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FAQ

1. What are Tokenized Fractional Assets?

The aim of tAssets is to mimic the price trends of real-world exchange-traded underlying assets and give investors access to not only home markets but also foreign markets as well. While tAAPL tries to closely represent the movements of AAPL stock, users are not afforded any rights of the underlying asset and tracking errors may arise due to the imbalances in trading volume in the underlying markets and the NEPRIswap markets.

2. How will tAssets be traded?

tAssets will be traded through interacting with liquidity pools on NEPRIswap. More information coming soon.

3. Will I have to go through the KYC process?

NEPRI TFA aims to be decentralized in all aspects including whitelisting, governance, minting, and trading. As a result, as long as you have nYUSD balance, you are able to perform all functions available on both the NEPRI TFA protocol as well as NEPRI TFA protocol-owned NEPRIswap pools without any need to go through a KYC process.

4. How will corporate actions and dividends be handled?

Corporate actions will be handled through an asset migration process. Given that Tokenized Fractional Assets do not confer any rights of the underlying asset, Tokenized Fractional Assets do not give dividends.

5. What are the trading commissions composed of?

There will be a fixed fee called the LP commission is 0.30% which serves as a reward for liquidity providers for NEPRI TFA-related pools on NEPRIswap. More detailed information coming soon.

6. What does it mean to mint an tAsset?

All tAssets that will be purchased or sold on NEPRI TFA will be minted. Minting is the process of providing collateral to issue a “synthetic” tAsset.
Price oracles play an important role in the minting process and are used for two key functions: First, they help determine the amount of collateral required for minting an tAsset. Second, they help determine whether sufficient collateral is backing existing tAssets.
In the below example (table 1), assume that a minter provided $200 worth of stablecoin to issue an tAsset worth $100 and that the minimum collateral ratio (MCR) is 120%. If at time T=2, the asset’s value increases to $101, then the collateral ratio would be 119% ($101/$120) and would fall below the MCR.
When this happens, the NEPRI TFA protocol will seize a portion of the collateral and initiate an auction for anyone willing to sell the tAsset in exchange. To incentivize this liquidation, the NEPRI TFA protocol allows anyone to purchase this seized collateral at a discount until the collateral ratio reaches the MCR again. In the example, using the collateral supplied at T=0, users will be able to send tAsset tokens in exchange for discounted collateral until the collateral ratio reaches 120% again at T=2.01. If, for instance, the asset price increases again at T=3, then the process repeats itself until the collateral ratio reaches 120%.
Assumptions
Minimum Collateral Ratio
120%
Collateral Auction Discount
0%
Initial Shares of Assets
1.00
Initial Assets Price
$100
Initial Collateral
$200
Time
Shares of Asset
Asset Price
Collateral Value
Collateral Ratio
0
1.000
$100
$200
130%
1
1.000
$110
$200
120%
2
1.000
$111
$200
119%
2.01
0.970
$111
$197
120%
3
0.970
$120
$197
100%
3.01
0.727
$120
$170
120%
4
0.727
$110
$170
135%
table1: When the minted asset’s price rises and the collateral ratio falls below the minimum collateral ratio, the protocol will sell collateral to buy back shares of the minted asset to burn.

7. What hours will I trade and mint tAssets?

tAsset liquidity will be provided directly through the NEPRIswap liquidity pools, and as such, they can be traded irrespective of market hours.
Unlike trading, the oracle feeder will be used to price the value of tAsset for minting. The oracle feeder will stop operating when real-world market hours are closed, so minting transactions on NEPRI TFA Protocol will fail.

8. How will tAssets keep their peg to real assets?

tAssets are soft pegged to the oracle price, which means that the NEPRI TFA protocol does not directly rely on price oracles to determine the trading prices of tAssets. Instead, NEPRI TFA relies on a combination of the minting liquidation process, arbitrageurs, and governance changes to keep tAsset prices close to oracle prices.
Minting Liquidation
As the price of an asset XXX rises on the NASDAQ, minted tXXX may fall below the minimum collateral ratio (MCR) and trigger a liquidation event. When that happens, the NEPRI TFA protocol will automatically sell collateral to buy tXXX until the collateral ratio reaches the MCR again. This buying pressure created for tXXX will drive prices higher and will help the price of tXXX converge with the price on the NASDAQ.
Arbitrageurs
If the price of XXX on the NASDAQ were $5000, but the price of tXXX on NEPRI TFA were $4500, an arbitrageur would buy the asset with the assumption that in the near future, with enough buying pressure, the tXXX price would eventually converge to the NASDAQ price of $5000. At that point, the arbitrageur would then sell tXXX at $5000, taking a profit of $500 per share. Similarly, if the price of XXX on the NASDAQ were $5000, but the price of tXXX on NEPRI TFA were $5500, an arbitrageur would provide collateral, mint the tXXX asset, and sell it at $5500 with the assumption that in the near future, with enough selling pressure, the tXXX price would eventually converge to the NASDAQ price of $5000. At that point, the arbitrageur would then repurchase tXXX at $5000 and then burn it to regain their collateral, taking a profit of $500 per share.
Governance
Without the trust that tAssets should be pegged to oracle prices, tAsset prices could theoretically diverge from oracle prices. Unlike minting liquidation which can create buying pressure to drive prices upwards, the NEPRI TFA protocol can only drive downward pressure to the minimum collateral price of an tAsset. For instance, if the MCR of an asset is 120% and the oracle price of XXX is $200, then the price of an mXXX could, in theory, reach $240. However, once the price of tXXX is greater than $240, then arbitrageurs can simply mint tXXX with $240 worth of collateral, sell the tXXX for $260, and forego the collateral. Therefore, the theoretical maximum price of tXXX would be $200. If, in practice, tAsset prices did drift significantly higher than oracle prices, governance could be used to solve this by creating incentives to mint and sell assets. For instance, the MCR could be lowered in order to reign in tAsset prices or negative selling fees could be used to incentivize users to mint assets and sell them in the market. Changing governance, however, would require a proposal and the collective agreement of NEPT stakers.

9. What will be the benefits of providing liquidity?

Providing liquidity for the NEPRI TFA Protocol will be equivalent to locking up your liquidity in NEPRIswap. By doing so, you will ensure that there is a sufficient supply of assets to be traded at any point in time. As compensation for providing liquidity, you will receive LP tokens which accrue trading commission charged by the protocol. In addition, staking these LP tokens will provide inflationary rewards in the form of NEPT tokens.

10. Will there be any risk to providing liquidity to the NEPRIswap pools?

You will be able to remove your liquidity provided at any point in time. While there will be no risk of losing any of your liquidity in most circumstances, in the case of large changes in price of the tokens provided, the return on providing liquidity may be less than the absolute price variation (known as impermanent loss). This is the same risk faced by liquidity providers on Uniswap.

11. What can we do with NEPT tokens?

NEPT tokens have a variety of functions on the NEPRI TFA Protocol. The first and foremost functionality of the token allows holders to participate in governance on the protocol. In addition, by providing liquidity to the NEPT token pool, NEPT LP tokens issued can be further staked in order to receive CDP withdrawal fees in the form of NEPT tokens.

12. Will the NEPRI Protocol smart contracts be audited?

Yes, they will be audited.
Last modified 5mo ago
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