Capital Structure

How the pool is organised — treasury-backed yield-bearing tokens as the reserve asset, the 80/20 split, and the Insurance Fund.

Yield-Bearing Tokens as the Reserve Asset

All capital in the Fleets pool is held in treasury-backed yield-bearing tokens. Unlike a $1.00 pegged stablecoin, these tokens’ price rises continuously as the underlying Treasury yield is reflected through an increasing exchange rate (currently ~3–5% APY).

This has a direct consequence for the protocol: the pool earns baseline yield even with no active loans. Every yield-bearing token held in the pool — whether in the liquidity reserve or undeployed capital — is appreciating in dollar terms every second. This yield is already reflected in the pool value in real time.

On-chain, the protocol stores only the yield-bearing token quantity (c_tokens), never a fixed USD value. The dollar value is computed live from the oracle:

C_usd(t) = c_tokens × token_price(t)

This means the pool’s USD value is always accurate and always current.

The 80/20 Structure

Every dollar deposited into the pool is split into two buckets:

Total Pool (100%)
├── Liquidity Reserve (20%) ──► Always in yield-bearing tokens
│                                   Never lent to operators
│                                   Available for redemptions
│
└── Loan Allocation (80%)
         ├── Active Loan Book ──► Fleet operators 
         └── Undeployed Capital ──► In yield-bearing tokens while awaiting deployment

Liquidity Reserve (20%)

The liquidity reserve is a hard floor for loan origination. It is ring-fenced — capital in the reserve cannot be allocated to fleet loans. Its purpose is to ensure that redemptions can be processed without requiring loan recalls.

• Always held in yield-bearing tokens (earning passive yield)
• Replenished first when amortised principal returns from loan repayments
• If the reserve falls below 20%, the protocol cannot originate new loans until it is restored above that threshold
• Redemptions remain available even when the reserve is below 20%

Loan Allocation (80%)

The loan allocation is the deployable capital. Up to 100% of this 80% bucket can be drawn into active fleet facilities. Capital in this bucket that is not yet lent (Undeployed Capital) remains in yield-bearing tokens earning passive yield.

As operators repay their loans, principal flows back into the Undeployed Capital bucket. The liquidity reserve is topped up first if it has fallen below 20%, then the remainder stays as Undeployed Capital available for new originations.

The Insurance Fund (Credit Enhancement Reserve)

The Insurance Fund is the second line of defence against credit losses, after the FFC tranche. It is funded from two sources:

1. 5% of gross yield each distribution epoch, minted as FYC tokens
2. 50% of accelerated redemption fees paid by depositors who exit before their scheduled queue

The Insurance Fund holds value in the form of FYC tokens. When a loan defaults and FFC is unable to fully cover the remaining loss, the Insurance Fund is activated — FYC tokens held in the insurance wallet are burned, reducing the FYC supply and stabilising the FYC price per token.

Only when both the FFC tranche and the Insurance Fund are fully exhausted would FYC holders experience a loss.

Pool Value Formula

The pool’s total value at any moment is:

V_pool = C_usd + OP

Term	Description
C_usd	Dollar value of yield-bearing token holdings: c_tokens × token_price(t) — current, not historical
OP	Outstanding principal — sum of active loan balances, reduced by every repayment and zeroed when a loan closes

When a loan defaults, the defaulted loan is removed from OP and any vehicle auction proceeds are returned to C_usd. The net loss from that default is absorbed directly into V_FFC (and, if needed, through insurance token burns into FYC supply). Because C_usd and OP are both live values — not cumulative historical figures — their sum always gives the accurate current pool value.

Tranche Value Split

The total pool value is split between the two tranches. At any point:

V_pool = V_FYC + V_FFC

The split between FYC and FFC is entirely determined by user participation — how much capital each set of depositors has contributed. There is no fixed target ratio between the tranches.

Key Protocol Parameters

Parameter	Value	Notes
Liquidity Reserve	20% of pool NAV	Hard floor for new loan origination
Max Loan Deployment	100% of Loan Allocation	Up to 80% of total pool
FFC Coverage Ratio (φ)	≥ 80% of active loans	Hard invariant, enforced at contract level
Protocol Fee	10% of gross yield	Minted as FYC into protocol wallet
Insurance Fund Allocation	5% of gross yield	Minted as FYC into insurance wallet
Net Yield to LPs	85% of gross yield	After fees and Insurance Fund
Base Yield (yield-bearing tokens)	~3–5% APY	Baseline for all idle capital
Grace Period	30 days	After missed repayment, before default
Penalty Rate	APR × 1.25	Applied to monthly interest during grace period

Continue to Yield Model to understand how these parameters combine to generate returns for FYC and FFC holders.