> For the complete documentation index, see [llms.txt](https://docs.libre.org/libre-docs/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.libre.org/libre-docs/understanding-the-platform/liquidation/tokenomics.md).

# Tokenomics & TP Value

## Overview

Libre's lending system uses **TP (Tether Pool) tokens** to represent lender positions in USDT pools. These tokens automatically accrue value as borrowers pay interest, providing a simple and transparent way to track earnings.

## TP Token Mechanics

### How TP Tokens Work

When you deposit USDT into a lending pool:

1. **Initial deposit**: Receive TP tokens at 1:1 ratio with your USDT
2. **Interest accrual**: TP tokens increase in value as borrowers pay interest
3. **Redemption**: Exchange TP tokens back for USDT + earned interest
4. **Transferability**: TP tokens can be sent to other Libre accounts

### Example: 90-Day Pool Investment

**Day 1 - Initial Deposit:**

* Deposit: 10,000 USDT
* Receive: 10,000 TP tokens
* TP token value: 1.000 USDT each

**Day 45 - Mid-Term:**

* Accrued interest: \~$137 (11% APR × 45 days)
* TP token value: 1.0137 USDT each
* Your position: 10,000 TP × 1.0137 = $10,137

**Day 90 - Pool Maturity:**

* Total interest: \~$275 (11% APR × 90 days)
* TP token value: 1.0275 USDT each
* Final redemption: 10,000 TP × 1.0275 = $10,275

## Pool Economics

### Interest Distribution

* **Fixed APR**: Each pool has a predetermined annual rate
* **Pro-rata sharing**: Interest divided proportionally among all lenders
* **Continuous accrual**: TP token value updates in real-time
* **No lock-up**: Exit anytime subject to pool liquidity

### Pool Utilization Impact

Unlike variable-rate systems, Libre pools offer **guaranteed returns**:

* **Full APR earned**: Regardless of utilization percentage
* **Predictable income**: No surprises from low borrower demand
* **Rate certainty**: Fixed rates set at pool creation

## TP Token Value Formula

```
Current TP Value = (Pool USDT + Accrued Interest) / Total TP Supply

Where:
- Pool USDT = Total lender deposits
- Accrued Interest = Cumulative borrower interest payments
- Total TP Supply = All TP tokens in circulation for that pool
```

### Practical Example

**Pool State:**

* Total USDT deposited: $1,000,000
* Accrued interest: $50,000
* Total TP tokens: 1,000,000
* **Current TP value**: ($1,000,000 + $50,000) ÷ 1,000,000 = $1.05 per TP

## Multiple Pool Strategy

### Diversification Benefits

Lenders can spread funds across multiple pools with different terms and rates. A balanced approach might include:

* **Short-term pools** — Higher liquidity, lower rates
* **Medium-term pools** — Balance of liquidity and yield
* **Long-term pools** — Higher rates, lower liquidity

### Risk Management

* **Spread duration risk**: Mix short and long-term pools
* **Liquidity management**: Keep some funds in shorter-term pools
* **Rate optimization**: Balance conservative and aggressive rates

## TP Token Trading

### Secondary Market

TP tokens are fully transferable, enabling:

* **Early exit**: Sell tokens instead of waiting for redemption
* **Premium/discount trading**: Market-driven pricing
* **Speculation**: Trade on interest rate expectations
* **Liquidity provision**: Help other users access pools

### Trading Considerations

* **Market price**: May trade above/below redemption value
* **Time decay**: Value approaches redemption price over time
* **Pool performance**: Actual vs. expected interest affects pricing

## Yield Calculations

### Simple vs. Compound Returns

Libre pools use **simple interest** calculation:

* **Annual interest**: APR × principal amount
* **Time-adjusted**: Prorated for actual days held
* **No compounding**: Interest doesn't earn additional interest
* **Transparent calculation**: Easy to verify returns

### Effective Yield Examples

**30-Day Pool at 9% APR:**

* Monthly return: 9% ÷ 12 = 0.75%
* On $10,000: Earn $75 per month

**90-Day Pool at 11% APR:**

* Quarterly return: 11% ÷ 4 = 2.75%
* On $10,000: Earn $275 per quarter

**180-Day Pool at 13% APR:**

* Semi-annual return: 13% ÷ 2 = 6.5%
* On $10,000: Earn $650 per half-year

## Pool Lifecycle

### Pool Creation

1. **Rate setting**: Lenders propose fixed APR
2. **Term definition**: Duration specified (30/90/180 days)
3. **Initial funding**: First lenders deposit USDT
4. **Borrower access**: Pool becomes available for loans

### Active Phase

* **Continuous lending**: New lenders can join anytime
* **Interest accrual**: TP tokens increase in value
* **Redemption requests**: Lenders can exit subject to liquidity
* **Performance tracking**: Real-time pool metrics

### Pool Maturity

* **Final settlements**: All loans must be repaid or liquidated
* **Final redemption**: TP tokens redeemed at final value
* **Pool closure**: No new activity accepted

## Risk Factors

### For TP Token Holders

* **Liquidity risk**: May need to wait for loan repayments to exit
* **Credit risk**: Protected by Bitcoin collateral and liquidation system
* **Duration risk**: Longer pools more sensitive to rate changes
* **Platform risk**: Smart contract and bridge security dependencies

### Mitigation Strategies

* **Diversification**: Spread across multiple pools and terms
* **Active monitoring**: Track pool performance and utilization
* **Exit planning**: Understand redemption timelines
* **Conservative sizing**: Don't overallocate to any single pool

## Comparing Pool Options

| Pool Term | APR    | Liquidity | Risk Level  | Best For           |
| --------- | ------ | --------- | ----------- | ------------------ |
| 30 days   | 3-15%  | High      | Low-Medium  | Short-term parking |
| 90 days   | 11-20% | Medium    | Medium      | Balanced approach  |
| 180 days  | 13%+   | Lower     | Medium-High | Yield maximization |

The TP token system provides **transparent, predictable returns** while maintaining the flexibility to exit or trade positions as market conditions change.