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.
A Principal Token (PT) is created when a yield-bearing position is split into two parts: the principal and the yield. The PT holds the principal claim — it can be redeemed for one unit of the underlying asset (for example, 1 USDC) once the position matures.
Because all of the future yield has been separated into the Yield Token (YT), a PT is worth less than the underlying before maturity. You might buy 1 USDC of principal for 0.95 USDC today; at maturity it redeems for 1 USDC. That 0.05 gain, locked in the moment you buy, is your fixed yield — exactly how a zero-coupon bond works in traditional finance.
Is a Principal Token the same as a bond?
Functionally, yes — a PT behaves like a zero-coupon bond. It pays no interest along the way and instead redeems for full face value at a set maturity date, so buying it below face value locks in a fixed return.
Can I lose money holding a PT?
Held to maturity, a PT returns its principal plus the locked-in discount, so it does not lose money in underlying terms. Before maturity its market price moves with interest rates, like any bond, so selling early can realize a gain or loss.