Yield Vaults

Learn more about the various vault types within Nara's Treasury Management & Yield Product.

Loan Vaults

Each Loan Vault is a unique smart-contract based on the ERC-4626 standard, featuring specific parameters, including:

• Loan Type (e.g., open-ended or fixed term)

• Eligible Collateral

• ERC-20 Vault Token

• Liquidity Asset

• Interest Rate

• Exchange Rate

• Cut-Off Times

• Processing Times

• Fees

• User permissions

Vault Tokens

Vault tokens are digital assets that represent a Lender’s share of a loan vault. When a Lender makes a loan into a vault, they receive vault tokens in return. These tokens accrue interest and can be redeemed for the underlying liquidity asset (e.g., USDC) at the current exchange rate.

• Representation of Ownership: Each vault token represents a proportional share of the assets within a specific loan vault.

• Interest Accrual: Vault tokens are designed to accrue interest over time, reflecting the yield generated by the underlying loans.

• Redeemability: Lenders can redeem their vault tokens for the underlying liquidity asset at any time, subject to the vault’s withdrawal processing times.

• Non-Transferable: Currently, vault tokens are non-transferable and can only be issued to and redeemed by whitelisted wallets that have completed the onboarding process. We however plan to make vault tokens transferable on the secondary market.

Security and Custody: Lenders are solely responsible for the secure custody of their vault tokens.

Exchange rate

Exchange rates are crucial for determining the value of vault tokens relative to the underlying liquidity asset. These rates are dynamic and reflect the accrued interest and any fees associated with the vault.

The exchange rate for a vault token is calculated based on the total value of assets within the vault, including accrued interest, divided by the total number of vault tokens in circulation. This ensures that the value of each vault token accurately reflects its proportional share of the vault’s assets.

As interest accrues on the underlying loans, the exchange rate of the vault token will increase, meaning that each vault token can be redeemed for a greater amount of the underlying liquidity asset over time. This mechanism allows Lenders to realize their yield. Note that exchange rate can also decrease in case of negative performance of the underlying asset (more common in higher risk assets).

Calendar & Business Days

Nara operations, including loan commencements, repayments, and withdrawals, are subject to specific business days and cut-off times. These are designed to align with traditional financial market practices and ensure efficient processing of transactions.

Business Days

Business days typically refer to weekdays (Monday to Friday), excluding public holidays in relevant jurisdictions (e.g New York). Specific holidays that may impact processing times will be communicated in advance.

Cut-Off Times

Cut-off times are specific daily deadlines by which transactions must be initiated to be processed on the same business day. Transactions initiated after the cut-off time will generally be processed on the next business day.

Impact on Transactions

Understanding business days and cut-off times is essential for Lenders to plan their investment and withdrawal activities effectively. Delays may occur if transactions are initiated outside of designated business hours or on public holidays.