/biz/ - Business & Finance

How does it work?

The system works like this:
1. Liquidity providers add liquidity to the Saffron DAI pool
2. LPs receive two Saffron LP tokens for adding liquidity: principal and dsec
3. DAI added to the pool is locked until the epoch ends. LP tokens are regular ERC20 tokens and can be traded freely
4. At the end of the epoch, LPs redeem their LP tokens for interest+SFI and principal. dsec tokens are redeemable proportionally for interest+SFI and principal tokens are redeemable for the exact amount of DAI

As an example: if I own 150 principal tokens and 10% of the dsec tokens then I can redeem 150 DAI and 10% of the interest and SFI earned during the epoch.

Remember, the epoch begins at a fixed time and has a fixed length of two weeks, so if an LP enters 10 days into the epoch then they are only locked in for 4 days. However, their dsec value (calculated by multiplying dollar value by seconds remaining in the epoch) is much lower than anyone who became an LP earlier in the epoch.