ST (Standard Token)

Understanding Underlying Asset and Quoting Asset

Before delving into Standard Token (ST), it's crucial to establish a clear understanding of two fundamental concepts: Underlying Asset and Quoting Asset.

• Underlying Asset: It represents the yield bearing asset that generates yield. In yield trading, the focus primarily lies on the potential yield this asset can generate over a defined period.

• Quoting Asset: It serves as the reference unit for measuring the Underlying Asset's value. It provides a benchmark for determining the price of the Underlying Asset.

In the example of mSOL (SOL staked on Marinade), mSOL acts as the Underlying Asset, while SOL serves as the Quoting Asset.

Standard Token (ST)

RateX introduces Standard Tokens (STs) that employ a rebasing mechanism to tokenize various types of yield-bearing assets, ensuring a standardized and uniform approach to representing returns.

ST is a quoting asset token that keeps its price per unit constant while automatically increasing the number of tokens in holder’s accounts to mirror the yield of its underlying asset. This adjustment increase the total value without changing the individual token price, effectively reflecting returns through quantity rather than price increase.

In the case of JitoSOL, the yield accumulates directly into the value of JitoSOL itself. Initially, 1 JitoSOL is equal to 1 SOL. With a 10% APR over one year, the value of 1 JitoSOL increases to 1.1 SOL due to the accumulated yield. However, when JitoSOL is standardized to ST-JitoSOL, the value of each ST-JitoSOL remains equivalent to 1 SOL. Instead of increasing in value, the quantity of ST-JitoSOL in a holder’s account increases from 1 to 1.1 over the year to reflect the same yield.

ST provides several key benefits:

• Value Alignment with Quoting Asset: STs are valued equivalently to the quoting asset, meaning when STs are used to price Yield Tokens, it’s akin to pricing them directly in the quoting asset.

• Yield Reflected in Token Quantity: Real yields are mirrored by adjustments in the number of STs. Any profits that Yield Token holders earn are also paid out as additional STs.

Decomposition of ST

For an ST (with a maturity date), its value at maturity consists of two parts: yield and principal. Thus, at any given time, its value is also made up of these two components.

$$ST_{maturity} = Principal + Yield$$

$$ST_{present} = PT_{present} + YT_{present}$$