Note Redemption

Liquidity Notes come with a fixed maturity date, which means the downside protection they offer is not perpetual but ends at a specified date and time. This fixed term allows the downside protection and other features of each Liquidity Note to conclude as scheduled.

Having a fixed maturity enables cryptocurrency projects to tailor each Liquidity Note according to their specific needs and the prevailing market conditions. By adjusting the maturity date, projects can align the Liquidity Notes with strategic timelines, market events, or liquidity requirements, providing flexibility in how they manage risk and incentivize participation.

Redemption Mechanism

When a Liquidity Note reaches its maturity date, holders have two options:

1. Redemption

On the specified maturity date, holders can redeem their Liquidity Notes based on the Volume Weighted Average Price (VWAP) of the underlying asset over the 72 hours directly prior to the maturity date/time. Using a 72-hour VWAP helps prevent price manipulation that could influence the redemption price at a specific moment.

Upon redemption, holders receive the underlying Liquidity Provider (LP) collateral associated with their Liquidity Notes. They can then choose to:

• Retain the LP Position: Continue holding the LP tokens if they wish to remain invested in the liquidity pool.

• Withdraw Underlying Assets: Redeem the LP tokens for the constituent cryptocurrencies, effectively exiting the liquidity position.

2. Rollover Extension

The cryptocurrency project may offer a rollover option to Liquidity Note holders. In this scenario, the project presents a new Liquidity Note with a new maturity date and potentially revised features, such as adjusted levels of downside protection, upside potential, and yield distribution.

Holder's Decision:

• Accepting the Rollover: If the holder accepts the rollover extension, their existing Liquidity Note is replaced with the new one, which includes the updated terms and extended maturity date.

• Declining the Rollover: If the holder does not accept the new terms, they can redeem their Liquidity Note as per the default redemption mechanics outlined above.