Liquid Tokens

Liquid Tokens

Liquid tokens (LST) represent a user's share in the vault. They are fully transferable SPL tokens that can be traded, used in DeFi, or redeemed for underlying assets.

Token Properties

Each vault's liquid token:

  • Uses the same token standard as underlying (Legacy or Token 2022)

  • Maintains the same decimal precision

  • Has a custom ticker and name

  • Follows SPL token conventions

Exchange Rate

The LST/underlying exchange rate is calculated as:

exchange_rate = underlying_represented_by_lst / lst_supply

Where:

underlying_represented_by_lst = managed + epoch_deposits - epoch_redemptions - prev_epoch_redemptions - pending_redemptions

Minting Process

When users deposit:

  1. Calculate current exchange rate

  2. Determine LST amount to mint

  3. Mint tokens to user's wallet

  4. Update vault accounting

The minting formula:

minted_lst = floor(deposited_underlying * lst_supply / underlying_represented_by_lst)

Burning Process

When users redeem:

  1. Burn LST from user's wallet

  2. Calculate underlying amount

  3. Create redemption record

  4. Queue for processing

The redemption formula:

underlying_redeemed = floor(redeemed_lst * underlying_represented_by_lst / lst_supply)

Transfer Capabilities

Liquid tokens can be:

  • Transferred between wallets

  • Traded on DEXs

  • Used as collateral

  • Integrated with protocols

For Token 2022 vaults, transfer hooks enable:

  • Compliance checks

  • Access control

  • Custom transfer logic

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