Principal Token (PT)

The Principal Token (PT) is your ticket to get your capital back. When you deposit liquidity into Yield Forge, half of what you receive is PT — a token that can be redeemed for the underlying assets at maturity.

How It Works

• 1 PT = a proportional claim on the underlying LP position
• After maturity — redeem PT and get back your tokens (e.g., WBTC + USDT)
• Before maturity — trade PT freely on the secondary market

Why Does PT Trade at a Discount?

Because PT holders give up the right to earn yield (that goes to YT holders). So the market prices PT below the underlying value, and the discount represents the implied interest rate.

$\text{PT Price} = \frac{V(t)}{(1 + r)^{t}}$

Where $r$ is the implied APY, $t$ is the time to maturity in years, and $V(t)$ is the maturity target — the current LP position value per PT unit.

In practice:

• A new 90-day cycle might have PT trading at $0.945 per$0.97 of underlying value (if LP had 3% IL)
• As maturity approaches, the price drifts up toward V(t)
• At maturity, PT = proportional share of underlying LP value

Strategies

Lock in a Fixed Return

Buy PT at a discount, wait for maturity, redeem for the underlying LP value. The discount relative to the maturity target is your guaranteed profit.

Example: Buy 1,000 PT for 920 USDC when V(t) = 0.97. At maturity, redeem for ~970 USDC worth of liquidity. Your fixed return is ~5.4%.

!NOTE If the underlying pool holds volatile assets (e.g., ETH/USDC), the dollar value of your redemption may fluctuate — but you always get back your proportional share of the pool.

Capital Efficiency

PT costs less than the underlying position. You can control more principal with less upfront capital.

Redemption

After maturity, call Redeem on the pool page. The protocol burns your PT and withdraws the proportional liquidity from the underlying protocol, sending both tokens back to your wallet.

See the Redeem Position guide for step-by-step instructions.