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.
A Yield Token (YT) is the yield half of a split yield-bearing position. When a deposit is tokenized, the yield is separated from the principal: the principal becomes a Principal Token (PT) and the future yield becomes the YT.
A YT holder collects the yield the underlying earns until maturity. At maturity the YT has delivered all its yield and expires worthless. So a YT is a decaying, higher-risk instrument: you profit only if the yield actually earned exceeds the implied APY priced into the market when you bought.
Why would anyone buy a Yield Token?
To gain leveraged exposure to yield. A small amount of capital buys the yield stream of a much larger principal, so if realized yield beats the implied rate, YT returns are amplified. It is a way to go long on yield.
Can a Yield Token go to zero?
Yes. A YT delivers yield only until maturity and then expires worthless by design. If realized yield underperforms the implied APY you paid, the YT can lose value even before maturity.