Minting of Synthetic ST&YT

RateX offers YT/ST trading pairs, with both YT and ST synthesized based on corresponding collateral. When issuers provide collateral to the protocol, they are allowed to mint synthetic YT and ST as assets. Meanwhile, issuers also incur the obligation to pay the yield on the synthesized YT and ST. This is reflected by the issuer having equal and opposite positions (+YT and -YT) for YT, and similarly for ST at the moment of minting.

Synthesis of ST:

There are two sources for ST synthesis:

1. Based on LP Deposits: When an LP deposits YBA as collateral, the protocol converts the market value of the deposited YBA into ST for the LP. As the market value of YBA changes, the protocol adjusts the amount of ST held by the LP during each Yield Calculation Time Interval to align with the value of the YBA.

2. Based on Trader Margins and the Liquidation Engine: When long traders long YT, they need to deposit margin to mint ST in exchange for YT. In this scenario, the long traders act as the issuers of ST. We use the deposited margin and the exchanged YT as collateral, combined with the liquidation engine, to ensure the repayment of ST.

Synthesis of YT:

There are two sources for YT synthesis:

1. Based on LP Deposits: When an LP deposits YBA as collateral for market making, the protocol generates YT based on the amount of YBA deposited and the corresponding market making range. In principle, the amount of YT generated cannot exceed the amount of ST according to YBA deposited. However, for certain types of YBA with low and stable yields, we allow LPs to generate a limited amount of YT that exceeds their YBA deposits to enhance liquidity efficiency.

2. Based on Trader Margins and the Liquidation Engine: When short traders short YT, they need to deposit margin to mint YT in exchange for ST. In this scenario, the short traders act as the issuers of YT. We use the deposited margin and the exchanged ST as collateral, combined with the liquidation engine, to ensure the repayment of YT.