Downside Protected Note(s)

Exchequer supports two note types. Both are ERC-20s with on-chain, transparent collateral and a downside protection floor at maturity. They differ in whether the buyer receives yield during the term and how upside is synthesized.

1) Growth Downside-Protected Note (Growth D-Pro)

A Growth D-Pros delivers a protection floor (max 75%) plus upside participation during the term. Returns (if any) are realized at settlement via the defined participation.

Creation Mechanism

1. Issue Notes — Project sells Growth D-Pros to buyers (ERC-20).

2. Collateralize & Replicate — Proceeds and treasury assets are posted on-chain to (a) fund the floor, and (b) replicate spot-like upside (no LP rebalancing).

3. LP — Project forms project-owned LP as part of the collateral plan.

4. Settle — At maturity, buyers receive the floor or the specified upside payoff, whichever is greater.

Features

• Partial downside protection (≤75% drawdown floor) settling in LP tokens.

• No yield (zero coupon); simple buyer outcome at settlement.

• No IL on the upside—tracks token appreciation per participation/cap terms.

• AMM-agnostic; works alongside any major DEX without requiring emissions.

• Issuer levers: term, floor level, participation rate, optional upside cap.

Typical fit: New-user acquisition and conviction holders who want clean “floor + upside” instead of yield; ideal when minimizing complexity and avoiding IL is paramount.

2) Yield Downside-Protected Note (Yield D-Pro)

A Yield D-Pros represents a collateralized LP position with a protection floor. Buyers earn trading-fee yield during the term, and principal is protected up to a 75% drawdown at maturity via LP-token settlement. Upside comes via LP exposure and may experience impermanent loss relative to pure spot in strong rallies.

Creation Mechanism

1. Issue Notes — Project sells Yield D-Pros to buyers (ERC-20).

2. Form LP — Proceeds are paired with treasury tokens to mint a project-owned LP position on the chosen AMM.

3. Accrue Yield — Trading fees generated by the LP accrue per the note’s terms.

4. Settle — At maturity, buyers receive the greater of the protection floor or the value defined by the LP exposure per terms.

Features

• Partial downside protection (≤75% drawdown floor) settling in LP tokens.

• Yield during the term from LP trading fees.

• AMM-native liquidity as a by-product of issuance (deepens on-chain books).

• Transparent, permissionless design (no CEX/MM retainers or token loans).

• Issuer levers: term, floor level, AMM/pool selection, fee routing.

Typical fit: Yield-seeking users and teams that want to buy on-chain liquidity while avoiding opaque MM deals.