Yield Accruing Positions

Yield Accruing Positions (YAPs) are fungible liquidity pool distributions designed to automatically grow your underlying asset holdings. Through YAPs, all ROOSTER emissions allocated to your position are max-locked to bolster the pool's governance power. The trading fees earned by this locked voting power are then systematically used to acquire more of the pool's underlying assets, continuously increasing the value of each LP’s share within the YAP.

How Do YAPs Work?

When a Liquidity Provider (LP) adds liquidity to a pool on Rooster, they have the option to join a YAP. YAPs are preconfigured distributions within the pool, optimized by parameters such as token pair, fee tier, and concentration width, offering a streamlined approach to liquidity provision and yield generation.

LPs who join YAPs receive fungible ERC-20 LP tokens representing their share of the YAP, unlike standard LP positions which are recorded on unique NFTs. These ERC-20 tokens signify a pro-rata claim on the YAP's current balance of underlying tokens. While the specific ratio of assets within the YAP may shift due to market trading activity (e.g., as more tokenA is swapped for tokenB), an LP always maintains their proportional share of the total underlying assets held by the YAP.

Liquidity within a YAP is eligible to receive ROOSTER emissions. The distinctive mechanism of YAPs revolves around how these emissions and subsequent pool revenues are managed:

1. Max-Locking of ROOSTER Emissions:

   • All ROOSTER emissions allocated to a YAP are automatically and entirely staked as max-locked veROOSTER (vote-escrowed ROOSTER). These emissions are not sold by the YAP system.

2. Voting for Pool Emissions:

   • The accumulated max-locked veROOSTER from the YAP is utilized to vote for directing future ROOSTER emissions towards the specific pool to which the YAP belongs. This voting action aims to sustain or increase the pool's share of ongoing emission rewards.

3. Earning Pool Fees via Voting Power:

   • Trading fees generated from swaps executed within the pool are distributed to veROOSTER holders who have cast their votes for that particular pool.

   • The share of these pool fees attributable to the YAP's veROOSTER voting power is duly collected.

4. Accruing Yield to the YAP:

   • The collected pool fees (typically denominated in the pool's underlying tokens, such as pUSD and pETH in a pUSD/pETH pool) are then automatically deployed to acquire more of these underlying assets for the YAP.

   • These newly acquired assets are integrated directly into the YAP's liquidity. For instance, in a pUSD/pETH YAP, collected fees would be used to augment the pUSD and pETH holdings, respecting the current asset ratio, thereby increasing the YAP's total liquidity.

   • This process directly expands the quantity of underlying assets backing the YAP LP tokens, leading to an appreciation in their value over time.

The outcome of this integrated mechanism is that liquidity held in a YAP benefits from a dual-action process:

• The intrinsic value of the LP tokens appreciates through the continuous accrual of more underlying assets, funded by the pool's trading fees that are earned via the YAP's consolidated voting power.

• The YAP dedicates its full ROOSTER emissions towards governance, enhancing its voting power to potentially secure more future emissions and attract greater fee revenue for its associated pool.

As YAP LP tokens represent a proportional share of all underlying assets within a YAP, LPs redeeming their tokens receive their pro-rata share of the YAP’s current total liquidity, which has organically grown through the strategic reinvestment of earned pool fees.

What Are the Benefits of YAPs?

• Automated Yield Compounding: Your portion of the pool's trading fees is automatically reinvested, growing your underlying position without requiring manual intervention.

• Focused Governance Participation: With 100% of the YAP's ROOSTER emissions directed to governance, participants collectively maximize their influence on future emission allocations, thereby potentially enhancing the pool's fee-generating capabilities.

• Fungibility and DeFi Composability: The ERC-20 nature of YAP LP tokens makes them readily integrable with other DeFi protocols, such as lending platforms and incentive markets (e.g., Royco). This provides YAP LPs with diverse opportunities, including using their positions as collateral or for other capital efficiency strategies.

• Alignment with Pool Performance: This model directly links the yield of YAP LPs to the economic activity (trading volume and fees) of their chosen pool, fostering a strong alignment of interests.

• Streamlined Integration for Token Projects: YAPs offer a straightforward path for new token projects to achieve multi-protocol integration. Tokens supporting YAPs on Rooster can quickly become part of broader DeFi activities like lending and rehypothecation, accelerating their adoption across the Plume network and extending utility for token holders.

How are YAP distributions chosen?

The distribution for each YAP is concentrated to capture the most trading activity for a particular token pair. The range covered by a YAP's distribution depends on the pair's volatility and the pool's width parameter: more volatile pairs will require a wider range, while stable pairs can be concentrated into a more narrow range.

When establishing the ranges for YAPs that include nTOKENs, they are treated as stable assets; so a YAP in an nTOKEN-pUSD pool can be considered a stable pair, and will use a narrower distribution. For more information on nTOKENs, please see the Nest docs.

What if I prefer to receive ROOSTER emissions directly?

Liquidity Providers who wish to manage their ROOSTER emissions themselves can opt to provide liquidity via a standard NFT position. This approach allows them to collect ROOSTER emissions directly. They can then decide independently whether to sell these emissions, stake them as veROOSTER for voting and personal fee earning, or utilize them in other capacities. Such a position is non-fungible (represented by an NFT) and generally offers less seamless composability in other DeFi protocols compared to a YAP LP token. This alternative provides direct control over emissions but does not include the automated compounding and collective governance focus inherent to YAPs.