model helps liquidity provider to avoid theta attenuation.
Whether it is an order book or AMM, Dank’s Fixed rate market supports two-way asset trading, that is, users can exchange dYT and underlying assets in the trading pool and order book at any time. As of now, USDC is the main trading asset.

Liquidity

The liquidity pool is an important balancing section of the Dank’s Fixed Rate Market and is also a risky pool. Users invest in dYT and USDC to form the pool. As an LP, users invest with USDC or dYT, or both at the same time to earn LP tokens as return. The funds are provided to ensure enough liquidity.
You can provide liquidity to the fund pool and get rewards in the form of LP tokens. As an early-stage liquidity provider that helps improve liquidity, you will become the important stakeholders in the overall protocol. Furthermore, the income from LP mortgage will be proportional to the number of LP tokens you put in and the total number of LP tokens. Unless you continue to provide liquidity, your holdings amount, and income of corresponding reward will gradually be diluted.

Redeem

The holder of the principal token (dOT), can redeem the locked underlying asset at any time, as long as the following conditions are met:
  • To redeem the underlying asset after the expiration date, only dOT is required.
  • To redeem the underlying asset before the expiration date, equal amounts of dOT and dYT are required.
Expired contracts can be extended term forwardly.

Advanced

dOT Auction Market

dOT and dYT can be categorised as two different tokens.
dOT can be auctioned. The auction price is set by the holder at their expected price, and the buyer bids within a limited time. After the auction has ended, the ownership of dOT will be transferred. The ownership of dOT and the corresponding dYT can be exchanged back to the underlying asset after expiration.
After the dOT auction is over, the remaining balance can be supplied again and also re-mint to increase the risk position. In order to obtain more profit positions, users can choose to auction dOT but hold dYT. So that, your dYT is increased while you are still earning interest from your unsold dYT. Moreover, the seller's market can re-mint the underlying assets they just exchanged for more dOT and dYT, and keep repeating the actions. As long as the auction price is controllable and revenue is guaranteed, capital efficiency can significantly be increased.
Buyer can earn the difference in the price from the underlying assets they exchanged when it expires. On the other hand, seller can immediately sell their dOT to increase capital efficiency, and they can lend asset repeatedly to rise the leverage for interest rate. However, user should be aware of the risks when the discount auction of dOT cannot cover the leveraged interest rate.