In the previous article, we covered the basics, but seeing FIVA in action helps understand its full potential. For experienced DeFi users, feel free to explore our other articles. For those interested in a detailed walkthrough, let's dive deeper.

How PT Works

When you buy PT tokens, you are locking in a fixed yield. Let’s break it down with an example:

Suppose you buy 1 PT tsTON for 0.9 TON with a 1-year maturity. This means, that after 1 year, you will be able to redeem 1 PT for 1 TON. In this case, your fixed APY (Annual Percentage Yield) is 10%.

Now, you could sell your PT tokens before the 1-year maturity, but the price you get will depend on the current market rate. If the market rate drops, your APY could be lower than the original 10%.

As more people buy PT tokens, the price of PT increases because there are fewer PT tokens available. For example, after you buy, the next buyer may have to pay 0.91 TON for 1 PT – reducing their fixed yield to about 9.9%. So, as PT prices go up, the fixed yield goes down for new buyers.

At the same time, the price of YT (Yield Token) rises due to the relationship between PT, YT, and the underlying asset: PT + YT = the value of the underlying token. As PT prices rise, YT becomes more expensive, meaning future buyers will have to pay more to earn yield.

In simple terms:

• PT is cheaper when the yield is high, meaning you can buy PT at a discount (e.g., for 0.8 TON). When the PT matures, you’ll redeem 1 PT for 1 TON, locking in a nice fixed yield.

• As maturity approaches, PT tokens increase in value, and at the end, they are fully redeemable for the underlying asset (1 PT = 1 TON). This allows users to lock in fixed yields or trade their PT tokens in the market.

How YT (Yield Token) Works

When you buy YT tokens, you are purchasing the future yield generated by the underlying protocol. For example, let’s say you buy 1000 YT tsTON tokens, and the APY of tsTON is 4%. Over one year, you would earn 40 TON in yield (1000 TON * 4% APY).

The yield you earn can be claimed directly from your dashboard on the FIVA protocol. Unlike PT, you don’t have to wait until the end of the year to claim your YT.

Here’s another scenario: If you decide to sell your YT tokens after 6 months, and the market rate remains at 4% APY, you will have already earned half of the 40 TON (20 TON). You can claim the 20 TON and then sell the YT tokens for another 20 TON. This way, you effectively earn the full 40 TON yield but split the timing of your returns.

The buyer who purchases your YT tokens will then receive the remaining 20 TON by holding the YT tokens until maturity. Once maturity is reached, the YT token will no longer generate yield, and its value will drop to zero.

Key Takeaways:

• PT tokens are ideal for locking in fixed returns and will increase in value as they approach maturity.

• YT tokens allow you to buy and sell future yield, but they lose value as they approach maturity because they no longer generate yield after that point.

By creating a market where users like you are allowed the option to either buy the principal token and hold till maturity or buy the yield token and sell at any time, FIVA provides more investment opportunities.

FIVA’s unique market creates a dynamic where users can manage their investment strategies based on their risk tolerance and yield expectations, giving them more control and flexibility in DeFi.

Jump to the next article where we discuss Liquidity Pools.

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In the previous article, we covered the basics, but seeing FIVA in action helps understand its full potential. For experienced DeFi users, feel free to explore our other articles. For those interested in a detailed walkthrough, let's dive deeper.

How PT Works

When you buy PT tokens, you are locking in a fixed yield. Let’s break it down with an example:

Suppose you buy 1 PT tsTON for 0.9 TON with a 1-year maturity. This means, that after 1 year, you will be able to redeem 1 PT for 1 TON. In this case, your fixed APY (Annual Percentage Yield) is 10%.

Now, you could sell your PT tokens before the 1-year maturity, but the price you get will depend on the current market rate. If the market rate drops, your APY could be lower than the original 10%.

As more people buy PT tokens, the price of PT increases because there are fewer PT tokens available. For example, after you buy, the next buyer may have to pay 0.91 TON for 1 PT – reducing their fixed yield to about 9.9%. So, as PT prices go up, the fixed yield goes down for new buyers.

At the same time, the price of YT (Yield Token) rises due to the relationship between PT, YT, and the underlying asset: PT + YT = the value of the underlying token. As PT prices rise, YT becomes more expensive, meaning future buyers will have to pay more to earn yield.

In simple terms:

• PT is cheaper when the yield is high, meaning you can buy PT at a discount (e.g., for 0.8 TON). When the PT matures, you’ll redeem 1 PT for 1 TON, locking in a nice fixed yield.

• As maturity approaches, PT tokens increase in value, and at the end, they are fully redeemable for the underlying asset (1 PT = 1 TON). This allows users to lock in fixed yields or trade their PT tokens in the market.

How YT (Yield Token) Works

When you buy YT tokens, you are purchasing the future yield generated by the underlying protocol. For example, let’s say you buy 1000 YT tsTON tokens, and the APY of tsTON is 4%. Over one year, you would earn 40 TON in yield (1000 TON * 4% APY).

The yield you earn can be claimed directly from your dashboard on the FIVA protocol. Unlike PT, you don’t have to wait until the end of the year to claim your YT.

Here’s another scenario: If you decide to sell your YT tokens after 6 months, and the market rate remains at 4% APY, you will have already earned half of the 40 TON (20 TON). You can claim the 20 TON and then sell the YT tokens for another 20 TON. This way, you effectively earn the full 40 TON yield but split the timing of your returns.

The buyer who purchases your YT tokens will then receive the remaining 20 TON by holding the YT tokens until maturity. Once maturity is reached, the YT token will no longer generate yield, and its value will drop to zero.

Key Takeaways:

• PT tokens are ideal for locking in fixed returns and will increase in value as they approach maturity.

• YT tokens allow you to buy and sell future yield, but they lose value as they approach maturity because they no longer generate yield after that point.

By creating a market where users like you are allowed the option to either buy the principal token and hold till maturity or buy the yield token and sell at any time, FIVA provides more investment opportunities.

FIVA’s unique market creates a dynamic where users can manage their investment strategies based on their risk tolerance and yield expectations, giving them more control and flexibility in DeFi.

Jump to the next article where we discuss Liquidity Pools.

Follow us for updates:

• Twitter

• Telegram Channel

• Telegram Community