Yield Manager

The interface to obtain yield for each user is by minting YieldStrippedToken. This happens when locking upfront yield when minting FixedRate contracts, or transferring proportional yield when burning VariableRate contracts.

The protocol isolates the the minting and burning access of YieldStrippedToken to a separated, switchable YieldManager contract.

Yield Formula

At its current form (this specific YieldManager to deploy and grant minter/burner access), each contract interaction triggers an update to Idle Yield

Idle Yield += Principal * TimeSpan (since last checkpoint) * Rate

The Principal is tracked when liquidity transfers in and out of the Vault contract. The Rate is controlled by YieldManager Governors. Therefore, Idle Yield is the maximum amount of yield that FixedRate contracts can upfront lock, or Variable Rate contracts can proportionally withdraw.

Position Fee

Every LP1 needs to pay (deduct from principal) a position fee. The fee charging portion is applied to the principal amount of LP1. For Point-Yield swap, the position fee is 0. For Variable-Fixed Yield swap, the position fee is 0.05%.

The position fee sits in the Vault contract. Every time LP2 burns the principal, same proportion as the yield for the fee will be sent.

Security

The protocol segregates each LP1 and each LP2 into different contracts. The principal of the yield stripped tokens are in each separated contract. The underlying token is stored in the yield stripped token contract. The vault only holds position fee.

The owner of LP1 and LP2 burns the principal to access actual token with the yield. The minting, burning of principal and the minting, burning of yield all have clear requirements for the allowed spending.

LP1 and LP2 contracts are immutable with no approval of spending needed. This segregation is to provide an extra layer of security, such that in the absolute worst or even adversarial scenario (i.e. no matter what happens to the vault), no user principal can be touched.

Also, the protocol governors control a last resort emergency switcher. At emergency, LP1 and LP2 can withdraw their principals directly from the contract, without interacting with the vault contract.