Yield Tokens represent a right to claim the underlying yield of assets deposited in a Future. You would be able to redeem this at the end of the term or could sell them off onthe designated AMM pool for these tokens.
Use Cases for YTs
Full Exposure to Variable Interest
If a user would like to take on a position that gives them full exposure to the performance of the variable interest rate at the cost of their asset, they can do so by purchasing Yield Tokens.
Earn Trading Fees on Interest Trading
Users who are looking to capitalize on the trading fees of these Yield Tokens can purchase or mint these Yield Tokens to provide liquidity for users to enter/exit these positions.
Increasing Exposure to Variable Interest
Element users who sell their principal token at a discount and gain capital efficiency can choose to re-deposit their gained asset back into Unreal to further increase their overall exposure to variable interest. We call this Yield Token Compounding, and it allows users to gain this increased exposure without risk of liquidations.
Arbitrage Fixed Rates and Variable Rates
For sophisticated traders who observe the discounted trading value of Ownership tokens and the premium trading value of yield tokens, they can take advantage of the gaps between these two traits by minting and trading.
Trade between different Yield Types and Rates
Traders who want to enter and exit various fixed and variable yield rates can easily do so due to the two liquid markets Unreal provides for Ownership and Yield Tokens. This allows users who change sentiments around the interest rate market to quickly enter a fixed rate market for hedging or the latter depending on how they feel the market outlook will be in the coming months or year.
Lending Based on Yield tokens as collateral
Lending protocols could accept yield tokens as collateral to lend money and thus providing users with funds based on the future yield generation at the minimum amount and thus the lending protocol would enter a high-risk but profit-intensive position. As they stand to earn whatever yield the tokens generated by the end of the term and if the yield generation is lower they could easily liquidate these tokens on Unreal Amm pools.