Overnight Tokens+

What Are Overnight Tokens?

Overnight Tokens+ are tokens that represent assets like USD or ETH, fully collateralized with yield-generating assets. These tokens are pegged to the price of the asset they represent and automatically accrue rewards by increasing the number of Tokens+ in your wallet.

USD+

Overnight offers several Tokens+, each fully collateralized with yield-generating assets and pegged to the value of the asset they represent. These include:

• USD+

• USDC+

• ETH+

• USDT+

• DAI+

Tokens+

These tokens automatically accrue rewards by increasing the balance in users' wallets, providing a seamless way to earn yield while maintaining the stability of the underlying asset.

What is rebase and how does it work? The rebase mechanism is triggered manually by the protocol and occurs seamlessly in six steps:

1. Users mint USD+ using USDC through Overnight’s dApp.

2. Smart Contracts implement an automated investment strategy for yield-generating purposes.

3. Fees and rewards from the investment strategy are swapped for USDC.

4. New USD+ is minted from the earned USDC.

5. The minted USD+ is sent back to the user's wallet through the rebase mechanism.

The rebase mechanism pays out yields from strategies, expanding the circulating supply financed by the USDC earned from yield-farming strategies.

Yield Mechanism with USD+ example

The yield for USD+ is generated through neutral-risk DeFi strategies, which users can easily track on the platform's stats page. These strategies are selected based on the principle of minimizing risk while ensuring stable returns.

The generated yields are distributed to Tokens+ holders via a rebasing mechanism. Here’s how it works:

1. Rebasing: Instead of fluctuating in value, the USD+ token balance in users' wallets increases as yield accumulates.

2. Stable Peg: The price of USD+ remains consistently pegged at 1 USD, ensuring stability.

3. Passive Earnings: Users benefit from passive earnings, as the increasing token balance directly reflects the yield earned, with no impact on the token's value.

This setup allows users to enjoy reliable yield generation without worrying about volatility in the token price.

Positive and negative rebase

A rebase token can experience Profit (positive rebase) when the collateral value exceeds 100% and Loss (negative rebase) when the collateral value falls below 100%. Please note that you assume the risk of all protocols in the Tokens+ Collateral. Profit payouts occur through daily rebasing, providing transparent balance and P/L visibility.

The pegging mechanism is based on the ‘NAV of 1’ policy (“Net Asset Value”), i.e. market value of assets equals the amount of Token+ in circulation. This is achieved by:

• Conservative risk management aims to avoid daily losses by building a diversified portfolio of highly conservative DeFi Investments

• Daily distribution of profits in the form of a rebase to USD+ holders; all yield collected by the USD+ reserves are distributed to USD+ holders directly by increasing their wallet balance once a day

Use a liquidity index reflecting the current ratio of the number of issued USD+ tokens to the volume of assets on strategies (Strategy), expressed in USDC.

Internally, balances are stored in RAY (using WadRayMath), which allows you not to worry about the accuracy of working with balances when mint / redeem / balanceOf. The liquidity index is adjusted when the payment process is started on Exchange.payout() on behalf of Exchange. Access to mint() and redeem() is only available to Exchange.

The external function exchange() make it possible to get the current Exchange address for making mint/redeem.