Litepaper

A Basic Description and Visualization of the Swivel Protocol's mechanics.

Introduction

Concerns surrounding protocols like Compound and Aave have become acceptable for all but the most risk-averse market participants. However, the volatility of DeFi rates still precludes many from effective portfolio/risk management, and others from market participation entirely. Swivel enables this wider market participation by providing the capital efficient infrastructure and professional trading interface necessary for tokenized cash-flows.

Tokenizing Cash-Flows (Yield Tokenization)

At it's core, Swivel is built around the concept of cash flow-tokenization (Yield Tokenization).

Swivel provides lenders the ability to split an interest generating token into two separate cash-flow tokens until a future date. One token representing the future yield generated (nTokens), and another representing ownership of an underlying token, redeemable at that future date (zcTokens).

In Swivel's design these two are referred to as nTokens (yield-generating tokens), and zcTokens (tokens redeemable at maturity).

This flexible architecture facilitates a number of interesting use-cases, namely fixed-yield lending and yield boosting (rate-trading), and provides the core infrastructure necessary for fixed-maturity rehypothecation (options markets, futures markets, etc.,).

Splitting USDC into zcUSDC and nUSDC