Yield token representing the present value of unrealized interest. When BT is borrowed and swapped for FW at a discount, CT captures the remaining value. CT holders accrue interest and rewards from the
underlying yield.
| *** ## Wrapping Rate All tokens are connected by a single fundamental invariant: $$ \mu(t) \hspace{0.1cm} \text{Underlying} = 1 \hspace{0.1cm} \text{FW} = \mu\_{s}(t) \hspace{0.1cm} \text{BT} + \mu\_s(t) \hspace{0.1cm} \text{CT} $$ The wrapping rate $$\mu(t)$$ specifically relates to the relationship between the underlying asset and the wrapped version (FW). We then have a modified version of this rate which is gross of bad debt loss. These two rates are computed as follows: $$ \mu (t) = \frac{Reserve(t)}{Supplied(t)} $$ Such that $$\mu(t)$$ is initialized at 1 and grows based on the earnings from rehypothecation (see [Rehypothecation](#rehypothecation)). As bad debt is incurred, $$\mu(t)$$ will decrease in value as FW is redeemable for less of the underlying asset. However, the modified wrapping rate $$\mu \_s(t)$$ will not decrease. This is computed as follows: $$ \mu\_s(t) = max(\mu(t),\mu\_s(t)) $$ Therefore the modified wrapping rate does not decrease. Specifically we do this for the accounting of yield distributed to CT (see [Rehypothecation](#rehypothecation)) as well as adapting the exchange rate from BT to FW based on this value (see [Fixed Rate Markets](https://docs.fira.money/protocol/fixed-rate-markets)). See the [Whitepaper](https://docs.fira.money/resources/whitepaper) for a full explanation. *** ## Bond Token (BT) ### Overview BT (Bond Token) is an ERC-20 token representing the principal component of a fixed-rate position. Each BT redeems 1:1 into the underlying asset at expiry. ### Key Properties * **Standard**: ERC-20 (based on `FiraERC20.sol` -- reentrancy-safe ERC20 base) * **Redemption**: 1:1 for the underlying asset at maturity * **Minting**: Only the corresponding CT contract or the LiquidityInjector can mint or burn BT * **Trading**: Traded in the FiraMarket AMM, borrowed/lent in the lending market * **Stored data**: Associated yield-token address (`FW`), expiry date * **Contract**: [BondToken.sol](https://github.com/usual-dao/fira/blob/master/src/fira_bonding/core/YieldContracts/BondToken.sol) ### Price Behavior BT trades at a discount to FW before maturity. The discount reflects the implied fixed yield (see [Fixed Rate Markets](https://docs.fira.money/protocol/fixed-rate-markets)). As maturity approaches, BT price converges toward 1:1 with the underlying. This convergence mechanism is what creates the fixed-rate dynamic: * Borrowers sell BT at a discount now and repay at par later (the discount is their interest cost) * Lenders buy BT at a discount and redeem at par later (the discount is their fixed yield) > For the full mathematical treatment of fixed-rate pricing, see [Whitepaper](https://docs.fira.money/resources/whitepaper). ### Creation Methods 1. **Deconstruction from FW**: Depositing FW into a Fira yield contract splits it into equal quantities of BT + CT 2. **Collateralized borrowing**: Borrowing BT through the LendingMarket against collateral (e.g. WBTC, WETH) 3. **LiquidityInjector minting**: Protocol-authorized contract that can mint BT to seed fixed-rate lending markets, ensuring market liquidity without relying on external actors *** ## Coupon Token (CT) ### Overview CT (Coupon Token) is an ERC-20 token that tracks all interest and yield due on a given BT line. CT holders accrue interest and rewards from the underlying yield. ### Key Properties * **Standard**: ERC-20 (based on `FiraERC20.sol`) * **Function**: Represents the right to yield generated by the principal until maturity * **Parent contract**: `InterestManagerCT.sol` -- handles calculation and distribution of yield from FW based on its exchange rate * **Contract**: [CouponToken.sol](https://github.com/usual-dao/fira/blob/master/src/fira_bonding/core/YieldContracts/CouponToken.sol) * **Interest Manager**: [InterestManagerCT.sol](https://github.com/usual-dao/fira/blob/master/src/fira_bonding/core/YieldContracts/InterestManagerCT.sol) ### Yield Mechanics CT increases in value as FW accrues yield (i.e., as the redemption value of FW > 1 underlying). CT holders can: * Hold CT until maturity and redeem for FW gains * Sell CT earlier if market conditions are favorable ### Value Proposition CT represents the present value of unrealized gains from fixed-rate loans. When BT tokens are borrowed and exchanged for their corresponding wrapped assets at a discount, CT tokens can be sold to realize the difference -- capturing the portion of value that was not initially extracted in the BT swap. *** ## FiraWrapped Token (FW) ### Overview FW (FiraWrapped) is a yield-bearing wrapper for the underlying asset. For example, FW-USDC (also written `USDCFW`) wraps USDC. ### Key Properties * **Standard**: ERC-20 / ERC-4626 compliant * **Minting**: Users deposit the base asset (e.g. USDC) to mint FW tokens * **Redemption**: FW can be redeemed back for the base asset at any time (frictionless) * **Decomposition**: Each FW can be split into 1 BT + 1 CT via yield contracts * **Exchange rate**: Tracks an exchange rate reflecting yield earned -- 1 FW gradually represents more underlying over time as interest accrues * **Contract**: [USDCFW.sol](https://github.com/usual-dao/fira/blob/master/src/fira_bonding/StandardizedYield/implementations/USDCFW.sol) ### Rehypothecation FW tokens internally invest a portion of deposited assets to earn yield via the **RehypothecationModule**. Idle USDC from FW is rehypothecated into variable-rate markets to generate yield. The rehypothecation is governed by three parameters: | Parameter | Description | | ----------- | ------------------------------------- | | `phiMin` | Minimum allowed idle ratio | | `phiMax` | Maximum allowed idle ratio | | `phiTarget` | Target idle ratio to rebalance toward | The rebalancing logic moves deposited USDC between two states: * **Idle** USDC held in the FW contract (readily redeemable) * **Invested** USDC as shares in a **SisuVault**, where it earns variable yield by supplying to LendingMarkets Rehypothecation is triggered on FW deposit or redeem function calls, and can also be triggered manually by the FW owner. > For the formal treatment of rehypothecation mechanics, see [Rehypothecation](https://docs.fira.money/protocol/rehypothecation) and the [Whitepaper](https://docs.fira.money/resources/whitepaper). ### Role in the AMM FW serves as the quote asset in the FiraMarket AMM. The AMM pricing of BT relative to FW determines the implied fixed interest rate for a given expiry. *** ## Token Strategy Summary | Token | Exposure | Strategy | | ------ | ------------------ | ---------------------------------------------------------------------------------------------------- | | **BT** | Fixed yield | Buy at discount, hold to maturity, redeem 1:1. No exposure to future rate changes. | | **CT** | Floating yield | Benefits from rising interest/yield rates. Value increases as FW accrues yield. | | **FW** | Underlying + yield | Passive yield from rehypothecation. Can be split into BT+CT for more targeted strategies. | | **LP** | BT + FW (AMM) | Exposure to both fixed-yield assets (BT) and yield-bearing tokens (FW), plus trading fee collection. | *** ## Contract Reference | Component | Contract | Role | | ------------- | ------------------- | ---------------------------------------------------- | | BondToken | `BondToken.sol` | ERC-20 zero-coupon bond, matures 1:1 with underlying | | CouponToken | `CouponToken.sol` | ERC-20 yield token, accrues interest from FW | | FiraWrapped | `USDCFW.sol` | Yield-bearing wrapper with rehypothecation | | FiraMarket | `FiraMarket.sol` | AMM for BT/FW trading and rate discovery | | LendingMarket | `LendingMarket.sol` | Core lending vault, collateral, liquidations | | SisuVault | `SisuVault.sol` | ERC-4626 vault for rehypothecation | *** ## Further Reading * [Contracts & Addresses](https://docs.fira.money/resources/contracts-addresses) — Deployed contract addresses on Ethereum Mainnet * [Whitepaper](https://docs.fira.money/resources/whitepaper) — Full mathematical treatment --- # Agent Instructions: Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. 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