There are three native tokens on v2 pools that are used for accounting purpose of lenders, borrowers and LPs.
Each Timeswap pool offers three ERC 1155 native tokens. The three token types on Timeswap V2 are bond tokens (BT), collateral claim tokens (CCT) and liquidity tokens (LT). Let's try to understand more about the utility of these tokens in pool economics. (Note:The figure below shows a DAI-ETH pool, where any token may serve as an asset any other token may serve as collateral, regardless of the sequence (i.e., a DAI-ETH pool is identical to an ETH-DAI pool).
- Collateral Claim tokens are minted for borrowers. From the name itself, it's very intuitive that since a borrower is locking collateral to borrow the asset, he is essentially getting CCT tokens as a claim for his locked collateral after the debt is repaid.
- CCT tokens can only be burnt before maturity. Since the borrowers have the option to pay back their debt before maturity to unlock their locked collateral, the CCT tokens only have the utility until maturity. After maturity, the CCT tokens' value becomes zero as you can no longer use them to claim your collateral by paying back the debt.
- So if there is a USDC-ETH pool, you can either have CCT for USDC or CCT for ETH, depending on the choice of collateral as either USDC or ETH used.
Alice borrows 500 USDC from a one-month duration USDC-ETH pool with a transition price of 1000 USDC and a current spot price of 1100 USDC. She locks 0.55 ETH to get a loan of 500 USDC, which gives her 0.55 CCT ETH from the pool as a claim to her 0.55 ETH if she pays her debt of 550 USDC before maturity.
- The Bond tokens can be burnt before maturity with a small penalty on the yield to provide an early exit to the lenders.
Holding 1 CCT and 1 Bond token simultaneously is equivalent to having a Neutral position (equal Lend and Borrow positions).
- Liquidity tokens are minted to Liquidity providers (LPs) as a claim to their portion of liquidity in the pool.
- Liquidity tokens allow LPs to claim to the existing liquidity, i.e., assets in the Principal pool and collateral locked in the Collateral Pool.
- LPs can burn their liquidity tokens anytime before maturity with a penalty for an early exit.