Dynamic Lending & Yield Trading

Summary

Dynamic Lenders earn yield from both fixed rate markets and variable rate markets. Their deposit is both used as LP for a specified fixed rate market (facilitating borrower & lender swaps) and lending on floating rate markets. With their deposit, they receive Coupon Tokens (CTs) which accrue interest from the floating-rate market deposits and are tradable.

Dynamic Lending

Dynamic Lenders are LPs for the fixed rate market that are also exposed to variable-rate markets. The LP is used to facilitate swaps between BTs and the underlying debt asset for lenders and borrowers, meaning the derived yield becomes a mixture of lending and trading fees.

As for variable-rate market exposure, a portion of the unused liquidity in the fixed rate market is rehypothecated to a variable-rate vault (see Rehypothecation). The yield generated from this vault is claimable by Coupon Tokens which are minted when Dynamic Lenders deposit.

Example

A user with 100 FW-USDC deposits into a fixed-rate market with a defined maturity

Yield Trading

CTs are a composable yield token that earns yield from liquidity that is allocated (rehypothecated) to the floating rate markets. As yield is earned from this market, it becomes claimable for CT holders. When dynamic lenders deposit, they can optionally mint Coupon Tokens (CTs) alongside their position.

Additionally, CTs (and BTs) can be converted from or to the underlying asset (see Fira Wrapped Tokens). As a result, CTs are tradable