Minting

Minting YOLK:

• Mechanism: Users can mint YOLK by depositing USDC into the protocol's smart contract. USDC deposits are 'zapped' into vgUSDC—a yield-bearing stablecoin vault on Silo Finance.

• Fee: A 2.5% fee is applied to each minting transaction. Fees are added to the protocol, increasing the USDC backing per YOLK.

• Supply Cap: There is no supply cap on YOLK. This ensures that minting and one-click leverage will continue indefinitely. While the token supply may inflate over time, fees and burning mechanisms ensure that the ratio of USDC per YOLK can only increase, ultimately preventing dilution.

Redeeming YOLK:

The simplest way to redeem your YOLK for USDC is to 'sell' back to the contract via the 'swap' tab in the dApp. This incurs the same 2.5% fee as minting, but burns the YOLK and sends the underlying USDC to the user. Fees are distributed to the contract, LP incentives and team at the same rates as minting.

Alternatively, YOLK can be redeemed by taking a loan against your position and instantly defaulting. This returns the underlying USDC to the user, minus the collateral premium and interest, and burns the YOLK.

Minting Example:

• Let's say there is 100 YOLK tokens in existence, and there is 100 USDC tokens backing them on the contract. That means the price of 1 YOLK is 1 USDC. There is a 2.5% minting fee, so to mint the next YOLK token a user must pay 1.025 USDC. Of the fee collected, 70% or 0.0175 USDC, is added to the backing, so there is now 101 YOLK and 101.0175 USDC. We can calculate the new price of YOLK by doing 101.0175 USDC / 101 YOLK = 1.0001732673 USDC/YOLK. The price of every YOLK token has increased! The other 30% of the fee collected, or 0.0075 USDC, is distributed to LP incentives, burn wallet and the team.

[User Deposits 1.025 USDC]
         |
         v
[Supplied to Silo for vgUSDC]
         |
         v
+---------------------------+
|  NEST Token Smart Contract |
+---------------------------+
         |
         |---> Adds to Contract Backing:
         |        - 1.00 vgUSDC (Base Amount)
         |        - 0.0175 vgUSDC (70% of Fee)
         |
         |---> Distributes Fees:
         |        - 0.003750 vgUSDC (15% of fee) to LP Incentives
         |        - 0.003750 vgUSDC (15% of fee) to Team
         |
         |---> Mints 1 YOLK Token
         v
[User Receives 1 YOLK Token]