Use Cases

Use cases for Element's Principal Tokens (PTs)

For Buyers

Buying Fixed Rates Income

Element allows users to purchase discounted Principal Tokens through AMMs and earn a fixed rate determined by the discounted value of the purchase.

For example, if a user purchases a 12-month Term Principal Token for ETH trading at a 10% discount, the effective fixed rate for making that purchase would be 10%.‌

Earn Trading Fees without Impermanent Loss

Users who are looking to capitalize on AMM trading fees can opt to provide liquidity on Principal Token AMM pairs and not have to worry about impermanent loss.

Because the price of principal tokens converges to the value of the underlying asset till eventually reaching a 1:1 value, if a user provides liquidity to the AMM and redeems at maturity all assets when withdrawn are of the same value.

For Sellers

Capital Efficiency

‌Users who want to earn the variable interest gain of a specific asset (such as USDC or DAI) but want access to their capital to further utilize their assets elsewhere can choose to sell their principal tokens at a discount to gain capital efficiency.

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 Element 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.

For Traders

Arbitrage without Carry Risk

Traders with specific trading strategies can profit off the basis point growth of an asset without carry risk. If Principal Tokens for USDC were trading at 150 Basis Points with 7 days left till maturity. A trader can take on that position, and carry it to redemption with no risk.

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 Element provides for Principal 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.

For Builders

Fixed Rate Yield Ladders

‌A Fixed Rate Yield Ladder product can provide users with continual liquidity as it continues to compound different proportions of a user's assets into various/different terms. At the end of a term period, the assets would automatically roll over to the next subsequent set fixed rate position unless the user chooses to withdraw. This provides users with more frequent instances of liquidity should they need the capital.

Principal Protected Products

Element's principal tokens that trade at a discount create a fixed rate that allows for users to build their custom-tailored principal protected product. In short, this means at the time of purchase, the fixed rate is secured and provides users with the additional capital that can be allocated towards variable interest strategies. These type of products rollover perpetually and take on the subsequent fixed rate term when the current one matures.