🪙Token
Fixed-rate Token (FT)
Token with fixed yield at maturity
Purpose
The Fixed-Rate Token (FT) is an ERC-20 token designed to provide lenders with a fixed return at maturity.
Mechanism
Lenders purchase FT at a discounted price and redeem it for its face value at maturity, effectively earning a fixed yield. FTs can also be traded on the market.
Benefits
FT offers predictable, fixed-rate returns over a defined term, providing certainty for lenders. In a declining interest rate environment, FT becomes more attractive than holding the underlying asset (e.g., USDC) directly.
Example
110 FT-USDC will be redeemable for 110 USDC at maturity. A lender purchasing 110 FT-USDC for 100 USDC is effectively earning a 10% annual return ((110-100)/100) over a one-year term.
This calculation assumes a one-year maturity. For maturities shorter or longer than one year, the annualized return is calculated proportionally. For example, if the maturity was 180 days (approximately half a year), the annualized return would be approximately 20%. The general formula for calculating the annualized return is:
Annualized Return = ((Maturity Price - Purchase Price) / Purchase Price) * (365 / Maturity Days) * 100
Where:
Maturity Price: The value at which the FT token can be redeemed at maturity.
Purchase Price: The price paid to acquire the FT token.
Maturity Days: The number of days until the FT token matures.
X Token (XT)
Interests to be paid
Purpose
The X Token (XT) is an ERC-20 token representing the interest obligation associated with an FT loan. It represents the present value of the interest to be paid by the borrower.
XT also serves as an indicator of the leverage multiplier applied to the collateral. However, this is a derived property rather than its primary function.
Relationship to FT
When a loan is created, it's represented by both FT and XT tokens. The combined present value of FT and XT equals the initial loan amount.
Formula
Initial Loan Value = Present Value (FT) + Present Value (XT)
Example
1000 USDC = PV(1000 FT-USDC) + PV(1000 XT-USDC) at anytime
Gearing Token (GT)
NFT with collateral and debt
Purpose
The Gearing Token (GT) is an ERC-721 NFT that represents a leveraged borrowing position. It encapsulates the collateral and debt.
GT simplifies complex looping strategies by representing the entire leveraged position in a single token. Standard looping requires multiple transactions across different protocols.
Mechanism
Borrowers/Leveragers deposit collateral.
A GT NFT is minted, representing the loan (FT) and the collateral backing it.
When the loan is repaid, the GT is burned, and the collateral is returned.
Any changes to the collateral (adding or removing) update the GT's metadata and the associated health factor.
Relationship to FT
The GT represents the collateral and the obligation to repay the loan (represented by the corresponding FT tokens).
Representation
Collateral Value = GT Value (which represents Collateral - Value of Debt (FT)) + Value of Loan (FT)
lp-XT and lp-FT
Providing Liquidity to TermMax AMM Markets
lp-XT and lp-FT are ERC20 liquidity provider (LP) tokens that investors receive after depositing underlying tokens into TermMax’s AMM pools. Holders of lp-XT and lp-FT are entitled to a share of the transaction fees and incentives generated by the market pools.
LP token holders have several options:
Redeem lp-XT and lp-FT: Exchange them for XT and FT tokens, respectively.
Exit Positions: Swap the redeemed XT and FT tokens back into the underlying assets to exit their liquidity positions.
Strategic Trading:
Sell XT Tokens: When the interest rate of the borrowed token decreases, potentially profiting from market movements.
Sell FT Tokens: When the interest rate of the borrowed token increases, capitalizing on favorable fixed-rate conditions.
The current Testnet implementation of lp-XT and lp-FT will be consolidated into a single, more efficient LP token on Mainnet. This upgrade streamlines the liquidity provision process and enhances user experience. The existing dual-token system on Testnet will be deprecated upon Mainnet launch.
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