About Minting, Redeeming, and Rolling Over
In this section we cover minting and redeeming. These mechanisms are fundamental to SPOT and they are necessary for understanding SPOT, however it's worth noting that minting, redeeming, and rolling over are power user actions.
We expect most users will simply buy and sell SPOT on external marketplaces to store and retrieve value. Moreover we expect most users will buy and sell AMPL on external marketplaces to enter and exit speculative positions in overall network growth.
As mentioned in the overview, SPOT is backed by a set of senior AMPL tranches as collateral. Before getting into the details of minting, redeeming, and rolling over, we'll first elaborate here on what happens if mature tranches fail to be rolled out so that we can discuss all cases in the coming sections below.
Important Note: If a tranche token inside the SPOT collateral set matures and is not rolled out before maturity, the underlying AMPL is automatically redeemed and placed into a special data structure called the "holding pen."
Thus, the collateral set consists of immature tranches and sometimes raw AMPL in the holding pen depending on the state of the AMPL network.
The holding pen both 1) holds raw AMPL and 2) stores a
_matureTrancheBalancevalue, this value records the number of tranches that have been redeemed and whose AMPL collateral is still in the holding pen.
_matureTrancheBalanceincreases every time mature tranches are redeemed for AMPL, and decreases every time users rollover AMPL out of the holding pen.
SPOT can only be minted by depositing tranche tokens from a single “active minting bond.” This ensures that at any given time all tranches used to mint SPOT share the same maturity date and tranche ratios. To learn about tranching see About Tranching.
The Minting Bond is refreshed periodically at a configured frequency. Minters pay a configurable percentage-based minting fee.
SPOT redemptions are proportionally withdrawn from its entire collateral set. In other words, if a user redeems 1% of the total SPOT supply, they will receive both 1% of each tranche vintage in SPOT and 1% of the AMPL in SPOT’s holding pen. Redeemers pay a configurable percentage-based redemption fee.
Rolling over is the process of withdrawing stale collateral from SPOT and replacing it with tranches minted from the new minting bond. To understand the importance of rolling over in a broader context see About SPOT.
SPOT Collateral Set Diagram — Rolling Over Tranches
SPOT stores a value called
_minTrancheMaturitySec, which is the minimum amount of time to maturity a tranche must have left before it is no longer considered “fresh.” Once a tranche ages past this limit, it is considered mature and available to be rolled over.
When rolling over stale tranches, a user will deposit
Ntranche tokens from the active minting bond and choose which mature collateral they want to receive in return. The system determines, based on equal value, how many of the stale collateral to return to the user.
A straightforward method of valuing an incoming or outgoing tranche is to simply count the number of Unit of Account (AMPL) tokens backing them.
This means that in the event that network contraction has impaired the senior AMPL tranches within the
_minTrancheMaturitySecthreshold at the time of rotation, some level of debasement will occur. This design tradeoff was made to ensure that rotators are never disincentivized to deposit fresh tranches in exchange for withdrawing maturing tranches. For a more complete discussion of debasement see About Debasement.