Native Tokens V2

Timeswap relies on precise accounting to maintain the protocol’s well-being. This accounting includes a set of native tokens that serve as proof for every activity carried out on the platform. We have cut it down by half from the six tokens that served this role in V1. This has led to a reduction in contract complexity and a corresponding increase in user-friendliness. We have also standardized the tokens as ERC-1155 NFTs instead of a mix of different tokens.

The Tokens

Three tokens are native to the Timeswap V2 protocol. This article will clarify the purpose of each of these three tokens and how they aid in administrating the protocol.

Collateral Claim Tokens (CCT)

CCT is created for borrowers. As the name suggests, when borrowers use collateral to obtain an asset, they receive CCT as a form of receipt for their locked collateral once the debt is repaid.

CCT can only be used before maturity. As borrowers have the option to repay their debt before maturity to release their locked collateral, the utility of CCT only lasts until maturity. After reaching maturity, the value of CCT becomes zero as it can no longer be utilized to reclaim collateral through debt repayment.

So, if Alice borrows from a USDC-ETH pool that lasts for one month when the spot price of ETH is 1100 USDC, Alice will need to lock 0.55 ETH (collateralization of about 120%) as collateral for a 500 USDC loan with a debt to repay 550 USDC. In return, Alice receives 0.55 CCT ETH, which she can use to claim her collateral if she repays her debt within that month.

Refer to the below image for an idea of how it works.

Bond Token (BT)

Bond Tokens represent both a lender’s principal and the yield it gives them access to. BT can be burnt anytime before or after maturity. If a lender exits the pool before maturity, there will be a small reduction in the yield portion. If a user holds 1 CCT and 1 BT, this is a neutral position because the borrow and lend positions are equal.

So, if Bob lends 1000 USDC to the USDC-ETH pool for a month with the current spot price of ETH being 1000 USDC, he will receive 1.2 BT after the transaction. This 1.2 BT can be redeemed for either 1200 USDC or 1.2 ETH.

Refer to the below image for an idea of how it works.

Liquidity Token (LT)

An LT represents the proportional claim of liquidity providers for the portion of their liquidity added to the pool. Liquidity providers can exit the pool by burning the LT but will get reduced yield for the early exit. However, if withdrawn after maturity no reduction is suffered by the LP. This incentivises LPs to keep their liquidity in the pool while also allowing them the option of an exit at any time of their choosing.

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