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This section covers the core protocol mechanisms that power Exponent’s interest-rate swap infrastructure. Understanding these systems is useful for advanced users, integrators, and anyone evaluating how the protocol works at a technical level.

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Protocol Architecture

Exponent is built on top of three protocol layers:

Yield Stripping (Exponent Core) – the issuance layer

Strip yield assets into Principal Tokens (PT) and Yield Tokens (YT) for a defined maturity. Handles minting, redemption, merging, and yield distribution. All other layers build on top of this.

Trading Infrastructure (Rate CLMM and Order Book) – the exchange layer

Two venues serve different market profiles: the Rate CLMM provides concentrated liquidity for long-tail and volatile markets, while the Rate Order Book enables precise quoting and large trades for high-volume markets. Both are purpose-built for interest rate swaps.

Strategy Vaults – the managed product layer

Professional managers deploy interest-rate swap strategies across the issuance and exchange layers, governed by onchain policies. Strategy constraints are programmatically enforced, not discretionary.

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Flow Example

1

Protocol/Asset Issuer

A yield asset issuer (e.g. Protocol A with an LST) integrates its asset at the issuance layer, where it is stripped into PT-LST and YT-LST
2

Market Listing

This market become tradable at the exchange layer for interest-rate swaps, where liquidity providers and traders exchange them on the Rate CLMM and/or Order Book
3

Trading

Yield participants can manage their rate exposure through the PT/YT-LST yield market
4

Market-making

Liquidity providers actively market-make the market to earn fees from PT/YT-LST swaps
5

Strategy Vault

At the product layer, a Strategy Vault might offer a high-yield fixed strategy by purchasing PT-LST on the CLMM or order book, then looping it on credit platforms to increase its fixed yield, earning higher returns for its depositors.
Different users interact with different parts of the stack depending on their objective:
  • Passive participants may prefer Strategy Vaults
  • Active traders and LPs interact directly with Yield Markets
  • Developers and integrators can build across any layer through Exponent’s SDKs

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Deep Dives

Yield Stripping & Swap

How yield assets are stripped into PT and YT and how interest rate swaps work.

Rate CLMM

Concentrated liquidity market maker designed for interest rate instruments.

Rate Order Book

Onchain order matching for large rate trades and professional market makers.

Strategy Vaults

Onchain-governed managed strategies built on Exponent’s rate infrastructure.