Protected Growth Token(PGT)
Summary (TL;DR)
Fixed-term ERC-20 Exchequer note with a downside floor (max 75% drawdown) and spot-equivalent upside participation.
No coupon/yield during the term; all value settles at maturity.
No impermanent loss on the upside — upside is delivered from a reserved token tranche, not from LP rebalancing.
Protection settles in LP tokens at maturity using a 72‑hour VWAP to determine settlement amounts.
Collateral structure: per 100 USDC of notes sold, the issuer
pairs 100 USDC + 100 TOKEN in LP to fund the floor, and
holds an additional 100 TOKEN in reserve to pay spot-equivalent upside. → Total on-chain collateral at issue ≈ $300 notional (at par), of which $200 sits in LP and $100 is a token reserve.
What it is
A PGT gives buyers a defined principal floor at maturity (capped at a 75% drawdown) and linear, spot-equivalent upside without the rebalancing drag of AMM LPs. Issuance and collateralization are entirely on-chain, with transparent parameters and auditable collateral.
For already-launched tokens, it enables repeatable, time-boxed campaigns—think TGE magic without the sell pressure—that reignite attention and acquisition while compounding deep, stable on-chain DEX liquidity as a designed consequence.
Who it’s for
Issuers (projects & treasuries).
Best for clean, easy-to-explain “floor + upside” campaigns that convert cautious users and conviction holders without emissions. Predictable risk budget (term, floor ≤75%, participation/cap).
Ideal around roadmap moments where clarity beats spectacle. Avoids IL on the upside; each cycle compounds deep, stable on-chain DEX liquidity as a designed outcome.
Buyers (allocators & users).
Long-term believers and funds who prefer defined exposure with linear upside and a stated worst-case at maturity.
Suitable for larger tickets newcomers who want a simple, auditable payoff.
High signal for wallets sizing into positions with an explicit drawdown limit.
Key Properties
Term: Fixed maturity (e.g., 3–12 months).
Protection: Partial principal protection up to a 75% drawdown. If the token is down ≤ 75% vs reference at maturity, the holder redeems LP worth original principal; losses beyond 75% are borne by the holder (see Payoff Logic).
Upside: Spot-equivalent (issuer-set participation, e.g., 100%, 125%) with optional cap; funded from the reserved token tranche (not via LP).
Yield: None during the term (zero coupon).
Settlement assets:
Floor pays in LP tokens backed by on-chain collateral (holder may withdraw to constituents).
Upside is delivered from the reserved TOKEN based on the 72-hour VWAP.
Price measure: 72-hour VWAP ending at the maturity timestamp to reduce manipulation risk.
Collateral structure: Two token tranches from treasury: (A) LP tranche to pair with buyer USDC, (B) Reserve tranche to fund upside.
Liquidity outcome: Each note adds to deep, stable on-chain DEX liquidity as a designed, cumulative consequence of the collateral plan.
Creation Mechanism
Issue Notes (ERC-20). Project publishes terms and sells PGT to buyers.
Form LP for the floor (Tranche A). Pair buyer USDC 1:1 with TOKEN to create project-owned LP that funds the floor.
Set aside a reserved token tranche for upside (Tranche B). Hold an equal-sized TOKEN batch off-LP to deliver spot-equivalent upside at maturity (participation per terms). This avoids upside IL because the upside isn’t sourced from a rebalancing LP.
On-chain escrow. LP and reserve tokens are locked in protocol contracts, fully auditable.
Settle at maturity. Redemption follows the Payoff Logic using the 72-hour VWAP.
Configurable Parameters (Issuer “knobs”)
Term (maturity date/time)
Protection floor (up to the 75% drawdown limit)
Upside participation (e.g., 100%, 125%) and optional cap
AMM/pool selection for LP tranche
Reserve sizing policy (default: reserve TOKEN sized for 100% participation)
Optional rollover offer at or prior to maturity
Payoff Logic at Maturity
Let P₀ be the reference price (VWAP at issuance or specified reference) and Pₘ the 72-hour VWAP immediately prior to maturity.
A) Drawdown ≤ 75% (Pₘ ≥ 0.25·P₀)
Floor: Holder redeems LP worth original principal (paid in LP).
Upside: If Pₘ ≥ P₀, deliver spot-equivalent upside from the reserved TOKEN per participation and any cap; if Pₘ < P₀, no upside is due.
B) Drawdown > 75% (Pₘ < 0.25·P₀)
Floor is capped. Holder redeems LP per the protection schedule and absorbs losses beyond the 75% floor. Outcome remains strictly better than unprotected spot for the same move.
Reserve tokens were earmarked for upside; if none is due, they are released per terms after settlement.
The floor reallocates tail risk from buyer to issuer and is funded by on-chain collateral. Upside is delivered from a non-LP reserve, so the buyer’s upside is linear and not subject to IL.
Numerical Walkthrough (Illustrative)
Setup
Buyer deposits 100 USDC.
Project posts 200 TOKEN at $1.00 from treasury, split into:
Tranche A (100 TOKEN) → paired with 100 USDC to form LP for the floor.
Tranche B (100 TOKEN) → held in reserve to pay upside.
Total initial collateral ≈ $300 (LP ≈ $200 + reserve ≈ $100).
Case 1 — 75% drawdown (TOKEN = $0.25 at maturity) Constant-product rebalancing ⇒ LP ≈ 200 TOKEN + 50 USDC (≈ $100 total).
Redemption: Holder receives LP worth $100 → full principal back (in LP).
Upside: None (Pₘ < P₀). Reserve is unused and released per terms.
Case 2 — 50% drawdown (TOKEN = $0.50) LP value ≈ $141.4.
Redemption: Full principal back in LP ($100) (drawdown ≤ 75%).
Upside: None (Pₘ < P₀). Reserve is unused and released per terms.
Case 3 — 90% drawdown (TOKEN = $0.10) LP value ≈ $63.2.
Redemption: Holder receives LP per schedule; loss beyond the 75% floor is borne by holder.
Upside: None. Reserve unused; released per terms.
Case 4 — 50% up (TOKEN = $1.50)
Floor: Not needed.
Upside (100% participation, uncapped): Spot-equivalent payoff on 100 USDC is $150.
Deliver $50 of upside from the reserve at $1.50 ⇒ 33.33 TOKEN from Tranche B.
Holder’s net economic outcome matches linear spot without taking IL on the upside.
(Exact amounts depend on pool, fee tier, and final VWAP; participation/caps alter the reserve usage.)
Redemption & Rollover
Price input: 72-hour VWAP immediately prior to maturity.
Settlement assets:
Floor: LP tokens backed by collateral (holder may burn LP for constituents).
Upside: Delivered from the reserved TOKEN (or cash-settled per terms).
Rollover (optional): Issuer can offer a new series; holders may roll or redeem.
Risks & Considerations
Residual tail risk: Losses beyond the 75% floor are borne by the holder.
IL avoidance applies to upside only: The upside is reserve-funded; the LP tranche is exclusively for the floor.
Smart-contract risk: Contracts are immutable/audited, but risk ≠ 0.
Liquidity & slippage: AMM/pool depth affects realized unwind when burning LP.
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