🪙Vault Tokens

Learn more about Vault Tokens and their role in OpenTrade's Treasury Management & Yield Product.

Vault Tokens

Vault Tokens are ERC-20 tokens that are unique to each Loan Vault. Each token is fungible within the loan vault it was issued from, but at this time they are not fungible across vaults. Tokens represent units of ownership in secured loans issued through the Loan Vault.

Tokens confer no legal rights or obligations on either the holder or issuer and are used only as a means of automating the accounting, authentication, and settlement process in a way that is interoperable and composable with Web3 tooling and infrastructure. The legal rights and obligations of the parties are governed by the Master Lending Agreement.

Vault Token Exchange Rate

Vault Tokens and the Liquidity Asset (USDC, EURC) are exchanged during deposits and withdrawals at a defined exchange rate. This exchange rate translates interest accrued at the current interest rate.

Fixed Term Vault Exchange Rate

For Fixed Term Vaults, the exchange rate is calculated as:

Value of Principal and Interest at Maturity / Outstanding Vault Tokens

The exchange rate is updated at the beginning of each loan cycle based on the Loan Principal Amount and the Confirmed Loan Fee Rate.

Simple Example: For a 360 day fixed term loan at 5.00% APR, on Day 1 the lender would receive 1 Vault Token for every 1 USDC in loan principal. On Day 360, the Lender can redeem 1 Vault Token for 1.05 USDC.

Flexible Term Vault Exchange Rate

Similar to Fixed Term Vaults, the exchange rate accounts for interest accrued based on the vault's interest rate. In effect, the exchange rate on Flexible Term Vaults reflects daily interest accrued based on a variable APR.

The primary difference with Flexible Term Vaults is that the exchange rate is updated daily based on a variable interest rate (the Loan Fee Rate) that changes at the end of each day.

It is calculated by taking the Loan Fee Rate for that day, calculating the Daily Interest Rate by taking 1 day of interest (compounded daily), and adding it to the prior days exchange rate.

Simple Example: On Day 1, a Lender would receive 1 Vault Token for every 1 USDC lent. If the Loan Fee Rate was 4.50% APR for that day, they could exchange 1 Vault Token for 1.000122 USDC the following day, which reflects a daily compounded interest rate of 0.01223%.

Adding the Vault Token to Your Wallet

If you'd like to view your vault token balances directly from within your wallet, you simply need to add the token address to your wallet. This is varies by wallet but is generally done by copying the Loan Vault contract address and inputing it into your wallet under "Add Token". Once done, the token symbol and your token balance will automatically be imported into your wallet. Please reference your wallet providers instructions for adding a token for further details.