pTokens

pTokens or Principal Tokens represent the underlying principal portion of a yield-bearing asset. When a pToken reaches maturity, it can be redeemed for the equivalent value of the underlying asset.

When a cToken is refracted into a yToken and a pToken, the pToken represents the underlying principal portion of the cToken.

For example, imagine an Atom LST called cAtom is refracted into pAtom and yAtom with a maturity period of 1 month. After 1 month, 1 pAtom can be redeemed for 1 Atom’s worth of cAtom.

Fixed yield

pTokens can be thought of as fixed-yield assets, because if you purchase a pToken for less than the market value of its underlying asset, you will receive the full value of the token once the pToken reaches maturity.

For example, if 1 pAtom is trading at a discount of 20% compared to Atom, you can purchase the pAtom at a discount. Once pAtom reaches maturity, you can redeem it for 1 Atom's worth of cAtom, profiting 20%. Effectively, you have yielded 20% on your pAtom purchase by its maturity date.

Use cases

What are the use cases of pTokens?

• Trade: You can buy pATOM when fixed yields are high and sell them when fixed yields move lower, profiting from the price difference.
• Arbitrage: You can merge pATOM with the corresponding amount of yATOM to redeem cATOM, taking advantage of the price discrepancies between the tokens.
• Earn Fixed Yields: You can hold pATOM to earn fixed yields and redeem cATOM at maturity, securing a guaranteed return.
• Liquid Voting: You can use pATOM to participate in voting on underlying ATOM governance proposals, influencing the decisions of the network.
• Provide Liquidity: You can provide liquidity to pATOM pools to earn underlying ATOM yields, swap fees, and liquidity rewards.