20 terms
The vocabulary, defined.
Plain definitions of the terms fixed income and yield tokenization run on: Principal Token, Yield Token, implied APY, bToken, time-decay AMM, trustline, real yield and more.
Anchor (Stellar)An anchor is a regulated on/off-ramp service on the Stellar network that connects bank money to the blockchain: it accepts a fiat deposit and delivers the equivalent asset to a Stellar wallet, and handles the reverse for withdrawals. Anchors are how most fiat currency enters and exits the Stellar ecosystem.Blend CapitalBlend Capital is the primary decentralized lending protocol on Stellar, where users supply assets like USDC to earn a variable yield and borrowers post collateral to take loans. Blend is the real, on-chain yield source that Spield builds on — Spield deposits supply USDC into Blend and its rising bToken exchange rate is the yield Spield tokenizes.bToken (bRate)A bToken is the receipt token Blend Capital gives a supplier in exchange for a deposit, and its exchange rate (the bRate) rises over time as interest accrues. Because the bRate is a real on-chain value that only increases with earned interest, protocols like Spield use it as a tamper-proof yield index.Fixed IncomeFixed income is a class of investments that pay a predictable, predetermined return over a set period, such as bonds and fixed-rate deposits. In DeFi, fixed income means locking a known yield in advance instead of earning a floating rate that changes block to block.Impermanent LossImpermanent loss is the opportunity cost a liquidity provider suffers when the prices of the two pooled assets diverge, leaving them worse off than if they had simply held the assets. In a time-decay AMM for Principal Tokens, impermanent loss trends toward zero for LPs who stay until maturity because the PT price converges predictably to par.Implied APYImplied APY is the annualized fixed yield the market is currently pricing into a yield-tokenized asset, derived from the prices of its Principal Token and Yield Token. It is the fixed rate you lock in by buying the PT, and the break-even rate a Yield Token buyer must beat to profit.MaturityMaturity is the date on which a fixed-income instrument expires and pays out. In yield tokenization, maturity is when a Principal Token can be redeemed 1:1 for the underlying asset and a Yield Token stops accruing and expires worthless.Principal Token (PT)A Principal Token (PT) is a token that represents the principal of a yield-bearing deposit and redeems 1:1 for the underlying asset at maturity, functioning like an on-chain zero-coupon bond. Because its yield has been stripped away, a PT trades at a discount before maturity, and that discount is the fixed yield a holder earns.Real YieldReal yield is DeFi return that comes from genuine economic activity — such as interest paid by borrowers or trading fees — rather than from newly minted token emissions. Real yield is more sustainable because it is not diluted away by inflation, and Spield’s yield is real yield sourced from Blend lending interest.Real-World Asset (RWA)A real-world asset (RWA) in crypto is a traditional off-chain asset — such as a Treasury bill, bond, real estate, or invoice — represented as a blockchain token backed by the underlying asset held in custody. RWAs bring off-chain yield and value on-chain, letting the token be traded, used as collateral, or composed into DeFi.Solvency InvariantA solvency invariant is a rule enforced in a protocol’s smart-contract code guaranteeing that its assets always cover its liabilities — for a yield protocol, that the backing held is never less than the tokens it has issued. Spield enforces a solvency invariant so its fixed rate can never promise more than the underlying Blend position actually earns.SorobanSoroban is the smart-contract platform on the Stellar network, letting developers write on-chain programs in Rust. Soroban brings DeFi primitives like lending, AMMs, and yield tokenization to Stellar, and it is the environment Spield’s contracts run in.StellarStellar is a fast, low-cost, open-source blockchain built for payments, asset issuance, and — since the launch of Soroban smart contracts — decentralized finance. Its native asset is XLM, and it hosts native USDC, making it a low-fee home for stablecoin yield and fixed-income products like Spield.Time-Decay AMMA time-decay AMM is an automated market maker designed to trade Principal Tokens, whose pricing curve accounts for the fact that a PT converges to par value as maturity approaches. This structure lets liquidity providers earn swap fees while facing near-zero impermanent loss if they stay until maturity.Tokenized TreasuriesTokenized treasuries are blockchain tokens that represent ownership of U.S. Treasury bills or money-market funds, backed 1:1 by the real securities held with a regulated custodian. They bring low-risk government-bond yield on-chain with 24/7 settlement, and are one of the fastest-growing real-world-asset categories in crypto.TrustlineA trustline is a Stellar account’s explicit opt-in to hold a specific asset, such as USDC from a specific issuer. Each trustline reserves 0.5 XLM while it exists, and until the trustline is added the account cannot receive that asset at all. Adding one takes seconds in any Stellar wallet.Underlying APYUnderlying APY is the actual, variable annual yield a deposit is currently earning from its yield source (such as a lending market), typically shown as a recent moving average. It contrasts with implied APY, which is the fixed rate the market prices in through Principal and Yield Token prices.Yield Token (YT)A Yield Token (YT) is a token that represents all the yield a deposit will generate between now and maturity. Holding a YT means you receive the variable yield of the underlying position until it expires, after which the YT is worth zero. Buying a YT is a leveraged bet that realized yield will beat the market’s implied rate.Yield TokenizationYield tokenization is the process of splitting a yield-bearing asset into two separate, tradable tokens: a Principal Token (PT) that redeems for the principal at maturity, and a Yield Token (YT) that captures the yield until maturity. It lets users lock in a fixed rate, trade future yield, and price yield as its own market.Zero-Coupon BondA zero-coupon bond is a bond that pays no periodic interest and is instead sold below its face value, returning full face value at maturity. The gap between the discounted purchase price and face value is the investor’s entire fixed return. A Principal Token is the on-chain equivalent of a zero-coupon bond.
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