Liquid Staking Overview

Latch also utilizes liquid staking solutions to further unlock liquidity, with key elements described below.

1. The Liquid Staking Tokens: atUSD / atETH

What are atUSD and atETH?

These are ERC-20 value-accruing tokens representing the user’s Smart Savings position - usually referred to as the “Liquid Staking Token” (“LST”). These tokens represent the user's share of the underlying assets in the Defi vault - atUSD corresponds to the USD stablecoin vault, and atETH corresponds to the ETH vault.

Alternatively, you can think them as the “Certificate of Deposit” tokens after you deposit into Smart Savings.

How do atUSD & atETH account for Smart Savings yields?

The Smart Savings yields are distributed to atUSD & atETH holders as these liquid staking tokens keep accruing value from the increasing atUSD/USDT & atETH/ETH exchange rate. The exchange rate represents how much USDT (or ETH) the user can redeem by burning 1 atUSD (or atETH).

For example, on Day 1, atUSD/USDT exchange rate is 1:1 (burning 1 atUSD to redeem 1 USDT). On Day 2, when 0.05 yield is realized from the underlying Defi Vault, atUSD/USDT exchange rate is therefore updated to 1:1.05 (burning 1 atUSD to redeem 1.05 USDT).

2. Omnichain Deposit / Withdraw / Spend Powered by Gravity

The deposit and withdrawal process powered by liquid staking will consist of 2 options: 1) Primary market of minting & burning liquid staking tokens, and 2) Secondary market of buying & selling liquid staking tokens via DEX. The primary market is more suitable for large amounts of deposits & withdrawals, while the secondary market is more efficient for normal day-to-day small deposits and withdrawals.

Latch also provides an auto-router function that guides users toward the most efficient path (primary vs. secondary).

Deposit Process

• Primary market: user deposits funds on Ethereum → mint liquid staking tokens on Gravity

• Secondary market: user deposits funds on any supported EVM chain → bridge to Gravity → swap to liquid staking tokens on DEX

Withdraw Process

• Primary market: user burns liquid staking tokens on Gravity → start the withdrawal process & waiting period countdown → claim funds on Ethereum (usually T+7 days)

• Secondary market: user swaps liquid staking tokens on DEX to USDT or ETH (T+0) → bridge from Gravity to any supported EVM Chain

Spend Process

• In any dApp integrated with Latch (e.g. Galxe), when users need to spend crypto for any transaction (e.g. NFT minting), the dApp will front the money and pay on user’s behalf, and later get reimbursed from the user’s Smart Savings balance, which has pre-authorized Galxe for such reimbursement purpose

3. Net Asset Value (”NAV”)

What is Net Asset Value and why do we need it?

The inherent value of the liquid staking tokens (atUSD & atETH) needs to be properly tracked at real-time, to account for the principal capital + yield generated, and distribute the accrued yield to each holder of atUSD & atETH.

For example, on Day 1, there are a total of 1,000 atUSD minted (”Total Supply”), which correspond to an underlying Defi Vault valued at US$1,000 (sum of all the Defi assets), then the NAV of each atUSD = NAV of the underlying Defi Vault (US$1,000) / Total Supply of atUSD (1,000) = $1.00. On Day 2, when NAV of the underlying Defi Vault grows to US$1,005, assuming no change to atUSD Total Supply, then NAV of atUSD grows to US$1,005/1,000 = US$1.005, implying a realized yield of 0.5%.

The NAV is then used as the exchange rate for primary market minting & burning of atUSD. Such that, on Day 2, depositing US$1.005 will mint you 1 atUSD, and burning 1atUSD will return you US$1.005 back.

How does the market trading price of atUSD & atETH peg to their Net Asset Value?

Following the example above, on Day 2, when NAV of atUSD = US$1.005, the market arbitrage force will push the secondary trading price of atUSD toward its NAV value.

• If atUSD trades higher than NAV (e.g. at US$1.01), then the arbitrager can use US$1.005 to mint 1 atUSD, and sells it for US$1.01, thus pocketing a profit of 1.01-1.005 = US$0.005 in real-time, and such selling activities will drive down atUSD price to NAV

• If atUSD trades lower than NAV (e.g. at US$1.00), then the arbitrager can buy 1 atUSD for US$1.00, and burn it to redeem back US$1.005 per the NAV rate, thus pocketing a profit of 1.005-1.00 = US$0.005 in real-time, and such buying activities will drive up atUSD price to NAV

4. Liquidity Pool for Instant Withdrawal

Camelot DEX Pool of atUSD/USDT and atETH/ETH on Gravity

atUSD/USDT and atETH/ETH DEX pools have been set up on Camelot DEX on Gravity chain, to facilitate the secondary market deposit and withdrawal process stated above. Size of the DEX pool has been designed to maintain a liquidity ratio of 10% of the underlying Defi Vault TVL.

Price ranges of the DEX pool are set dynamically to ensure an acceptable slippage level, together with a rebalancing mechanism to adjust the token ratios in the DEX pool.

In the extreme scenarios that all liquidity in the DEX pool has been used up and refills haven’t come in time, the secondary market deposit and withdrawal process may be temporarily unavailable. During such time, for any withdrawal needs, you can either wait for the DEX pool to be refilled and withdraw instantly through the pool (T+0) afterward, or go through the primary market option instead - burning the liquid staking token and claim funds after the waiting period (T+7 days).