Deposit Flow

Depositors can deposit currency tokens in exchange for shares under a particular tick, which identifies the maximum loan limit, maximum duration, and interest rate tier associated with the funds. Ticks and their use in loans are described in more detail in the Liquidity Ticks section.

Every tick maintains independent accounting of deposits and shares. Ticks are valued in two ways: realized value and accrued value. The realized value is the sum of deposits plus the interest and losses of all completed loans. The accrued value is the realized value plus the current real-time interest accrued from all active loans that are borrowing from the tick.

$\text{Realized Value} = \text{Cash Value + Interest and Losses from Completed Loans}$

$\text{Accrued Value} = \text{Realized Value} + \text{Accrued Interest from Active Loans}$

The number of shares minted for a deposit is determined by the tick's deposit share price, which is calculated from the tick's accrued value and outstanding shares.

$\text{Deposit Share Price} = \frac{\text{Accrued Value}}{\text{Outstanding Shares}}$

Depositors can later redeem their shares in a particular tick for currency tokens. The shares will be exchanged for currency tokens at the tick's redemption share price, which is calculated from the tick's realized value and outstanding shares.

$\text{Redemption Share Price} = \frac{\text{Realized Value}}{\text{Outstanding Shares}}$

In general, the redemption share price is less than or equal to the deposit share price. In the case that there are no active loans using the tick, the two share prices are equal. Since Pool loans are fixed duration and repaid in a single balloon repayment, the asymmetric deposit and redemption share prices serve two purposes: to prevent depositors from capturing interest prematurely before loan repayment, and to allow for fair appreciation within the tick, irrespective of a deposit's timing.

Redemptions are processed immediately from available cash in the tick, after which, the remaining, unredeemed shares are scheduled for future redemption when cash is available again to the tick from a loan repayment or liquidation. Scheduled redemptions may be executed at various redemption share prices, as repayment and liquidation activity affect the tick's realized value. Redemptions are serviced in the order they are scheduled.

Redeemed cash can be withdrawn as soon as it becomes available. Instead of withdrawing to currency tokens, depositors may also choose to redeposit their redeemed shares into another tick in the Pool without any currency token transfers, in an operation called rebalancing.