Keep the principal.
Sell the yield.

Overview

The underlying assets are deposited into a named external yield source. STRIP holds the exact vault shares onchain, records the two owners independently, and redeems the complete position once at maturity.

STRIP does not manufacture yield, borrow against the deposit, use new deposits to fund old positions, or promise the original principal back. Every payout comes from the assets actually returned by the external vault.

Position lifecycle

A position can only move forward through a small state machine. Trading changes ownership of the Yield Right; it does not alter the vault shares or principal accounting.

Settled is the maturity path. Merged is the early-exit path when one wallet owns both rights. A position cannot enter both terminal states.

Principal

The Principal Claim is an ERC-721 that owns the principal side of settlement. Its token ID equals the position ID.

P is the original deposit and V is the amount actually returned by redeeming every vault share. The payout is capped at P. If the vault returns less, the Principal owner receives the lower amount and bears the loss.

Yield Rights

The Yield Right is a second ERC-721 with the same token ID. It owns only the positive value above the original principal, after the realized-yield fee.

The right can be transferred, sold at a fixed price, or sold through an English auction. The final owner at settlement receives Cᵧ(V). If V ≤ P, its payout is zero.

Settlement mathematics

All quantities are denominated in the same underlying asset. STRIP does not convert USDG into dollars and does not require a price oracle for settlement.

P

Original principal deposited.

S

Exact vault shares held by STRIP.

Vₜ

Previewed asset value of those shares at time t.

V

Actual assets received when the shares are redeemed.

fᵧ

Realized-yield fee rate. Launch value: 0.05.

Q

Price paid to acquire the Yield Right.

Asset conservation

Every unit returned by the vault is assigned exactly once.

Settlement outcomes

Illustration for P = 10,000 USDG and fᵧ = 5%. Gas and marketplace purchase price are excluded.

Vault share accounting

STRIP stores shares, not an estimated balance. At creation, the adapter deposits P assets and reports the exact number of shares minted.

The pre-maturity accrued value is informational. previewRedeem can change between blocks, and the actual redemption value V can differ from Vₜ because of vault losses, rounding, liquidity, or execution conditions.

Entry execution bound

The frontend obtains a previewed share output Ŝ. It derives a maximum acceptable asset price per share with 27-decimal precision and a 0.50% tolerance.

If the vault mints materially fewer shares than previewed, creation reverts. The protocol also checks the exact asset amount received and the exact change in its share-token balance, rejecting fee-on-transfer behavior.

Pricing a Yield Right

STRIP does not set a fair price. Sellers and bidders price the right to an uncertain future payoff. If a buyer pays Q, their realized result before gas is:

Break-even redemption value

For P = 10,000, Q = 150, and fᵧ = 5%, break-even requires approximately V* = 10,157.8947 USDG. That is a threshold, not a forecast.

Price as a principal ratio

With Q = 150, P = 10,000, and D = 90 days, the buyer pays 1.50% of principal upfront, equivalent to a simple annualized ratio of 6.083%. This is a market-price normalization only. It is not vault APY, expected return, or guaranteed profit.

Seller economics

Creating a position

Choose USDG, Steakhouse USDG, an amount, and a maturity between one and 365 days. Approve USDG if necessary, then submit createPosition.

Both NFTs use the same position ID. No backend approval or offchain signature creates ownership.

Selling yield

The Yield Right owner approves the marketplace and chooses a fixed price or an auction. The marketplace escrows the NFT, so a listing cannot become stale after an unrelated transfer.

A fixed-price seller can relist at a new price or cancel before maturity. An auction can be cancelled only while it has no bid.

Buying yield

A fixed-price buyer approves the position’s underlying asset and calls buy. Payment, marketplace fee, seller proceeds, and Yield Right transfer happen atomically.

The buyer becomes the onchain owner of the Yield Right immediately. The Principal Claim remains with its current owner.

Auctions

Auctions are ascending-price English auctions denominated in the position’s underlying asset. The seller chooses a reserve and an end time that must be at least 15 minutes away and strictly before maturity.

R is the reserve and B is the current highest bid. A bidder increasing their own bid transfers only the difference. When a different wallet takes the lead, the previous amount becomes a pull-based refund:

Once time expires, anyone can finalize. The winner receives the Yield Right and the seller receives the winning bid less the marketplace fee. If there was no bid, the NFT returns to the seller.

Settlement

At or after maturity, anyone can settle a position. The action zeroes the stored share balance, marks the position settled, redeems every share, and records final payouts. Reentrancy protection and state changes occur before payout transfers.

Principal and Yield owners claim separately. Either claim can trigger settlement first when the position is mature. Each successful claim burns its NFT and sets its claim flag before transferring assets.

Early exit

Before maturity, early exit is available only when the same wallet owns both NFTs. mergeAndExit burns both rights, redeems every share, and returns the exact assets received.

If ownership is split, neither side can terminate the other side’s exposure. At maturity the settlement path replaces early exit.

Yield sources

V1 supports Steakhouse USDG on Morpho Vaults V2, an ERC-4626-compatible production vault over canonical USDG.

Sources are explicitly registered with their asset, vault, and adapter. Arbitrary target calls are impossible. Disabling a source prevents new deposits but does not change the settlement rights of existing positions.

Protocol fees

Launch rates are immutable in StripConfig. A Yield Right can incur both fees at different moments: the marketplace fee applies to its sale, while the yield fee applies only to positive realized yield.

$STRIP value capture

Eligible USDG fees accumulate in FeeCollector. Anyone can call buyAndBurn. The collector converts USDG to WETH through the verified 0.01% Uniswap V3 pool, unwraps WETH into native ETH, buys $STRIP through Pons V2, and sends the result directly to 0x0000…dEaD.

The conversion has two independent 1% protections: one relative to the current pool quote and one relative to the production Morpho USDG/WETH oracle. This oracle is used only for protocol-revenue conversion; position settlement remains entirely oracle-free.

Before graduation, the ETH buys from the verified Pons bonding curve. After graduation, it uses the exact native-ETH Pons Uniswap V4 pool key. Curve purchases remain disabled while Pons’ recipient-specific opening tax is active.

The protocol token is bound once in canonical configuration. Initialization verifies that the token was created by the production Pons V2 factory and that its quote asset is native ETH. The address cannot later be replaced.

Contract system

There are no proxies, governance, multisig, insurance fund, or arbitrary external-call paths.

Protocol invariants

Production addresses

Always verify an address on Blockscout before approving assets.

Risks

• Underlying source. Vault code, curators, collateral, markets, or liquidations can fail.
• Principal loss. The Principal Claim can return less than the amount deposited.
• Yield uncertainty. Realized yield can fall, be zero, or fail to cover the Yield Right’s purchase price.
• Auction exposure. A leading bid remains committed until outbid or finalization.
• Liquidity. Vault liquidity can delay or prevent redemption at a given moment.
• Smart contracts. STRIP and every integrated dependency carry implementation risk.
• Market liquidity. A listing or auction may receive no buyer. There is no insurance.

Developers

Contract views are canonical. Events provide deterministic discovery for positions, ownership transitions, marketplace activity, settlement, claims, fees, and burns.

The included indexer begins at the configured deployment block, scans logs in bounded chunks, waits 12 blocks before treating history as finalized, deduplicates by transaction hash and log position, and polls only recent ranges.

Read APIs

These routes improve speed and discovery only. They do not authorize transfers, determine ownership, or replace contract state.