Liquidity and pools

PT and YT only become useful if people can buy and sell them. Before any user trades, Aureus needs an initial secondary market.

Bootstrap liquidity

In the testnet MVP, Aureus starts with protocol-seeded (or LP-seeded) pools:

PAXGy
  ↓
Aureus Vault
  ↓
PT + YT
  ↓
Initial Liquidity Pools
  ↓
PT / PAXGy    YT / PAXGy
  ↓
Trading
  ↓
Market Prices
  ↓
Gold Term Curve

Pool	What it prices
PT / PAXGy	Gold principal for a maturity, and therefore the fixed rate
YT / PAXGy	Future gold yield until that maturity

The initial pools exist to bootstrap liquidity, price discovery, PT trading and YT trading. Once users trade, prices evolve with supply and demand, and the implied rates feed the Gold Term Curve.

How the market balances itself

No artificial incentive is needed to keep both sides of the market active: the price does it.

If few people want YT, its price falls. YT becomes cheaper leverage on gold yield, and the implied fixed rate on PT rises, so PT becomes more attractive to anyone who wants a predictable return.
If many people want YT, its price rises and the fixed rate on PT falls, which makes selling future yield more attractive for PAXGy holders.

Every move in price attracts the side that was missing. That equilibrium is what the Gold Term Curve reflects.

Liquidity providers

Liquidity providers (LPs) add capital to PT and YT pools so others can trade.

What LPs earn:
- a share of trading fees;
- the yield of the PAXGy held in the pool, since pools are quoted against PAXGy;
- on PT / PAXGy pools, the PT side moving toward its redemption value as maturity approaches.
No token rewards are promised. Future protocol incentives may be considered later; see the roadmap.
Risk: LPs take on the price risk of the assets in the pool, and may end up with more of the asset that fell in value. See Risks.

Beyond pools

For larger notionals, Aureus plans an institutional RFQ with professional market makers in Phase 4. It is not part of the MVP.