pAsset Minting
Minting pAssets means creating new USDp, GOLDp, or future pAssets against pETH collateral.
Every minted asset belongs to a specific pAsset market. The pAsset Markets section explains how each market functions, whereas this section focuses on the positions and mechanisms that bring those assets into circulation.
In Polaris, there are two main ways new supply can enter circulation:
- Users can mint pAssets by opening or adjusting a collateralized position backed by their own pETH.
- Users can also buy newly minted supply at peg, without opening a position, whenever an asset trades above its target price.
Both paths create pAssets backed by pETH, but they follow different accounting models.
Minting creates debt that belongs to a specific position. Buying at peg does not create a position; instead, the resulting collateral, debt, and fees are distributed across all open positions in that pAsset market through the Adaptive Peg Defense.
Polaris also introduces a third, less common path. When a collateral-only position whose debt has turned negative through market activity is closed, the protocol mints the corresponding pAsset to settle that balance.
Why Mint pAssets
Minting allows users to create onchain assets backed by their pETH without selling the underlying collateral.
A user may mint USDp to access dollar liquidity, mint GOLDp to create gold exposure, or mint future pAssets for other strategies. The minted asset can then be held, used in DeFi, deposited into an Earn Pool, or combined with external money markets and other integrations.
Unlike many other collateralized minting systems, the headline interest rate is not always the same as the effective cost of minting. Minters pay interest in the pAsset they mint, and earn yield that can include:
- pETH-related flows distributed to minters in proportion to their debt.
- Fees from peg buys and redemptions, which are socialized across affected positions.
- Protocol Safety Rate payments to lower-leverage and collateral-only positions, funded by higher-leverage positions.
Because interest is paid in the pAsset and pETH yield is earned in pETH, a position’s net rate also moves with the ETH price. This means a position can experience a low, or even negative, effective rate when the yield it earns exceeds the interest it pays. This is especially relevant for pAssets with lower interest-rate profiles, such as GOLDp and potential future assets like CHFp.
Opening a Mint Position
Opening a mint position is the standard way to mint pAssets and use them across DeFi.
A user deposits pETH as collateral and mints a pAsset against it. The resulting debt belongs to that user’s position, which must remain within the market’s collateral requirements.
For example, a user who mints USDp needs to maintain enough pETH collateral to satisfy the USDp market’s minimum collateral ratio. If the position becomes too risky, it can be liquidated according to the liquidation rules of that market.
This path is most relevant for users who want to access liquidity without giving up their pETH exposure. The position remains open over time, so the user continues to manage collateral, debt, interest, and liquidation risk.
The economics of the position can also evolve over time. Minters receive pETH yield in proportion to their debt, and they receive fees from peg buys and redemptions that are socialized across the market. These fees help offset the effect of Adaptive Peg Defense adjustments and can make the resulting changes profitable for affected positions under certain market conditions.
Collateral-Only Positions
Unlike conventional minting protocols, Polaris also supports collateral-only positions.
A user can deposit pETH into a pAsset market without minting that pAsset immediately. This creates a position with collateral but no initial debt.
Collateral-only positions can receive fees from peg buys and redemptions because those actions are distributed across the open positions in the market. They can also receive Protocol Safety Rate payments from higher-leverage positions.
One way to understand this is as a pETH-backed liquidity position for a specific pAsset market. The position does not begin by creating pAsset debt, but it supports the market’s collateral base, participates in peg buys and redemptions across the market, and can earn fees for doing so.
The Protocol Safety Rate adds another source of yield. It is expected to be small during normal conditions, but it becomes more significant when the market’s collateral health weakens and the protocol rewards lower-leverage or collateral-only positions.
Buying at Peg
Buying at peg serves a different purpose: when a pAsset trades above its target price, anyone can buy newly minted supply at the target price with pETH and sell it into the market. This increases circulating supply and helps push the market price back toward its target.
Peg buyers don’t open a position. The new supply is added to existing positions, which take on the debt and collateral and earn the fee, according to the protocol’s rules. Existing positions therefore participate directly in every peg buy, evolving continuously as supply expands.
The most common reason to buy at peg is arbitrage: when USDp trades above $1, buy at peg and sell on the market. Swap also routes through buying and redeeming at peg whenever it gives a better price than the market.
As a result, each pAsset market can increase supply without concentrating the economic effects of peg activity within newly created positions.
Adaptive Peg Defense and Position Effects
Adaptive Peg Defense connects market-level peg activity to existing positions.
When buying at peg expands supply, or redeeming at peg contracts it, the resulting changes are distributed across the affected pAsset market instead of being isolated to the peg buyer or redeemer.
This means minters are not isolated from peg activity. Their collateral, debt, and fee balances can change as the market responds to price deviations.
Fees from peg buys and redemptions are distributed to affected positions, helping compensate minters for the impact of those system-level adjustments. Under certain market conditions, this can make peg activity profitable for existing positions instead of being purely dilutive.
As a result, both sides of a pAsset’s target price are defended, with the effects of peg activity distributed across the market.