A Yieldcoin is a digital asset designed to represent a claim on future yield or interest generated by another underlying cryptocurrency asset or a pool of assets, often within a decentralized finance (DeFi) lending or staking protocol. It effectively tokenizes the future income stream from a crypto asset.
Mechanism
Yieldcoins are typically created by splitting a principal asset from its future yield using a specialized smart contract protocol. The principal component, often termed a principal token, represents the original asset without its yield, while the yieldcoin represents only the accrued interest or rewards over a specified period. These components are then traded independently.
Methodology
Investors utilize yieldcoins to gain exposure to future yield without holding the principal asset, or to separate and trade the income stream for immediate liquidity. This strategic financial engineering enables new forms of risk management and yield speculation, allowing for the creation of diversified portfolios based on future earnings potential within the crypto investing ecosystem.
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