Growth D-Pro

Summary (TL;DR)

  • Fixed-term ERC-20 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 Growth D-Pro 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.

Who it’s for

  • Users who want a simple “floor + linear upside” payoff rather than mid-term yield.

  • Projects that want to deepen on-chain DEX liquidity without opaque MM/CEX deals — while keeping upside payments outside LP to avoid IL.


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.


Creation Mechanism

  1. Issue Notes (ERC-20). Project publishes terms and sells Growth D-Pro to buyers.

  2. Form LP for the floor (Tranche A). Pair buyer USDC 1:1 with TOKEN to create project-owned LP that funds the floor.

  3. 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.

  4. On-chain escrow. LP and reserve tokens are locked in protocol contracts, fully auditable.

  5. 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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