> For the complete documentation index, see [llms.txt](https://praxis-4.gitbook.io/praxis/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://praxis-4.gitbook.io/praxis/documentation/how-it-works/pt-and-yt.md).

# PT & YT

How your deposit splits into a Principal Token and a Yield Token.

When you deposit USDC into Praxis, it is put into a vault and two tokens are minted to your wallet: a **Principal Token (PT)** and a **Yield Token (YT)**. These two tokens represent different parts of the same deposit — one holds the value, the other represents whan it earns.

<figure><img src="https://3077153577-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2F1k7Ug6B8E4iIVGbTfaxS%2Fuploads%2FKWls7pVkIomLcJGLIMGm%2FA6%20-%207.png?alt=media&amp;token=10b1dbfb-ed51-43ae-b132-fe8b3d04f8b1" alt=""><figcaption></figcaption></figure>

***

## The Split

Every deposit mints tokens at a **1:1 ratio**: 100 USDC -> 100 PT + 100 YT

Both tokens are standard ERC-20s. You can hold them, trade them, or use them across the Praxis ecosystem independently.

***

## Principal Token (PT)

PT is your **claim on the original deposit**. It is always redeemable for the exact amount of USDC you put in — no more, no less.

* One PT = one USDC at redemption, regardless of what markets do
* PT does not grow over time
* PT is never spent, locked, or touched by prediction activity

PT exists to make one guarantee unconditional: your principal capital is always there to take back.

***

## Yield Token (YT)

YT is the active part of your deposit. It represents **your share of the yield** the vault generates over an epoch.

### YT grows in value over time

YT does not rebase (your token count stays the same), but its **exchange rate increases continuously** as the vault earns yield. If the vault returns 10% APY over a year, 100 YT at the start of the epoch is worth $0 in accumulated yield but by the end it is redeemable for $10 in yield.

This is the key difference from protocols like Pendle, where YT decays to zero at maturity. In Praxis, **YT accumulates value throughout the epoch** and reaches its maximum value at the end.

### YT is your prediction bankroll

All Praxis prediction markets run exclusively on YT. When you enter a position, your YT stake is transferred into the market pool. Winners claim the full pool; losers forfeit their stake.

Wins grow your YT balance. Losses reduce it. Either way, the accumulated yield already captured in your remaining YT is preserved.

***

## What Happens at Maturity

Each vault runs for a fixed epoch. At the end:

{% stepper %}
{% step %}

## Redeem PT → Principal

Return your PT tokens to the vault and receive your full original USDC deposit. 1 PT = 1 USDC.
{% endstep %}

{% step %}

## Redeem YT → Accumulated Yield

Return your YT tokens and receive your share of the total yield accumulated by the vault over the full epoch. The later in the epoch you redeem, the more yield each YT is worth.
{% endstep %}
{% endstepper %}

You can redeem PT and YT independently. There is no requirement to return both at the same time.

***

## Early Redemption

You do not have to wait for maturity to access your position.

**YT early redemption:** You can redeem YT at any time for the yield it has accumulated **so far**. Future yield that has not yet been earned is not included. Redeeming early means forfeiting remaining yield of the epoch.

**Full early exit:** Burn PT + YT together to withdraw the full position (principal + yield-to-date) before the epoch ends. This is the cleanest way to exit completely without waiting.

{% hint style="info" %}
Selling YT on the secondary market at a market price that reflects the remaining yield potential is another exit path. See [PT/YT Trading](/praxis/documentation/advanced/pt-yt-trading.md) for how that works.
{% endhint %}

***

## Depositing Mid-Epoch

Because YT begins accumulating yield from the moment the epoch starts, depositing **after** an epoch has already begun means the YT you receive is already worth something. A late depositor joining two months into a three-month epoch should not receive the same YT at face value as a day-one depositor.

To account for this, Praxis applies a **late deposit fee** when you mint mid-epoch. The fee equals the value already accumulated in YT at that point. Critically, **this fee is not deducted from your wallet** but added into the YT you receive.

**Example:** You deposit 100 USDC mid-epoch when 100 YT is already worth $5 in accumulated yield. A $5 late deposit fee is applied that is incorporated into your YT, which is immediately worth $5. As a result, you paid $5 more on entry and you hold $5 of YT value from the start. Net effect: zero.

This keeps the YT exchange rate consistent for all holders regardless of when they entered.

{% hint style="warning" %}
The late deposit fee increases as you get closer to maturity. Depositing very late in an epoch means most of the yield has already accrued. Consider depositing at the start of a new epoch if the fee is large.
{% endhint %}

***

## Summary

| Token  | Represents       | Changes over time                      | Used in markets |
| ------ | ---------------- | -------------------------------------- | --------------- |
| **PT** | Original deposit | No, always 1:1 with USDC               | No              |
| **YT** | Vault yield      | Yes, accumulates value toward maturity | Yes             |

The vault currently generates yield through [Morpho](/praxis/documentation/advanced/yield-sources.md) vaults. The Praxis architecture is designed to be source-agnostic for additional yield strategies to be added.