Normalized Token

A Normalized Token is a unified representation of multiple assets pooled together within FRAG-22. Instead of managing multiple assets separately, yield sources hold normalized tokens, which dynamically adjust their value according to the real-time valuations of the underlying assets. Normalized tokens are exclusively managed by yield source adapters or special authorized entities (e.g., slashers), maintaining controlled, secure operations.

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Key Features of Normalized Tokens

• Dynamic Valuation:

  Continuously reflects changes in underlying asset values.

• Simplified Asset Handling:

  Yield sources interact only with normalized tokens, reducing complexity.

• Controlled Access:

  Exclusively accessible to authorized entities (yield sources, slashing modules).

• Proportional Redemption:

  Redeemable into underlying assets proportionally, ensuring fairness.

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User Actions & Token Lifecycle

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Asset Allocation & Normalized Token Minting

User deposits assets → FRAG-22 allocates to Yield Sources → Mint normalized tokens.

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Process :

• Users deposit underlying assets into the Fund Reserve.
• The reserve allocates these assets to selected yield sources.
• The system calculates the minting amount based on current asset valuations (maintaining 1:1 value at the initial minting, dynamically adjusted later).
• Corresponding normalized tokens are minted and issued to yield source adapters.

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Yield Source Interaction & Yield Management

Yield Sources manage normalized tokens → Generate yield → Harvest & return rewards

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Process :

• Yield sources hold normalized tokens representing pooled assets.
• Assets generate yield through external DeFi protocols.
• Yield sources harvest the accumulated yield regularly.
• Harvested yields are transferred back to the Fund Reward Account, contributing to the overall reward pool.

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Redemption & Withdrawal of Underlying Assets

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User-Initiated Withdrawal (Standard Case)

User requests withdrawal → Burn normalized tokens → Underlying assets returned

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Process :

• Users initiate withdrawal requests.
• The system validates the request and determines how many normalized tokens must be burned based on current valuations.
• Corresponding underlying assets are proportionally redeemed and returned to the Fund Reserve.
• The user receives the redeemed underlying assets.

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Special Authorized Redemption (e.g., Slashing)

Authorized entity holds normalized tokens → Redeem underlying assets

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Process :

• Special entities (such as slashers) holding normalized tokens can redeem underlying assets.
• Authorization and token ownership are validated.
• The normalized tokens are burned, and underlying assets proportionally redeemed.
• Assets are immediately released, ensuring rapid, secure operations.

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Exchange Ratios & Pricing Mechanism

Normalized token exchange ratios dynamically depend on:

• Total Normalized Token Supply:

  Reflects collective user positions in the pool.

• Underlying Assets Value:

  Determined by real-time asset valuations using integrated pricing sources.

• Proportional Distribution:

  Underlying assets are redeemed proportionally based on current locked asset valuations within the pool, maintaining fairness and transparency.

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Normalized Token Pool Structure Diagram

• Normalized Token Mint: Manages the minting and burning processes.
• Token Reserve Accounts: Store underlying assets individually.
• Asset Valuation Service: Provides dynamic pricing to ensure accurate valuation of underlying assets.

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Importance of Normalized Tokens

• Unified Representation:

  Enables simplified management of multiple diverse assets through a single token interface.

• Accurate Valuation:

  Continuously ensures fairness by reflecting real-time asset values.

• Efficiency & Scalability:

  Reduces operational overhead and facilitates scalable yield management.

• Security & Control:

  Restricts access to yield sources or authorized entities, ensuring the system’s security and integrity.