Yield D-Pro

Summary (TL;DR)

  • Fixed‑term ERC‑20 note backed by on‑chain LP collateral.

  • Partial downside protection up to a 75% drawdown, paid in LP tokens at maturity using a 72‑hour VWAP reference price.

  • Buyers earn trading‑fee yield during the term.

  • Upside comes via LP exposure and therefore can underperform spot in strong rallies due to impermanent loss (IL).

What it is

Yield D-Pro gives buyers a floor at maturity and yield during the term by anchoring the note to a project‑owned LP position. It is issued and collateralized entirely on‑chain, with transparent parameters and auditable collateral. The protection leg pays out in LP tokens from the collateral stack.

Who it’s for

  • Users who want yield + protection rather than pure spot exposure.

  • Projects that want to deepen on‑chain DEX liquidity without opaque MM/CEX deals.

Key Properties

  • Term: Fixed maturity date (e.g., 3–12 months). Protection applies only at maturity.

  • Protection: Partial, up to 75% drawdown. If the token is down ≤ 75% at maturity, the holder redeems LP tokens worth the original principal. If the drawdown exceeds 75%, the holder bears losses beyond the floor but is still strictly better off than unprotected spot over the same move.

  • Yield: Trading‑fee yield from the LP position during the term, distributed either streamed or accounted at settlement (issuer‑defined). APR is variable and depends on pool activity, fee tier, and routing.

  • Upside: Delivered via LP exposure; may underperform spot in strong uptrends due to IL, but can perform competitively in choppy/high‑volume regimes where fees are material.

  • Settlement asset: Protection pays out in LP tokens; holders can keep LP or withdraw to constituents instantly by burning LP.

  • Price measure: 72‑hour VWAP ending at the maturity timestamp to reduce manipulation risk.

Creation Mechanism

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

  2. Form LP. Proceeds are paired with treasury tokens to mint a project‑owned, full‑range LP position (AMM/pool/fee‑tier disclosed).

  3. Post Collateral. LP tokens are escrowed on‑chain to back the floor.

  4. Accrue Trading Fees. LP trading fees accrue per the note’s distribution method (streamed vs. on‑settlement accounting).

  5. Settle at Maturity. Redemption follows the Payoff Logic below using the 72‑hour VWAP.

Configurable Parameters (Issuer “knobs”)

  • Term (date/time)

  • Protection floor (any value up to the 75% drawdown limit)

  • AMM/pool/fee‑tier and routing disclosure

  • Yield distribution method (streaming vs. on‑settlement)

  • Optional hedging policy (if any)

  • Rollover offer (optional) at or prior to maturity

Payoff Logic at Maturity

Let Pm be the 72‑hour VWAP immediately prior to maturity and P0 the initial reference price.

A) Token up or flat (Pm ≥ P0)

  • Holder redeems the LP position (LP tokens) per terms, including any accounted trading fees.

  • Value reflects LP composition at maturity and may be different from spot HODL due to IL.

**B) Token down, drawdown ≤ 75%

  • Full principal protection. Holder redeems LP tokens worth the original principal (paid in LP), regardless of the exact LP value.

**C) Token down, drawdown > 75%

  • Protection capped. Holder redeems LP tokens per the protection schedule; any loss beyond the 75% floor is borne by the holder. Outcome remains strictly better than unprotected spot over the same move.

Protection reassigns tail risk from buyer to issuer and is funded by the escrowed LP collateral. It does not create free money.

Numerical Walkthrough (illustrative)

Setup:

  • Buyer deposits 100 USDC; project contributes 100 TOKEN at $1.00.

  • Full‑range LP is minted with 100 USDC + 100 TOKEN (≈ $200 initial collateral).

Case 1 — 75% drawdown: TOKEN = $0.25 at maturity.

  • Constant‑product rebalancing implies LP ≈ 200 TOKEN + 50 USDC (≈ $100 total).

  • Redemption: Holder receives LP tokens worth $100 → full principal back in LP.

Case 2 — 50% drawdown: TOKEN = $0.50 at maturity.

  • LP ≈ 141.42 TOKEN + 70.71 USDC (≈ $141.42 total, before fees).

  • Redemption: Floor applies; holder receives LP tokens worth $100 (full principal). Any streamed fees already paid during term are additive to realized outcome.

Case 3 — 90% drawdown: TOKEN = $0.10 at maturity.

  • LP ≈ 316.23 TOKEN + 31.62 USDC (≈ $63.24 total).

  • Redemption: Holder receives LP per the protection schedule (value < $100). Loss beyond 75% is borne by holder, but still better than unprotected spot.

(Figures exclude fees; exact amounts depend on pool depth, fee tier, and final VWAP.)

Redemption & Rollover

  • Price input: 72‑hour VWAP immediately prior to maturity.

  • Settlement asset: LP tokens backed by collateral (holder may burn LP for constituents on‑chain).

  • Rollover (optional): Issuer may offer a new series with revised terms; holders can accept rollover or redeem.

Risks & Considerations

  • Impermanent loss (upside leg): LP exposure can underperform spot in strong rallies.

  • Residual tail risk: Losses beyond the 75% floor are borne by the holder.

  • Liquidity & slippage: Realized unwind depends on AMM depth/fees at redemption.

  • Smart‑contract risk: Contracts are immutable and audited, but risk cannot be eliminated.impermanent loss in strong one‑way rallies compared to buy‑and‑hold spot.

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