Yield Tokenization
Yield 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.
Yield tokenization (also called yield stripping) takes a position that earns a variable yield — such as USDC lent on a money market — and separates its two economic components into distinct tokens that can be held or traded independently.
This is the on-chain version of bond stripping in traditional finance, where a bond’s principal and coupons are separated and sold as individual instruments. The PT is the stripped principal (a zero-coupon bond); the YT is the stripped stream of yield.