🔬Methodology
Last updated
Last updated
Both fixed and variable tranches in the same Earth Interest Rate Product share a subscription period. Each vault issues its receipt token (EP Token) to investors upon depositing.
Deposit Tokens: Users can only deposit one token as collateral per tranche. The tokens that may be deposited differ from vault to vault and depend on the specific yield-bearing asset the vault is built on.
EP Tokens (Earth Product Tokens): Vault tokens are minted for depositors in a tranche that functions as a receipt that represents their share. EP Tokens are burned when the investment is redeemed from the vault.
EPf Token (Fixed Income Token): EP Token that is received upon depositing into the fixed tranche. For example, EPf USDC is an EP Token representing a depositor’s share in the fixed tranche of Earth product that accrues a fixed yield in USDC from the underlying strategy.
EPv Token (Variable Yield Token): EP Token that is received upon depositing into the variable tranche. For example, EPv wETH-USDC is an EP Token representing a depositor’s share in the variable tranche of Earth vault that accrues variable yield from the underlying strategy.
The fixed-return vaults hold the underlying assets without using any strategies to generate yield. Instead, leverage is applied to the variable vault by borrowing funds from the fixed vaults. Therefore, the ratio among the TVL of these vaults determines the leverage available to the variable vault.
At the start of the epoch: Leverage is calculated, APRs of the fixed vaults are recorded, and funds are borrowed from the fixed vault contract. LP strategy is implemented with collateral + borrowed funds.
During the epoch period: The system keeps a check on the generated profit/loss. Liquidate collateral and exit the strategy if the loss in the epoch is close to the collateral value. Otherwise, the epoch will keep compounding the generated yield.
At the end of the epoch: Borrowed funds with interest are first returned to the fixed-income vaults. After that, all the remaining funds are sent to the boosted vault.
