Normalized Token Pool
Normalized Token
A Normalized Token is a unified representation of multiple assets pooled together within FRAG-22. Instead of managing multiple assets separately, yield sources hold normalized tokens, which dynamically adjust their value according to the real-time valuations of the underlying assets. Normalized tokens are exclusively managed by yield source adapters or special authorized entities (e.g., slashers), maintaining controlled, secure operations.
Key Features of Normalized Tokens
- Dynamic Valuation: Continuously reflects changes in underlying asset values.
- Simplified Asset Handling: Yield sources interact only with normalized tokens, reducing complexity.
- Controlled Access: Exclusively accessible to authorized entities (yield sources, slashing modules).
- Proportional Redemption: Redeemable into underlying assets proportionally, ensuring fairness.
User Actions & Token Lifecycle
Asset Allocation & Normalized Token Minting
User deposits assets → FRAG-22 allocates to Yield Sources → Mint normalized tokens.Process :
- Users deposit underlying assets into the Fund Reserve.
- The reserve allocates these assets to selected yield sources.
- The system calculates the minting amount based on current asset valuations (maintaining 1:1 value at the initial minting, dynamically adjusted later).
- Corresponding normalized tokens are minted and issued to yield source adapters.
Yield Source Interaction & Yield Management
Yield Sources manage normalized tokens → Generate yield → Harvest & return rewardsProcess :
- Yield sources hold normalized tokens representing pooled assets.
- Assets generate yield through external DeFi protocols.
- Yield sources harvest the accumulated yield regularly.
- Harvested yields are transferred back to the Fund Reward Account, contributing to the overall reward pool.
Redemption & Withdrawal of Underlying Assets
User-Initiated Withdrawal (Standard Case)
User requests withdrawal → Burn normalized tokens → Underlying assets returnedProcess :
- Users initiate withdrawal requests.
- The system validates the request and determines how many normalized tokens must be burned based on current valuations.
- Corresponding underlying assets are proportionally redeemed and returned to the Fund Reserve.
- The user receives the redeemed underlying assets.
Special Authorized Redemption (e.g., Slashing)
Authorized entity holds normalized tokens → Redeem underlying assetsProcess :
- Special entities (such as slashers) holding normalized tokens can redeem underlying assets.
- Authorization and token ownership are validated.
- The normalized tokens are burned, and underlying assets proportionally redeemed.
- Assets are immediately released, ensuring rapid, secure operations.
Exchange Ratios & Pricing Mechanism
Normalized token exchange ratios dynamically depend on:- Total Normalized Token Supply: Reflects collective user positions in the pool.
- Underlying Assets Value: Determined by real-time asset valuations using integrated pricing sources.
- Proportional Distribution: Underlying assets are redeemed proportionally based on current locked asset valuations within the pool, maintaining fairness and transparency.
Normalized Token Pool Structure Diagram
- Normalized Token Mint: Manages the minting and burning processes.
- Token Reserve Accounts: Store underlying assets individually.
- Asset Valuation Service: Provides dynamic pricing to ensure accurate valuation of underlying assets.
Importance of Normalized Tokens
- Unified Representation: Enables simplified management of multiple diverse assets through a single token interface.
- Accurate Valuation: Continuously ensures fairness by reflecting real-time asset values.
- Efficiency & Scalability: Reduces operational overhead and facilitates scalable yield management.
- Security & Control: Restricts access to yield sources or authorized entities, ensuring the system’s security and integrity.