> ## Documentation Index
> Fetch the complete documentation index at: https://docs.fragmetric.xyz/llms.txt
> Use this file to discover all available pages before exploring further.

# 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 :**

```mermaid theme={null}
flowchart TD
User[User Deposits Assets] --> Reserve[Fund Reserve Account]
Reserve --> Allocation[Allocation to Yield Sources]
Allocation --> Valuation[Asset Valuation & Calculation of Mint Amount]
Valuation --> Mint[Mint Normalized Tokens]
Mint --> YieldSources[Yield Source Adapter Receives Normalized Tokens]

style User fill:#34A853,color:#fff
style Reserve fill:#4682B4,color:#fff
style Allocation fill:#4682B4,color:#fff
style Valuation fill:#FFC107,color:#000
style Mint fill:#00AEEF,color:#fff
style YieldSources fill:#0078D4,color:#fff
```

* 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 rewards**

#### **Process :**

```mermaid theme={null}
flowchart TD
YieldSources[Yield Sources Hold Normalized Tokens]
YieldSources --> ExternalYield[Generate Yields via External Protocols]
ExternalYield --> Harvest[Yield Harvesting]
Harvest --> RewardAccount[Fund Reward Account Receives Yield]

style YieldSources fill:#0078D4,color:#fff
style ExternalYield fill:#4682B4,color:#fff
style Harvest fill:#00AEEF,color:#fff
style RewardAccount fill:#34A853,color:#fff
```

* 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 returned**

#### **Process :**

```mermaid theme={null}
flowchart TD
UserRequest[User Requests Withdrawal] --> WithdrawValidation[Withdrawal Validation]
WithdrawValidation --> NormalizedBurn[Calculate & Burn Normalized Tokens]
NormalizedBurn --> AssetRedemption[Redeem Proportional Underlying Assets]
AssetRedemption --> ReserveReturn[Assets Returned to Fund Reserve]
ReserveReturn --> UserReceive[Assets Transferred to User]

style UserRequest fill:#34A853,color:#fff
style WithdrawValidation fill:#FFC107,color:#000
style NormalizedBurn fill:#00AEEF,color:#fff
style AssetRedemption fill:#6A5ACD,color:#fff
style ReserveReturn fill:#4682B4,color:#fff
style UserReceive fill:#0078D4,color:#fff
```

* 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 assets**

#### **Process :**

```mermaid theme={null}
flowchart TD
AuthorizedEntity[Authorized Entity Requests Redemption] --> Validation[Validate Authorization]
Validation --> TokenBurn[Burn Normalized Tokens]
TokenBurn --> ProportionalRedemption[Proportional Redemption of Underlying Assets]
ProportionalRedemption --> AssetRelease[Underlying Assets Released]

style AuthorizedEntity fill:#F7941D,color:#fff
style Validation fill:#FFC107,color:#000
style TokenBurn fill:#00AEEF,color:#fff
style ProportionalRedemption fill:#6A5ACD,color:#fff
style AssetRelease fill:#34A853,color:#fff
```

* 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**

```mermaid theme={null}
flowchart TD
subgraph Normalized Token Pool
NormalizedTokenMint["Normalized Token Mint"]
TokenReserveAccount["Reserve Accounts<br>(per Underlying Asset)"]
ValuationService["Asset Valuation Service (Pricing Sources)"]

NormalizedTokenMint <-->|Mint / Burn| TokenReserveAccount
TokenReserveAccount <-->|Valuation Updates| ValuationService
end

style NormalizedTokenMint fill:#00AEEF,color:#fff
style TokenReserveAccount fill:#4682B4,color:#fff
style ValuationService fill:#FFC107,color:#000
```

* **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.