Timeless is a yield tokenization protocol where the yield tokens never expire.
Timeless splits user deposits into two types of yield tokens: Perpetual Yield Token (PYT), whose holders receive the yield generated by the user deposits, and Negative Yield Token (NYT), whose market price moves in the opposite direction as PYT.
Timeless enables the following use cases
- Yield boosting: Boost the yield you earn from any supported farm by 1x-2x
- Yield hedging: Decrease the volatility of the yield you earn
- Yield speculation: Speculate on whether yield rates are going up or down
Perpetual Yield Token (PYT)
- Timeless perpetual yield tokens (PYT) represent streams of future yield generated by the corresponding principal. 1 PYT always corresponds to 1 underlying principal, which makes accounting easier.
- For example, say we have a PYT that uses the Yearn USDC vault to generate yield, then 1 PYT represents the right to claim the yield generated by 1 USDC in the Yearn USDC vault from now to forever in the future.
- PYTs are useful because their prices move in the same direction as the yield rates of the yield-generating vaults they use, so it’s easy to use them to speculate on yield rates. They're also useful for yield boosting, where you buy PYT off the market at a discount to boost the yield you earn.
Negative Yield Token (NYT)
- Timeless negative yield token (NYT) is the byproduct of perpetual yield token (PYT). Whenever 1 PYT is minted, so is 1 NYT.
- NYT is used when getting back the underlying principal: burning 1 PYT and 1 NYT together gives you back 1 underlying asset.
- NYT holders don't receive any of the yield generated by the underlying. NYT is useful because of the property that the price of 1 PYT and 1 NYT always add up to 1 in terms of the underlying asset, meaning the price of NYT always moves in the opposite direction as PYT, and thus in the opposite direction as the yield rate.
- NYT is used for yield speculation, where you buy NYT to bet that the yield rate will go down in the future. It's also used for yield hedging, where you convert part of your portfolio into NYT to decrease the volatility of the yield you earn elsewhere.
Compounded Perpetual Yield Token (xPYT)
- xPYTs are auto-compounding vaults that compound the yield generated by PYTs (which is paid in the underlying asset) into more PYTs.
- xPYTs are permissionlessly managed, meaning anyone can trigger the auto-compounding and earn a fee for doing so. In practice, this means xPYTs rely on MEV bots to handle the auto-compounding. Thus, xPYTs do not rely on any centralized infrastructure for auto-compounding, it is done in the most decentralized way.