# pAsset Minting > Learn how pAssets are minted against pETH collateral. Canonical URL: https://docs.polaris.finance/architecture/passet-minting Markdown URL: https://docs.polaris.finance/architecture/passet-minting.md Section: Core Architecture Documentation index: https://docs.polaris.finance/llms.txt Full documentation bundle: https://docs.polaris.finance/llms-full.txt --- 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](https://docs.polaris.finance/architecture/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 ways new supply can enter circulation**: - Users can mint pAssets by opening or adjusting a collateralized position backed by their own pETH. - Arbitrageurs can mint directly through the peg stability mechanism whenever an asset trades above its target price. Both paths create pAssets backed by pETH, but they follow different accounting models. Self minting creates debt that belongs to a specific user position. Direct arbitrage minting does not create a normal long-lived position for the arbitrageur; instead, the resulting collateral, debt, and fees are distributed across all open positions in that pAsset market through the [Adaptive Peg Defense](https://docs.polaris.finance/design/adaptive-peg-defence). ## 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 Vault, 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. The cost of a position is determined by the relevant pAsset market's interest-rate mechanics, but minters can also receive protocol-generated value that offsets the interest they pay. These offsets can include: - pETH-related flows distributed to minters in proportion to their debt. - Fees generated by direct arbitrage minting and redemptions, which are socialized across affected positions. - Protocol Safety Rate payments to lower-leverage and collateral-only positions, funded by higher-leverage positions. This means **a position can experience a low, or even negative, effective rate** when the value it receives 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. ## Self Minting Self minting is the standard way to mint pAssets by opening a collateralized position, and use it 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 direct arbitrage minting 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 direct arbitrage minting and redemptions because those actions are distributed across the open positions in the market. They can also receive [Protocol Safety Rate](https://docs.polaris.finance/design/interest-rates#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 market-level minting and redemption activity, 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. ## Direct Arbitrage Minting Direct arbitrage minting serves a different purpose: when a pAsset trades above its target price, arbitrageurs can mint new supply and sell it into the market. This increases circulating supply and helps push the market price back toward its target. Unlike self minting, the arbitrageur does not need to open a normal collateralized position that remains in the system. The newly created supply is instead incorporated into the existing pAsset market through the Adaptive Peg Defense. **The added collateral, debt, and minting fees are distributed across every open position** according to the protocol’s rules. Existing positions therefore participate directly in every arbitrage event, evolving continuously as supply expands through permissionless minting. As a result, each pAsset market can increase supply without concentrating the economic effects of arbitrage within newly created positions. ## Adaptive Peg Defense and Position Effects Adaptive Peg Defense connects market-level arbitrage activity to existing positions. When direct minting expands supply, or redemptions contract supply, the resulting changes are distributed across the affected pAsset market instead of being isolated to the arbitrageur. This means self minters are not isolated from peg activity. Their collateral, debt, and fee balances can change as the market responds to price deviations. The fees generated by direct minting 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 arbitrage-driven 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 arbitrage activity distributed across the market.