# Polaris Documentation > User documentation for Polaris, an onchain yield layer built around pETH, a yield-bearing reserve asset designed to collateralize censorship-resistant stablecoins and synthetic assets. ## Agent Guidance - Polaris is currently on the Sepolia public testnet; testnet assets have no monetary value, no production redemption, and no mainnet claim. - Do not infer production addresses, production constants, audit status, or launch status from testnet values. - Prefer the Markdown URLs in this file for retrieval, and cite the canonical URL shown beside each page. ## Introduction URL: https://docs.polaris.finance/ Markdown URL: https://docs.polaris.finance/index.md Polaris is an onchain yield layer built around pETH, a yield-bearing reserve asset designed to collateralize censorship-resistant stablecoins and synthetic assets. ETH enters the system through the Polaris bonding curve and becomes pETH, the collateral asset at the center of the ecosystem. Stablecoins, commodities and synthetic assets are all issued against pETH, while economic activity within the protocol generates value that flows back into the system. This creates a monetary system where collateral, liquidity and protocol activity reinforce one another without relying on external counterparties or offchain dependencies. The flagship stablecoin of the Polaris ecosystem is USDp, a fully decentralized dollar backed by pETH. This same reserve model is designed to support several additional assets, all sharing the same collateral foundation. While USDp maintains its peg through overcollateralization and a series of protocol mechanisms described throughout this documentation, the yield associated with Polaris is generated by onchain activity across the ecosystem, including bonding curve fees, borrowing demand, conversions and other protocol mechanisms. This allows value created within Polaris to remain within Polaris. Relevant app/search vocabulary: app, official app, testnet, Sepolia, pETH, pAssets, USDp. --- ## Manifesto URL: https://docs.polaris.finance/overview/manifesto Markdown URL: https://docs.polaris.finance/overview/manifesto.md Decentralized finance was built on the idea that money should not depend on trusted intermediaries. A permissionless financial layer open to everybody, where participation depends on transparent rules rather than centralized institutions. Over the years, stablecoins have become the foundation of this onchain economy, enabling everything from trading and lending to payments and settlement. However, their biggest tradeoff is that the majority of stablecoins rely on centralized issuers that control the underlying reserves, retain the yield those reserves generate, and ultimately keep ownership over the monetary infrastructure, including the ability to freeze assets. At the same time, several other stables evolved beyond simple digital dollars into yield-bearing financial products whose returns depend on external counterparties and increasingly complex financial strategies, becoming more of a tokenization derivative strategy than real forms of money exchangeable as currencies. Both these approaches helped DeFi grow and showed strong product-market fit. At the same time, they gradually introduced new dependencies into an ecosystem originally built to remove them and make room for greater transparency, leaving a fundamental paradox. Blockchains gave us decentralized financial infrastructure that anyone can access and verify, yet the different forms of currencies flowing through that infrastructure mostly depend on centralized rails or mechanisms whose risks are often difficult to assess. This makes it clear that we have not yet managed to answer one of the fundamental questions in crypto: what should permissionless money look like at global scale? --- ## Vision URL: https://docs.polaris.finance/overview/vision Markdown URL: https://docs.polaris.finance/overview/vision.md Stablecoins are the largest monetary application built on blockchains today, and USDp represents Polaris' path toward a stable and censorship-resistant dollar that can finally scale. But once a scalable reserve asset exists as well, its role goes far beyond issuing a single currency. As the range of assets built on top of Polaris expands, that same collateral asset can support currencies, commodities and synthetic assets that all share the same infrastructure. Meanwhile, that reserve asset itself can scale and evolve alongside the ecosystem. Splitting pETH into fpETH and vpETH is one example, allowing users to unlock entirely new financial strategies. And additional protocol primitives can build on the same foundation, expanding what users can do with pETH as the reserve asset. The same principle applies to the applications built above it. Polaris is designed as infrastructure rather than a closed platform, allowing third-party builders to permissionlessly issue their own stablecoins, synthetic assets and financial products. On the other hand, every application built on top of Polaris contributes to the same reserve foundation based on pETH, allowing builders to benefit from an ecosystem that becomes stronger as it grows. This also changes how real-world value can reach the blockchain. Rather than just importing assets through traditional rails, with their custodians and trust assumptions, Polaris provides a foundation where those exact currencies, commodities and traditional assets become native to blockchains, gaining transparent ownership, permissionless access and censorship resistance. If this model succeeds, ETH itself can begin to play a broader role within Ethereum. Staking will always remain fundamental to securing the network, though this should not remain the only productive destination for ETH. By introducing a native yield layer, pETH creates another productive path for ETH, giving holders and stakers a new choice while allowing the monetary system built on top of Ethereum to expand. In that future, Ethereum's growth and its monetary infrastructure no longer evolve independently. The more the ecosystem grows, the stronger its reserve foundation becomes. And the stronger that foundation becomes, the more it can support the next generation of DeFi applications. --- ## Why pETH URL: https://docs.polaris.finance/overview/why-peth Markdown URL: https://docs.polaris.finance/overview/why-peth.md The evolution of stablecoins revealed another structural problem. Even if permissionless money could scale without relying on centralized issuers or opaque sources of yield, Ethereum would still face a different challenge. The network secures one of the largest financial ecosystems in the world, yet very little of the economic activity taking place on top of it meaningfully strengthens ETH itself. Today, staking is the primary source of native ETH yield, as it plays a fundamental role in securing the network. But as DeFi continues to grow, staking should not be the only way for ETH to participate in that growth. Polaris is built on the observation that Ethereum's monetary layer and Ethereum's yield layer should not be separate systems. Today, these two operate largely independently, with stablecoins generating enormous economic activity while the collateral supporting them rarely benefits from that activity. At the same time, ETH secures the network that makes this economy possible, yet captures relatively little of the value created above it. Polaris connects these two systems by placing its collateral, pETH, at the center of its yield layer. As demand for stablecoins and synthetic assets permissionlessly issued on top of Polaris grows, the economic activity generated by the protocol is designed to reinforce pETH, the reserve asset supporting them. So instead of importing yield from external dependencies, Polaris redirects value created within its own economy back into the system through liquidity flows. Because pETH is continuously reinforced by the economic activity generated within Polaris, it is not designed to remain a fixed 1:1 representation of ETH. As the reserve asset of the protocol, it is continuously strengthened by the value generated across the ecosystem, allowing the collateral backing the monetary layer to participate directly in the value created by that economy. This distinguishes it from liquid staking tokens, whose yield is derived from securing the Ethereum network. --- ## fpETH URL: https://docs.polaris.finance/core-assets/fpeth Markdown URL: https://docs.polaris.finance/core-assets/fpeth.md One of the unique properties of pETH is that it has both a market price and a mathematically-derived floor. The floor gradually grows as more economic activity takes place across Polaris, while the market price remains free to fluctuate according to demand. As a result, pETH can and will trade above its floor, meaning every pETH combines two different sources of value: the steadily growing floor and the market premium that exists above it. For many users, holding the original pETH exactly as it is makes perfect sense. While others may simply prefer holding the steadily growing floor without being exposed to the volatility of the market premium, or they may simply want to use those two components for entirely different strategies. Splitting pETH makes that possible by transforming one pETH into two complementary assets: - fpETH, which represents the steadily growing floor component of pETH, where its protocol-native yield accumulates. - vpETH, which represents the volatile market premium of the bonding curve above the floor. ## Splitting pETH Splitting pETH produces: 1 pETH → 1 fpETH + 1 vpETH The economic value remains the same before and after the split. What changes is that the floor and the premium become independent tokens, allowing each of them to develop its own use cases. Splitting pETH is a reversible action, allowing one fpETH and one vpETH to be merged back into one pETH at any time. ## Understanding fpETH To simplify, suppose Bob owns 1 pETH, currently worth 1 ETH. At that moment, the pETH floor is 0.75 ETH. The remaining 0.25 ETH is the market premium, representing the value at which pETH trades above its floor and reflecting demand for pETH, the pAssets built on top of it and the future growth of Polaris. Bob wants the steadier part of pETH. He mainly cares about the floor rising over time as Polaris activity routes value back into the collateral. Alice wants the more volatile part. She believes demand for pETH and pAssets will grow, pushing pETH further above its floor as the bonding curve expands. So Bob splits his pETH, then keeps fpETH and sells vpETH. Six months later, the floor has increased from 0.75 ETH to 0.82 ETH as more activity has taken place across Polaris. During the same period, TVL has flowed out of the bonding curve, reducing the premium assigned to pETH from 0.25 ETH to 0.23 ETH. Bob still holds 1 fpETH and Alice still holds 1 vpETH. Together, those two tokens continue to represent exactly 1 pETH, just as they did on the day of the split. At the split: 1 pETH = 0.75 ETH floor + 0.25 ETH premium = 1.00 ETH\ Six months later: 1 pETH = 0.82 ETH floor + 0.23 ETH premium = 1.05 ETH The difference is that 1 pETH is now worth 1.05 ETH, even though fpETH and vpETH still make up exactly one pETH. While the market premium has contracted, the steady growth of the floor has offset that decline, allowing pETH to continue appreciating over time. Bob has benefited from the higher floor and the protocol-native ETH yield it represents, while Alice's position reflects the smaller premium the market now assigns to pETH. The two assets originated from the same pETH, but each gave its holder exposure to a completely different source of value. ## A Different Kind of ETH Asset fpETH remains an ETH-denominated asset, but its value grows for different reasons than most ETH-denominated assets. For instance, liquid staking tokens grow as validators earn staking rewards and lending strategies depend on borrowers paying interest. fpETH follows the growth of the pETH floor instead. As described in the pETH section, that floor strengthens through the protocol activity taking place across Polaris, without relying on validators or external yield sources. Rather than being distributed separately, that protocol-native ETH yield is continuously reflected in the growth of the floor itself. This makes it natively yield-bearing while avoiding the volatility associated with the market premium of pETH. Therefore, fpETH is designed to be the least volatile asset built around pETH, with its value following the ever-growing pETH floor. ## Using fpETH The simplest way to use fpETH is to hold it as passive exposure to the long-term growth of the pETH floor. For users who already hold pETH, splitting it can also be a way to hedge part of its volatility by separating the steadily growing floor from the more volatile premium component. But fpETH also unlocks Reserve Loans, which are one of the core financial primitives introduced by Polaris. These Loans allow users to borrow ETH using fpETH as collateral. Unlike traditional lending markets, these loans are not liquidatable. Therefore, since fpETH represents the floor component of pETH and both the collateral and the borrowed asset are ultimately denominated in ETH, movements in the ETH price cannot push the position below its collateral requirement. As a result, users don't need to overcollateralize their ETH borrowing simply to protect themselves from liquidation. Instead, they can borrow up to 100% of the floor value represented by their fpETH, build capital-efficient ETH looping strategies or access liquidity while continuing to benefit from the growth of the pETH floor. As Polaris expands, additional applications may also build around fpETH as a protocol-native reserve asset. Relevant app/search vocabulary: Swap, swap, Split, fpETH, vpETH, pETH, floor price. --- ## GOLDp URL: https://docs.polaris.finance/core-assets/goldp Markdown URL: https://docs.polaris.finance/core-assets/goldp.md GOLDp is the Polaris digital gold. It is a synthetic asset designed to track the price of one ounce of gold while being backed by pETH through overcollateralized debt positions. Unlike traditional tokenized gold, no physical bullion is held on behalf of users. Anyone can independently verify the collateral backing every GOLDp in circulation, while issuance and redemptions are enforced by immutable smart contracts. Because GOLDp exists entirely onchain, users can access digital gold without relying on custodians or KYC requirements. ## Using GOLDp GOLDp is minted by depositing pETH as collateral and opening an overcollateralized debt position. Like USDp, GOLDp uses the same minting mechanism and minimum collateral ratio of 115%. In practice, this means every position must hold at least \$1.15 worth of pETH collateral for every \$1 worth of GOLDp. Once minted, GOLDp provides onchain exposure to the price of gold. It can be transferred freely on Ethereum, held as a digital gold asset or integrated into DeFi applications. On top of this, users who want to earn protocol-native yield can also deposit GOLDp into the GOLDp Earn Vault, which distributes both GOLDp and pETH from a portion of the interest paid by GOLDp minters and pETH liquidation gains. The mechanics of the Earn Vault are explained in the dedicated section of the documentation. Moreover, GOLDp can be used in different ways depending on the strategy. Users may hold it as digital gold, deposit it into the Earn Vault, provide liquidity alongside other gold assets or build other strategies on top of it. The resulting market exposure depends on how GOLDp is ultimately used. ## Maintaining the Peg The GOLDp peg is supported by pETH overcollateralization and by market participants responding to arbitrage opportunities. When GOLDp trades above the market price of gold, new GOLDp can be minted 1:1 against pETH collateral and sold into the market. The additional supply creates downward pressure on the market price. When GOLDp trades below the reference price of gold, market participants can redeem GOLDp for the underlying collateral, which removes GOLDp from circulation and reduces the circulating supply. Together, these mechanisms continuously adjust the circulating supply in response to market conditions while every GOLDp remains backed by pETH collateral. Polaris builds on this foundation with an additional stability rate built into its CDP architecture. This mechanism applies to every asset issued through Polaris, including GOLDp. Later sections explain the stability rate in detail, but architecturally it automatically shifts collateral and debt from the most leveraged positions to the least, strengthening the peg during periods of market stress. --- ## pETH URL: https://docs.polaris.finance/core-assets/peth Markdown URL: https://docs.polaris.finance/core-assets/peth.md pETH is the native yield-bearing asset of Polaris. It serves as the collateral for every pAsset but also forms the economic foundation on which the whole ecosystem is built. Unlike wrapped ETH, pETH is not designed to track the price of ETH on a 1:1 basis. It is a native reserve asset built on ETH reserves whose value evolves with the Polaris economy. This distinction is important because Ethereum already offers several ways to hold ETH onchain. Liquid staking tokens generate yield by securing the network, while other assets rely on custodians that exist offchain. Those approaches work well for the goals they were designed for, but Polaris is built around a different model. The protocol generates yield entirely from onchain activity and is designed to operate without relying on custodians, offchain assets or external yield sources. Its collateral asset is based on the same design principles, serving as the protocol's shared reserve asset while supporting the liquidity and yield mechanisms that power it. Unlike liquid staking tokens, pETH does not generate yield from validator rewards. Its yield comes from activity taking place inside Polaris. Swap fees generated through the bonding curve, interest paid by pAsset minters, token conversions and applications built on top of Polaris all contribute to the same yield engine. As the ecosystem grows, that activity strengthens the same reserve asset that supports the rest of the protocol, allowing new applications to build on a common foundation instead of introducing different collateral systems. ## A Native Market pETH is created whenever ETH enters the Polaris bonding curve. The deposited ETH becomes part of the backing that supports pETH, while the user receives pETH in return. When pETH is exchanged back for ETH, the process simply runs in reverse, with the returned pETH burned and the corresponding ETH released from the bonding curve. This gives pETH protocol-native liquidity from the moment it is created. Users can always move between ETH and pETH through the bonding curve without depending on external liquidity providers deciding whether to supply capital. As more ETH enters the system, the liquidity available through the curve grows alongside it, making the same liquidity available to every mechanism built on top of Polaris instead of fragmenting it across separate pools. The bonding curve plays a central role in Polaris, but understanding pETH does not require understanding how the curve works internally. A complete explanation of its pricing mechanism and behavior is available in the dedicated Bonding Curve section. ## Using pETH Holding pETH is the starting point for interacting with Polaris. Users can deposit it as collateral to mint USDp, GOLDp and the other pAssets supported by the protocol, or simply hold it as exposure to the protocol's economic activity and the yield it generates. Because every pAsset is backed by the same shared collateral base, new assets can be introduced by Polaris or issued by third parties without requiring separate collateral systems. This allows the ecosystem to expand while continuing to build on the same underlying asset. As Polaris grows, the role of pETH extends beyond collateral. The same asset can be used across additional Polaris primitives introduced throughout this documentation. As more activity takes place across the ecosystem, the value generated by that activity flows back into the same yield engine that supports pETH. This allows Polaris to scale around a single collateral asset, with every new product or asset expanding the same foundation instead of introducing a new one. ## Floor Price Unlike most ETH-denominated assets, pETH has both a market price and a mathematically guaranteed floor price. The market price is determined by supply and demand and can fluctuate over time, while the minimum amount of ETH backing each pETH determines the floor price. As Polaris grows, part of the value generated across the protocol is designed to strengthen that backing over time, allowing the pETH floor price to steadily increase together with the ecosystem. Because the market price and the floor price are separate, pETH can trade above its floor while the floor itself continues to reflect the minimum ETH backing beneath the asset. This distinction also makes it possible to have additional Polaris primitives around the two pETH components, called fpETH and vpETH, which are explored in the dedicated sections of the documentation. Relevant app/search vocabulary: Swap, swap, Split, fpETH, vpETH, pETH, floor price, pETH bonding curve, bonding curve, pETH floor. --- ## POLAR URL: https://docs.polaris.finance/core-assets/polar Markdown URL: https://docs.polaris.finance/core-assets/polar.md POLAR is the token powering Polaris. The protocol is built around pETH and the pAssets minted against it. Together, they provide the collateral, currencies and synthetic assets that form the foundation of the system. Around that foundation, liquidity flows develop across different products, applications integrate the protocol, users build new strategies and the value generated throughout the Polaris ecosystem needs to be directed toward the participants who help it grow. POLAR is the utility token that provides the shared economic layer that allows the Polaris ecosystem to scale around these activities by supporting liquidity, integrations, ecosystem incentives and long-term stewardship. ## POLAR Design Unlike several governance tokens, POLAR is not designed around perpetual emissions that distribute new tokens simply because time passes. Following the initial allocation and its vesting schedule, the long-term growth of the supply is designed to happen through the Polaris conversion mechanism. With this mechanism, users convert pETH into newly minted POLAR. The pETH used for the swap is burned, reducing its supply and directing the value generated by the conversion towards the pETH yield flows, which also increase the value backing every pETH in circulation. The conversion mechanism only works in one direction, from pETH to POLAR. Since POLAR cannot be converted back into pETH, the protocol never needs to reserve part of the conversion value for future redemptions. This allows the full value generated by every conversion to grow the pETH floor, where it becomes part of the protocol-native yield. Therefore, the POLAR supply is set to grow thanks to activity inside Polaris without following a fixed emissions schedule. At the same time, every conversion strengthens pETH, the collateral asset supporting the rest of the protocol. The conversion mechanism and its economic design are explained in detail in the dedicated section of the documentation. ## The Role of POLAR POLAR is designed to support the development of the Polaris ecosystem. As new applications are introduced, they can build around the same utility token to drive adoption and engage users. Liquidity programs can use POLAR as new products get introduced, while integrations and ecosystem initiatives can continue building on the same utility asset as Polaris expands. This allows different parts of the ecosystem to coordinate around a common economic layer without merely relying on incentives. As more activity takes place across Polaris, the role of POLAR naturally expands alongside it. ## vePOLAR The long-term utility of POLAR is expressed through vePOLAR. Users receive vePOLAR by committing POLAR for a chosen period of time between 2 weeks and 4 years, aligning stewardship with participants who take a longer-term view of the ecosystem. In return, vePOLAR holders receive a share of the interest paid by USDp and GOLDp minters, with that value distributed directly in USDp and GOLDp. POLAR is not used to boost these returns through additional incentives. Through vePOLAR, long-term participants can help coordinate how the ecosystem evolves by taking part in decisions around incentive distribution, integrations and other initiatives. The protocol itself continues to operate through immutable smart contracts, while vePOLAR provides a structured stewardship layer that helps guide the development of the ecosystem. The stewardship model and the tokenomics of POLAR are explained in the dedicated sections of the documentation. Relevant app/search vocabulary: POLAR, convert, lock, vePOLAR, burn pETH, conversion auction, POLAR token, POLAR staking, POLAR tokenomics. --- ## USDp URL: https://docs.polaris.finance/core-assets/usdp Markdown URL: https://docs.polaris.finance/core-assets/usdp.md USDp is the native Polaris dollar. It tracks the value of the US dollar while being backed by pETH through overcollateralized debt positions. It exists entirely onchain and is designed to remain censorship resistant. Anyone can independently verify the collateral backing every USDp in circulation, while issuance and redemptions are only enforced by immutable code. ## Using USDp USDp is minted by depositing pETH as collateral and opening an overcollateralized debt position. Each position must maintain a minimum collateral ratio of 115%, meaning every USDp is backed by at least \$1.15 worth of pETH. Once minted, USDp functions as a digital dollar that users fully own. It can be sent anywhere on Ethereum, used across DeFi applications or integrated into payment flows without relying on any centralized parties. On top of that, users who want to earn protocol-native yield can deposit USDp into the USDp Earn Vault, which distributes both USDp and pETH from a portion of the interest paid by USDp minters and pETH liquidation gains. The mechanics of the Earn Vault are explained in the dedicated section of the documentation. ## Maintaining the Peg The USDp peg is supported by pETH overcollateralization and by market participants responding to arbitrage opportunities. When USDp trades above one dollar, new USDp can be minted 1:1 against pETH collateral and sold into the market. The additional supply creates downward pressure on the market price. When USDp trades below one dollar, market participants can redeem USDp for the underlying collateral, which removes USDp from circulation and reduces the circulating supply. Together, these mechanisms continuously adjust the circulating supply in response to peg conditions while every USDp remains backed by pETH collateral. Although permissionless 1:1 minting is a genuine innovation for decentralised stablecoins, Polaris builds on this foundation with an additional stability rate for debt positions. Later sections explain the stability rate in detail, but architecturally it automatically shifts collateral and debt from the most leveraged positions to the least, further strengthening the USDp peg during times of stress. --- ## vpETH URL: https://docs.polaris.finance/core-assets/vpeth Markdown URL: https://docs.polaris.finance/core-assets/vpeth.md Every time pETH trades above its mathematically-derived floor, the difference represents its market premium. That premium reflects what the market believes pETH is worth beyond its floor. It captures expectations about the future growth of Polaris, the utility of pETH across the ecosystem and the confidence participants place in its long-term development. As shown in the previous page, splitting one pETH transforms it into one fpETH and one vpETH. Together they always reconstruct the original pETH, while allowing users to hold, trade and build strategies around two different sources of value. While fpETH isolates the steadily growing floor, vpETH isolates the component of pETH through which the market expresses its expectations for the future growth of Polaris ## Understanding vpETH Let's go back to Bob and Alice. When Bob split his original pETH, it was worth 1 ETH. At the time, pETH floor was 0.75 ETH, while the remaining 0.25 ETH represented the market premium. Bob kept fpETH because he wanted exposure to the steadily growing floor, while Alice bought vpETH. Alice saw the opportunity differently, as she believed the market was underestimating how much additional value Polaris would create as the ecosystem continued to grow, and how much of that value would eventually be reflected in the premium of pETH. For instance, she expected more economic activity to take place across Polaris through higher borrowing volumes, more liquidations, new applications and stronger demand for pETH. If those expectations proved correct, the market would gradually attach a larger premium to pETH long before that additional value became reflected in its floor. Suppose that six months later the floor has increased from 0.82 ETH to 0.90 ETH, with stronger demand increasing the premium from 0.23 ETH to 0.40 ETH. Bob still owns one fpETH and Alice still owns one vpETH. Holding those two tokens together continues to make up exactly one pETH, but its composition has strongly changed since the day it was split. At the split: 1 pETH = 0.82 ETH floor + 0.23 ETH premium = 1.05 ETH\ Six months later: 1 pETH = 0.90 ETH floor + 0.40 ETH premium = 1.30 ETH The premium now accounts for a much larger share of pETH than before, allowing Alice's vpETH to capture most of that additional appreciation while Bob continues benefiting from the steady growth of the floor. The two assets still originate from the same pETH, but each responds to a different source of value as Polaris evolves. While fpETH follows the gradual growth of the floor, vpETH reflects how the market values everything beyond it. ## A Familiar Mental Model Users familiar with Pendle may recognize the idea of separating a single asset into two independently tradable components. Both Pendle and Polaris begin with a yield-bearing asset, but they isolate different components. Pendle separates future yield from principal, while Polaris keeps the yield mechanism unchanged and instead separates pETH into its steadily growing floor and the market premium above it. Although the mechanics and the economic exposure are entirely different, both systems allow users to isolate the component they want instead of just holding the merged asset. ## Using vpETH The simplest way to use vpETH is to gain direct exposure to the market premium of pETH. Some users may simply hold it because they believe the market is underestimating the future growth of Polaris. But others may actively trade it as the premium expands and contracts over time. Because vpETH represents the portion of pETH that trades above its bonding curve floor, it can also serve as a useful hedging tool. For example, users holding over-collateralised debt positions on Polaris may choose to short vpETH to reduce their exposure to changes in the premium while continuing to hold the underlying pETH position. This effectively leaves the user exposed only to the ETH/USD price, which also can be hedged on an external venue to remain completely delta-neutral, while still earning protocol-native yield. As Polaris expands, additional applications may also build around vpETH. Relevant app/search vocabulary: Swap, swap, Split, fpETH, vpETH, pETH, floor price. --- ## Bonding Curve URL: https://docs.polaris.finance/architecture/bonding-curve Markdown URL: https://docs.polaris.finance/architecture/bonding-curve.md Bonding curves have been used across crypto for years, particularly in DEXs and launchpads, where they are mainly used to price and exchange assets. Polaris innovates in a different direction by using a bonding curve to create a collateral asset capable of supporting an entire ecosystem of decentralized assets. Whenever ETH enters the bonding curve, new pETH is created. Returning pETH to the bonding curve simply reverses the process, burning the pETH and releasing the corresponding amount of ETH. Since the bonding curve itself acts as the market between ETH and pETH, users can always move between the two assets without relying on external liquidity providers. As more ETH enters Polaris, the liquidity available through the bonding curve grows together with the protocol itself, allowing every pAsset built on top of pETH to draw from the same shared source of liquidity instead of relying on independent markets. As such, value generated anywhere in Polaris accumulates around a single collateral asset without sacrificing scalability, therefore making it possible to build new financial primitives on top of pETH, with each one strengthening the same foundation that supports the whole protocol. Beyond bringing pETH into existence, the bonding curve also enables several of the properties that define Polaris. It sets the price of pETH, generates a protocol-native source of yield directly from onchain swaps and allows borrowing rates to emerge directly from market conditions. ## A Scale-Free Design The bonding curve is designed to behave consistently regardless of the amount of capital secured by the protocol. This scale-free design means that whether Polaris secures thousands of ETH or millions, the same mechanism continues to operate under the same rules, allowing the protocol to scale without changing the economic behavior of pETH as adoption increases. This also allows pETH to remain the shared collateral asset for a growing ecosystem of pAssets without fragmenting liquidity as new assets are introduced. ## The Role of β The main parameter defining the bonding curve is β (beta), which controls the concavity of the curve. β is easiest to understand by visualizing the shape of the bonding curve. A larger β produces a steeper curve, causing the market price of pETH to react more aggressively as capital enters or leaves the bonding curve. A smaller β produces a flatter curve, reducing the impact of those same capital flows while increasing the proportion of pETH represented by its floor price. Choosing β involves a trade-off between price responsiveness and collateral stability. Polaris was intentionally designed around the latter, with the goal of building a highly stable collateral asset while preserving enough price responsiveness to allow for protocol growth. The chosen value of β is intended to enable the Polaris economic model, ensuring low volatility and a relatively high floor price ratio, while allowing the floor to become an increasingly important component of pETH over time. ## The Economic Engine Unlike most collateral assets, one of the defining characteristics of pETH is that the value generated throughout Polaris strengthens its floor price over time. All value generated through the protocol ultimately flows back to the same economic system built around pETH, which allows its floor price to steadily grow as the protocol expands. This growing floor is what makes pETH a protocol-native yield-bearing asset and also forms the basis of fpETH, which isolates that steadily growing component for users who prefer exposure to the floor without the volatility of the market premium. Users who instead want exposure to both components can simply hold pETH, while those interested in isolating the market premium can do so through vpETH. The role of the bonding curve therefore extends beyond just enabling pETH\<-\> ETH swaps, as it provides the shared economic foundation on which Polaris is built. As a result, it allows collateral, liquidity, protocol-native yield and future applications to expand around a single reserve asset instead of competing for separate pools of capital. Relevant app/search vocabulary: pETH, pETH bonding curve, bonding curve, pETH floor. --- ## Earn Vaults URL: https://docs.polaris.finance/architecture/earn-vaults Markdown URL: https://docs.polaris.finance/architecture/earn-vaults.md Earn Vaults allow pAssets minted through Polaris to become yield-bearing assets. Users deposit a pAsset into its corresponding Earn Vault, where those deposits are used to absorb liquidations whenever positions exceed the maximum allowed LTV. In return, depositors receive a guaranteed minimum share of the interest paid by pAsset minters over time, along with any pETH liquidation gains. This makes Earn Vaults the primary mechanism through which protocol-native yield is distributed to pAsset holders. Since both minter interest and liquidation gains originate from activity inside Polaris, the resulting yield does not rely on external lending markets or offchain assets. ## Position Ownership Each Earn Vault deposit is represented by a transferable NFT that tracks its own rewards over time. Representing deposits as NFTs allows users to transfer ownership of an Earn Vault position without withdrawing its underlying assets or resetting its accounting. In practice, users can transfer or sell an existing Earn Vault position without first withdrawing their deposit. Whoever receives the NFT also receives the position exactly as it exists at that moment, including its accumulated rewards and future liquidation exposure. ## Auto-Compounding Vaults For users who prefer a simpler experience, Polaris also supports auto-compounding vault wrappers represented as ERC-4626 tokens, such as sUSDp and sGOLDp. These vaults automatically manage the underlying Earn Vault position while making deposits fungible and easier to integrate throughout the wider DeFi ecosystem. Users who prefer a more passive experience can simply hold the ERC-4626 vault token while continuing to accrue the same underlying yield. We expect assets such as sUSDp and sGOLDp to become the primary integration point for wallets, DeFi applications and other protocols building on top of Polaris. Relevant app/search vocabulary: Earn, earn, yield, APR, Earn Vault, deposit, claim rewards, sUSDp, sGOLDp. --- ## Flows URL: https://docs.polaris.finance/architecture/flows Markdown URL: https://docs.polaris.finance/architecture/flows.md Flows distribute protocol-generated value to applications, markets and integrations building on top of Polaris. These incentive streams are funded by protocol activity and distributed in pETH or pAssets. Thus, ecosystem incentives are paid out using assets directly connected to protocol activity, without relying on inflationary POLAR emissions. ## Flow Allocation Flows are allocated to whitelisted contracts according to how much pETH or a specific pAsset they hold. In general, the larger their share of that asset, the larger the share of the corresponding flow they receive, with stewardship also able to apply additional weighting where appropriate. Flows can also include a temporary minimum allocation for selected recipients. This allows strategically important integrations or new markets to begin receiving meaningful flows before they have accumulated enough assets for the standard balance-based allocation to become effective. Because these minimum allocations distribute protocol value before a recipient has earned it through normal usage, they are managed through stewardship and should only be used where the recipient is expected to create value for Polaris. ## pETH and pAssets Flows pETH flows are funded by pETH-denominated protocol activity, including bonding curve swap fees, Reserve Loan fees and pETH-to-POLAR conversions. When these fees are processed, they are burned into the bonding curve floor. This increases the pETH floor, releases ETH from the reserve and uses that ETH to purchase pETH through the bonding curve before distributing the acquired pETH through pETH flows. Also, each pAsset market generates its own independent flow funded by the interest paid by users who mint that specific pAsset, such as USDp or GOLDp. Unlike pETH flows, every pAsset market routes a protocol-defined minimum allocation of this flow to the corresponding Earn Vault and to vePOLAR. The remaining flow can then be distributed to approved recipients building around that pAsset, including liquidity pools, vaults, structured products and other integrations. ## Stewardship Role Once configured, flows operate automatically through immutable protocol rules. Stewardship determines which contracts are eligible to receive flows, which address receives them, any additional weighting applied to each recipient and whether a temporary minimum allocation should be used. Recipients are expected to create value for Polaris in return for flow support. That value may come through liquidity, integrations, revenue sharing or other forms of ecosystem growth. --- ## pAsset Markets URL: https://docs.polaris.finance/architecture/passet-markets Markdown URL: https://docs.polaris.finance/architecture/passet-markets.md pAssets are currencies and synthetic assets issued against pETH using the shared collateral infrastructure provided by Polaris. USDp and GOLDp are the first pAssets introduced by the protocol, but the underlying architecture is designed to support a much broader range of markets over time. Any asset with an oracle can become a pAsset. This includes fiat currencies, commodities, indices and many other onchain or offchain assets whose price can be reliably tracked. Every pAsset maintains its own accounting, oracle configuration, risk parameters and Earn Vault while relying on the same pETH collateral foundation. Thus, new markets can benefit from the Polaris infrastructure without needing a separate collateral system for every asset. ## Launching a pAsset Market Polaris is designed as open-source infrastructure that anyone can build on. Launching a new pAsset market is permissionless, meaning builders can introduce new assets without approval from the protocol itself. Beyond the underlying smart contracts, a successful pAsset market ultimately depends on adoption. Polaris provides the shared collateral infrastructure, so builders can focus on growing demand for their asset, expanding its liquidity and integrating it across DeFi without having to build the underlying infrastructure from scratch. Each pAsset market may evolve independently, as builders can design their own revenue model and decide how their market develops over time. ## Aligning with Polaris One of the main benefits of building a pAsset market on Polaris is access to pETH flows, which direct protocol incentives towards markets that create lasting value for the ecosystem. Markets that naturally strengthen Polaris through adoption, distribution, liquidity or revenue sharing are most likely to benefit from pETH flows. Access to pETH flows is stewarded through vePOLAR. Builders present their market and explain how it contributes to the broader Polaris ecosystem, while stewards determine which markets receive pETH flows and how those incentives are allocated. Markets that expand demand for pETH and pAssets while offering clear value back to Polaris will naturally be the strongest candidates for alignment. Different markets may contribute in different ways: some may choose to share part of their issuer interest with vePOLAR holders, while others may focus on distribution, liquidity, strategic integrations, or strengthening other parts of the Polaris ecosystem. With this approach, anyone can launch a new pAsset market while giving Polaris a way to direct protocol incentives towards builders who contribute to the long-term growth of the ecosystem. ## Builder Economics Every pAsset market is required to route a minimum share of its primary interest to its own Earn Vault. This boosts the overall protocol safety by ensuring that every market continuously supports the vault responsible for absorbing liquidation losses during periods of market stress. Beyond this required allocation, builders are free to determine how the remaining revenue is distributed. Depending on the objectives of the market, it may support the builder directly, incentivize liquidity, fund integrations, reward ecosystem partners or be shared with vePOLAR as part of a broader alignment strategy. This flexibility means every pAsset market can develop its own business model on top of the shared foundation provided by Polaris. ## Growing Together Each new market expands the range of assets available through Polaris, and also strengthens the ecosystem built around pETH. As new markets attract users, liquidity and economic activity, they contribute to the same collateral foundation supporting every existing pAsset instead of creating isolated systems that compete for capital. This shared architecture allows Polaris to grow as an ecosystem rather than as a collection of independent markets. As each new pAsset market grows, it helps expand the ecosystem that made it possible in the first place. --- ## Reserve Loans URL: https://docs.polaris.finance/architecture/reserve-loans Markdown URL: https://docs.polaris.finance/architecture/reserve-loans.md Reserve Loans are a core financial primitive introduced by Polaris, allowing users to borrow ETH directly from the bonding curve reserve using fpETH as collateral. As described in the fpETH section, fpETH represents the steadily growing floor component of pETH. Since the fpETH price in ETH is guaranteed to only increase, changes in the ETH price cannot cause the position to become undercollateralized. This removes the need for liquidations and allows users to borrow up to 100% of the floor value represented by their fpETH. With this feature, borrowers gain ETH liquidity without giving up fpETH yield, making highly capital-efficient looping strategies possible. ## Loan Mechanics Instead of paying a conventional borrowing interest rate, Reserve Loans apply a time-weighted performance fee, which is deducted directly from the increase in the fpETH floor price over the lifetime of the loan. This allows users to benefit from the growth of the fpETH floor while passively paying for the extra liquidity they access. As described in the dedicated Fee Router section, the fees generated by Reserve Loans are recycled back into the Polaris ecosystem, becoming part of the value distributed throughout the protocol. Relevant app/search vocabulary: Reserve Loan, Reserve Loans, borrow ETH, non-liquidatable, fpETH collateral. --- ## Stewardship URL: https://docs.polaris.finance/architecture/stewardship Markdown URL: https://docs.polaris.finance/architecture/stewardship.md Polaris uses bounded stewardship instead of open-ended governance. Governance can become a source of risk when it is capable of changing how a protocol operates or how value flows through the system after deployment. Users are then required to evaluate not only the protocol itself, but also the character and decision-making processes of those responsible for governing it. Polaris is designed to minimize that reliance by enforcing as much of the protocol logic as possible through immutable smart contracts. Where that is not possible, economic incentives encourage participants to act in ways that strengthen the system. Stewardship is therefore limited to the few decisions that neither mechanism can address, leaving the core protocol immutable. Stewards cannot introduce new collateral to back pAssets, modify the bonding curve or change the liquidation mechanisms that underpin the system. Users interact with the same core architecture throughout the lifetime of the protocol, without governance being able to redefine its foundations after deployment. ## Steward Responsibilities Although the core protocol cannot change, some parts of the ecosystem still benefit from ongoing coordination. Stewardship is responsible for certain parameters within predefined protocol boundaries, allowing the ecosystem to adapt to changing market conditions. This includes: - Interest rate splits - POLAR conversion parameters - Replacing faulty oracle feeds - Whitelisting or removing flow recipients. - Adjusting flow weightings These decisions influence how value moves throughout the Polaris ecosystem without giving stewards the ability to modify the protocol itself. Further details on each of these parameters are covered in the relevant sections of this documentation. --- ## Tokenomics URL: https://docs.polaris.finance/architecture/tokenomics Markdown URL: https://docs.polaris.finance/architecture/tokenomics.md The final POLAR allocation, vesting schedule and launch parameters will be published closer to launch once finalized. This section focuses on the economic principles behind POLAR. ## Supply POLAR will launch with an initial supply of 100 million tokens, distributed across the treasury, community, team and investors. Those tokens will gradually enter circulation according to their respective vesting schedules, while the long-term growth of the supply is entirely driven by organic demand, served by the conversion mechanism. Every new POLAR outside the vesting schedule requires pETH to be permanently converted before it can enter circulation (see Conversions). As the protocol grows, pETH grows alongside it by capturing protocol-native value. Since every additional POLAR entering circulation beyond the initial allocation is created from pETH, the POLAR supply can only expand alongside the value of the underlying Polaris ecosystem, keeping the utility token economically connected to the ecosystem it serves. ## A Closed Economy Polaris is designed as a closed economic system where the value generated by protocol activity remains inside the ecosystem. Instead of relying on continuous token emissions to attract liquidity, value generated through the core protocol mechanisms is redistributed across the ecosystem according to the role of each asset. Treasury-held POLAR participates through vePOLAR alongside every other long-term holder, aligning incentives across the ecosystem. ## vePOLAR Long-term participation in Polaris takes place through vePOLAR. Users commit POLAR for a chosen period of time to align themselves with the long-term growth of the ecosystem. In return, they receive a share of protocol-native value, including interest from deployed pAssets, together with stewardship rights. These returns are distributed through protocol activity itself, without relying on additional POLAR incentives. Relevant app/search vocabulary: POLAR, convert, lock, vePOLAR, burn pETH, conversion auction, POLAR token, POLAR staking, POLAR tokenomics. --- ## Adaptive Peg Defence URL: https://docs.polaris.finance/design/adaptive-peg-defence Markdown URL: https://docs.polaris.finance/design/adaptive-peg-defence.md Polaris incorporates permissionless minting and redemptions to help pAssets trade around their target price. Many collateralized asset systems are more effective at defending one side of the peg than the other, allowing supply to contract without providing an equally direct way to expand it when stressful situations come, or vice versa. Polaris supports both directions, allowing pAssets to be minted against pETH collateral or redeemed for pETH at their target value whenever market conditions create an arbitrage opportunity. ## Above Peg When a pAsset trades above its target price, market participants can mint new supply against pETH collateral and sell it into the market for a net profit. For example, if USDp trades above one dollar, an arbitrageur can deposit ETH into the bonding curve, receive pETH and immediately mint new USDp at par before selling it above one dollar. This increases the circulating supply and naturally pushes the market price back toward its target. Polaris extends this mechanism thanks to its Adaptive Peg Defense model, which distributes the collateral, debt and minting fees across all existing positions, preventing them from being concentrated in a single position. This allows supply to expand in response to above-peg demand without pushing a single position toward liquidation. The expansion is shared across the market, allowing the protocol to respond to upward depegs through direct onchain minting. ## Below Peg When a pAsset trades below its target price, market participants can buy the discounted asset and redeem it through the protocol for pETH at its target price. For example, if USDp trades below one dollar, an arbitrageur can purchase USDp below peg, redeem it at par for pETH and capture the price difference. The redeemed USDp is burned, reducing the circulating supply and encouraging the market price to move back toward target. The same Adaptive Peg Defense model applies to redemptions: collateral removal, debt reduction and redemption fees are split across existing positions instead of concentrating on a single position. As a result, supply contracts without disproportionately affecting individual positions. The contraction is shared across the market, allowing the protocol to respond to downward depegs through direct onchain redemptions. --- ## Conversions URL: https://docs.polaris.finance/design/conversions Markdown URL: https://docs.polaris.finance/design/conversions.md As introduced in the POLAR section, the long-term supply of POLAR does not grow through perpetual emissions. Beyond the initial allocation, additional POLAR may only be created via the Polaris conversion mechanism. This approach ensures that the supply doesn't simply expand due to time passing or because the protocol needs new incentives. Every new POLAR token exists because someone has chosen to convert pETH, meaning that growth in the utility token is directly tied to demand for the reserve asset and the economic expansion of the Polaris ecosystem. As a result, every expansion of the POLAR supply requires pETH to be converted, creating a direct economic relationship between the two assets. ## From pETH to POLAR Whenever a user converts pETH, the converted pETH is permanently burned and an equivalent amount of new POLAR is minted. Burning pETH reduces its circulating supply while releasing ETH from the bonding curve reserve. A portion of that ETH may be returned directly to the converter as a rebate, while the remaining value is ultimately routed back into the protocol through the Fee Router, where it contributes to the protocol-native yield reflected in the pETH spot price. Each conversion therefore has two economic effects: it expands the POLAR supply, while also increasing the value represented by every remaining unit of pETH. ## Conversion Pricing Conversions are permissionless and can take place at any time, but the conversion price is dynamic and set via a Dutch auction mechanism. Whenever someone converts pETH into POLAR, the price immediately increases before decaying again over time. The size of that increase depends on the fraction of the existing POLAR supply minted by the conversion, meaning a conversion that mints a larger share of the supply pushes the price up much more aggressively than a smaller one. This naturally encourages smaller and more frequent conversions instead of large supply-shocking events. As the price gradually falls, opportunities emerge whenever converting becomes more attractive than acquiring POLAR on the open market. Thus, PETH-to-POLAR conversions are expected to occur steadily over time in relatively small chunks. ## One-Way Only The conversion mechanism only works in one direction, from pETH to POLAR. If POLAR could be converted back into pETH, part of the value generated by every conversion would need to remain in reserve for future conversions. Because the conversion is one-way, no such reserve is needed, allowing the full economic value generated by each conversion to remain inside Polaris. Since pETH is the reserve asset supporting the entire ecosystem, every conversion permanently reduces its supply, increasing the value represented by each remaining unit while also expanding the supply of POLAR. This creates a direct economic relationship between the two assets, allowing the utility token to grow without relying on a fixed emissions schedule, while also contributing to the growth of the pETH floor and the protocol-native ETH yield earned by pETH and fpETH holders. ## Rebates Part of the ETH released during a conversion may be returned directly to the converter as a rebate. The rebate is a protocol parameter adjusted through Polaris stewardship, which influences how the value generated by a conversion is distributed between the converter and the broader ecosystem. Increasing the rebate makes conversions more attractive, while reducing it directs a larger share of the released ETH toward the pETH yield flows. The rebate changes how the released ETH is distributed, but does not affect the amount of pETH burned or POLAR created. ## Who Converts? Although conversions are permissionless, most users are unlikely to interact with the mechanism directly. In practice, conversions are primarily performed by arbitrageurs, keepers and other market participants whenever the conversion price, together with any available rebate, becomes more attractive than acquiring POLAR on the open market. Most users will simply buy POLAR through secondary markets without ever interacting with the conversion mechanism themselves. Relevant app/search vocabulary: POLAR, convert, lock, vePOLAR, burn pETH, conversion auction. --- ## Fee Router URL: https://docs.polaris.finance/design/fee-router Markdown URL: https://docs.polaris.finance/design/fee-router.md The Fee Router component redirects value generated by Polaris back into the ecosystem. Its role is to collect protocol revenue denominated in pETH, process it through the bonding curve and distribute the resulting rewards according to the pETH flow logic. ## Strengthening pETH First When pETH collected as protocol fees reaches the Fee Router, it is first burned at the pETH floor. This permanently removes the accumulated pETH from circulation, increasing the floor price of every remaining pETH while releasing the corresponding ETH from the bonding curve reserve. That ETH is then immediately used to purchase newly minted pETH, which raises the bonding curve spot price. Only then are the newly minted pETH distributed as rewards. Passing protocol revenue through the bonding curve allows the same value to strengthen the pETH floor before becoming rewards to be distributed throughout the ecosystem. And by the time those rewards reach their recipients, both the floor price and the market price of pETH have already benefited from protocol activity. ## A Shared Economic Engine The Fee Router collects protocol revenue denominated in pETH, processes it through the bonding curve and distributes the resulting pETH rewards according to the configured pETH flows. This means every pETH reward distributed by the Fee Router has already contributed to strengthening both the floor price and the spot price of pETH before reaching its final destination. --- ## Interest Rates URL: https://docs.polaris.finance/design/interest-rates Markdown URL: https://docs.polaris.finance/design/interest-rates.md Polaris uses two complementary interest rates to manage pAsset markets. Together, they help maintain the target price of each pAsset while protecting the overall health of the collateral system. The Peg Stability Rate is the primary interest rate paid by pAsset minters. It adjusts automatically according to minting and redemption activity and helps keep pAssets trading around their target price. The Protocol Safety Rate is a secondary interest rate that normally remains inactive. It only activates when the overall collateralization of a pAsset market falls below a predefined threshold, automatically paying interest from higher-leverage positions to lower-leverage or collateral-only positions. ## Peg Stability Rate The Peg Stability Rate is the standard borrowing cost paid by users who mint pAssets. Interest paid through the Peg Stability Rate becomes the primary yield source for that pAsset market and is distributed to the pAsset's Earn Vault and vePOLAR stakers, according to the market's configured flow allocation assigned. A unique feature of the Peg Stability Rate is that it is not altered by governance or manual intervention. Instead, it adjusts automatically based on minting and redemption activity taking place inside the protocol. When a pAsset trades above its target price, arbitrage opportunities naturally encourage new minting. As net minting activity increases, the Peg Stability Rate responds to this signal by gradually decreasing, reducing the cost of creating new pAssets and allowing supply to expand more quickly. Vice versa, when a pAsset trades below its target price, arbitrage opportunities encourage redemptions instead. As net redemption activity increases, the Peg Stability Rate gradually increases, making the creation of new debt positions less attractive while helping the circulating supply contract. ## Protocol Safety Rate The Protocol Safety Rate is designed to protect the overall collateral health of a pAsset market. Under normal market conditions it remains inactive and has no effect on user positions. It only activates when the market's aggregate collateral ratio falls below a predefined threshold. Once active, positions with higher leverage begin paying an additional interest rate, while lower-leverage or collateral-only positions receive those payments. This makes it profitable for healthier positions to enter or remain in the market during stressed conditions, while making high-leverage positions more expensive to maintain. The goal is to improve the market's overall collateral health by increasing the cost of higher leverage while rewarding more conservative collateralization. This encourages the market to return toward stronger overall collateralization without requiring liquidations or governance intervention. Unlike the Peg Stability Rate, the Protocol Safety Rate is not protocol revenue. Every payment made through the mechanism remains inside the same pAsset market and is redistributed directly between participants. --- ## Liquidations URL: https://docs.polaris.finance/design/liquidations Markdown URL: https://docs.polaris.finance/design/liquidations.md When a user mints a pAsset, they do so against pETH collateral. If the value of that collateral falls too far relative to the debt, the position can fall below the protocol's Minimum Collateral Ratio of 115% and become eligible for liquidation. Liquidations protect the solvency of each pAsset market by closing unsafe positions before they create losses for the wider system. ## Liquidation Process Each pAsset market has its own Earn Vault, which acts as the first line of defense during liquidations. Depositors supply the pAsset to the Earn Vault, and those deposits can be used to cancel the debt of liquidated positions. When a liquidation occurs, the position's debt is cancelled using pAssets from the Earn Vault, while the corresponding pETH collateral is transferred to the vault. Earn Vault depositors therefore receive liquidation gains in exchange for acting as the first backstop for the market. This liquidation mechanism is one source of protocol-native yield distributed to Earn Vault depositors and is explained in greater detail in the dedicated Earn Vault section. ## Fallback Redistribution If the Earn Vault does not hold enough deposits to absorb the entire liquidation, the remaining debt and collateral are redistributed across the other open positions in the same pAsset market. As such, liquidations are always processed entirely within the protocol without relying on external auctions or discretionary intervention. Redistribution assigns each open position a proportional share of both the remaining debt and collateral. While intended only as a fallback mechanism, it ensures that liquidations can always occur even when the Earn Vault is temporarily unable to absorb the full position. Relevant app/search vocabulary: liquidation, liquidations, liquidate, liquidated, liquidation penalty. --- ## Oracles URL: https://docs.polaris.finance/design/oracles Markdown URL: https://docs.polaris.finance/design/oracles.md Polaris is designed to rely on its own onchain mechanisms wherever possible, minimizing its dependence on external inputs. The price of pETH, for example, is determined entirely by the bonding curve and never depends on external price feeds. However, pAssets require external reference prices. Polaris limits the oracle layer to those markets, with a design that can be reused across every future pAsset while minimizing oracle dependency and remaining resilient to oracle failures. To achieve this, Polaris routes every external price through a custom oracle aggregator called the Medianiser. The Medianiser is used wherever external reference prices are needed. For instance, USDp uses it for ETH/USD, while GOLDp uses it for both ETH/USD and XAU/USD. Future pAssets follow the same approach by using the reference feeds required for their own underlying asset. This allows Polaris to keep pETH pricing internal to the bonding curve while using external oracles only where real-world reference pricing is unavoidable. It also means USDp does not require an external market-price oracle to maintain its peg, as its adaptive peg defence uses minting, redemptions and interest rate adjustments without the need to rely on an external pAsset price feed. ## The Medianiser Each Medianiser is responsible for a single external price, such as ETH/USD or XAU/USD. A pAsset market may use one or more Medianisers to calculate the collateral value required for that asset. A Medianiser supports up to three independent oracle feeds. Only one feed is required, but additional feeds improve resilience whenever multiple high-quality data sources are available. When more than one feed is configured, the Medianiser selects the price according to the feeds currently available: - If three valid feeds are available, it returns the median price. - If one or two valid feeds are available, it returns the first valid feed in the configured order. - If no valid feeds are available, it falls back to the last valid price datapoint. A feed is considered valid only if the external call succeeds, the returned value is positive and the price is not stale. As a result, Polaris can continue operating flexibly even if individual oracle feeds become unavailable. When multiple feeds are available, the protocol aggregates them. If some feeds fail, it continues operating with the remaining valid feeds, and if every configured feed becomes unavailable, it falls back to the last valid price. ## Updating Oracle Feeds Although the protocol itself is immutable, oracle providers may evolve over time or become unavailable. Oracle sources can therefore be replaced through stewardship. A failed feed can be replaced immediately, while replacing a live feed or adding a new feed to an empty slot requires a timelock. This allows Polaris to recover from oracle failures without giving stewards immediate discretionary control over active price sources. Relevant app/search vocabulary: oracle, oracles, Medianiser, price feed, ETH/USD, XAU/USD. --- ## Recovery Mode URL: https://docs.polaris.finance/design/recovery-mode Markdown URL: https://docs.polaris.finance/design/recovery-mode.md Recovery Mode is the protective state a pAsset market enters when its overall collateralization falls below a critical threshold. Each pAsset market has its own Recovery Mode. Stress affecting one market does not automatically place every other market into the same state, allowing USDp, GOLDp and future pAssets to remain independent from one another. Once active, the protocol continues operating normally while restricting actions that would further weaken the affected market. Users can still add collateral, repay debt and improve the health of their positions, while actions such as minting additional pAssets can become unavailable. The goal is to prevent the market from becoming weaker while still allowing participants to repay positions and reduce debt. The normal liquidation threshold does not change, and positions are liquidated only after reaching the same maximum LTV that applies under normal market conditions. ## Peg Stability Recovery Mode also affects direct minting and redemptions. New direct minting is disabled because it would increase the outstanding debt to the affected market, while redemptions remain open because they reduce the circulating supply. If the market's collateral falls below full backing, redemption payouts become proportional to the collateral that remains available. This ensures every redeemer receives the same share of the remaining backing instead of rewarding the first participants to exit. Bonding curve swaps remain live throughout this whole process. The bonding curve is shared pETH infrastructure rather than part of any individual pAsset market, allowing pETH holders to continue using it even if a specific market enters Recovery Mode. The mechanism is designed to help a stressed market deleverage in an orderly and isolated manner, without impacting the wider Polaris ecosystem. --- ## Revenue Model URL: https://docs.polaris.finance/design/revenue-model Markdown URL: https://docs.polaris.finance/design/revenue-model.md Polaris operates under the design philosophy that all value generated throughout the protocol should not leak externally. Protocol revenue is generated entirely from ecosystem activity, and in turn directed toward supporting ecosystem growth. Creating pAssets, trading through the bonding curve, opening Reserve Loans, building on top of pETH and future protocol primitives all contribute to the same revenue engine. The fees generated by these activities are routed back through the bonding curve to strengthen pETH, increase its floor and distribute yield. Fees generated by the protocol first strengthen the collateral layer before being distributed across the ecosystem, allowing the same economic activity that generates value to reinforce the foundation supporting Polaris. ## Revenue Through Flows Both pETH and pAsset flows are designed to generate sustainable yield across the Polaris ecosystem. Through vePOLAR stewardship, pETH flows can be directed wherever they create the greatest value, from pAsset markets and liquidity to ecosystem integrations and applications. As adoption grows, the value of these flows grows alongside it, giving external protocols a direct incentive to build on Polaris while contributing to its growth. Further details on flows are covered in the dedicated Flows section of this documentation. ## How Polaris Generates Revenue The Polaris treasury participates in the protocol under the same economic model as every other participant. To earn protocol revenue, treasury-held POLAR must first be locked as vePOLAR. Protocol revenue is not routed directly to the team through privileged fee streams or hidden offchain charges. Instead, the treasury earns revenue through the same onchain mechanisms available to every vePOLAR holder. This aligns the team's incentives with the protocol's long-term sustainability, with the team only benefiting when Polaris generates value for the ecosystem as a whole. Because every vePOLAR holder earns protocol revenue through the same mechanism, Stewardship naturally rewards decisions that strengthen the protocol over time. --- ## Spike-and-Decay Fees URL: https://docs.polaris.finance/design/spike-and-decay-fees Markdown URL: https://docs.polaris.finance/design/spike-and-decay-fees.md Several core mechanisms in Polaris use spike-and-decay pricing, such as bonding curve swaps, pAsset minting and redemptions, and pETH-to-POLAR conversions. In particular, the first two share the same design but use different parameters, while pETH-to-POLAR conversions use a Dutch auction mechanism. Each of these mechanisms responds to a different type of market activity, but they all adjust their pricing according to the same market forces. The result is that higher demand for a particular action also increases its cost. As demand fades, that cost gradually decays until the action becomes attractive again. This allows prices to continuously adapt as market conditions evolve, enabling Polaris to capture more value during periods of higher demand while naturally encouraging activity again as costs decline. Once deployed, these mechanisms operate in an entirely immutable manner. Unlike parameters such as the conversion rebate, spike-and-decay pricing is not adjusted through stewardship and responds exclusively to market activity. The minimum and maximum fee ranges will be finalized closer to launch. --- ## Advanced URL: https://docs.polaris.finance/testnet/advanced Markdown URL: https://docs.polaris.finance/testnet/advanced.md The Advanced section brings together protocol operations that go beyond the standard user flows. These tools are primarily intended for arbitrageurs and experienced users who want direct access to core protocol mechanisms. This section currently includes the following operations: - **Mint / Redeem**: Mint or redeem USDp and GOLDp directly against pETH whenever market prices create arbitrage opportunities that help restore the peg. - **SP Direct**: Deposit directly into the Stability Pool instead of the auto-compounding Earn Vault. - **Collateral Auctions** *(currently unavailable)* When a savings vault absorbs a liquidation, you can purchase pETH collateral from permissionless liquidation auctions. Most auctions are expected to be cleared by keeper bots, but anyone can participate. - **Conversions**: Convert pETH into POLAR directly through the protocol conversion mechanism. Image: The Advanced section with its Mint/Redeem, SP Direct, Auctions and Conversions operations Relevant app/search vocabulary: app, official app, testnet app, app.testnet.polarisfinance.io, connect wallet, testnet, Sepolia, Sepolia ETH, chain ID 11155111, faucet, Peg Stability Module, PSM, redeem, convert pETH to POLAR, arbitrage. --- ## Analytics URL: https://docs.polaris.finance/testnet/analytics Markdown URL: https://docs.polaris.finance/testnet/analytics.md This section offers a real-time overview of protocol activity throughout the testnet. From here you can monitor the performance of every major Polaris components, with interactive visualizations and live metrics that make it easy to understand how the protocol evolves over time and how its different features interact. In particular, analytics are organized by protocol component, allowing you to explore the metrics that matter for each part of the system. Depending on the selected view, you'll find information such as yield, utilization, liquidity, issuance, lending activity, governance participation and other protocol-specific indicators. On the right, the Fee Flows visualization provides an interactive view of how value moves throughout Polaris. Multiple visualization modes are available to explore fee distribution, APR sources and the relationships between protocol components from different perspectives. Image: The Fee Flows visualization showing how value moves between Polaris components Relevant app/search vocabulary: app, official app, testnet app, app.testnet.polarisfinance.io, connect wallet, testnet, Sepolia, Sepolia ETH, chain ID 11155111, faucet. --- ## Dashboard URL: https://docs.polaris.finance/testnet/dashboard Markdown URL: https://docs.polaris.finance/testnet/dashboard.md The Dashboard provides a complete overview of your activity across Polaris. From here you can monitor your balances, active positions, Earn deposits and recent transactions, while also accessing the Sepolia faucet before interacting with the protocol. It is designed to be the starting point of the application, allowing you to quickly understand the current state of your portfolio without navigating through every individual section. Image: The Polaris testnet Dashboard, showing balances, active positions, Earn deposits and recent transactions Relevant app/search vocabulary: app, official app, testnet app, app.testnet.polarisfinance.io, connect wallet, testnet, Sepolia, Sepolia ETH, chain ID 11155111, faucet. --- ## Earn URL: https://docs.polaris.finance/testnet/earn Markdown URL: https://docs.polaris.finance/testnet/earn.md This section gives users access to the Earn Vaults. From here you can deposit into the auto-compounding sUSDp and sGOLDp Earn Vaults, monitor your deposits and accumulated yield, and withdraw your funds whenever you want. Everything related to your Earn positions is managed from this section. Image: The Earn interface with the auto-compounding sUSDp and sGOLDp Earn Vaults Relevant app/search vocabulary: app, official app, testnet app, app.testnet.polarisfinance.io, connect wallet, testnet, Sepolia, Sepolia ETH, chain ID 11155111, faucet, Earn, earn, yield, APR, Earn Vault, deposit, claim rewards, sUSDp, sGOLDp. --- ## Guide URL: https://docs.polaris.finance/testnet/guide Markdown URL: https://docs.polaris.finance/testnet/guide.md This section contains detailed explanations of every core interaction available during the testnet. Organized by protocol section and asset, it explains how each feature works and what happens when you perform different actions. It is designed to accompany your exploration of Polaris, making it easier to understand the protocol while using it. Each of the following pages also include explanations for the actions available in that section, providing additional context while you interact with the protocol. Image: The in-app Guide's "What to do on Polaris?" view, with recommended actions filtered by token Relevant app/search vocabulary: app, official app, testnet app, app.testnet.polarisfinance.io, connect wallet, testnet, Sepolia, Sepolia ETH, chain ID 11155111, faucet. --- ## Liquidity URL: https://docs.polaris.finance/testnet/liquidity Markdown URL: https://docs.polaris.finance/testnet/liquidity.md This section is where you provide liquidity to Polaris pools and earn a share of the swap fees they generate. From here you can add or remove liquidity, monitor your positions and pool statistics, and manage your exposure across different protocol markets. Every pool displays its current liquidity, estimated APR, your share of the pool, and the assets that can be redeemed when withdrawing liquidity. Polaris currently offers the following liquidity pools: - USD Pool (USDp–ETH) - POLAR Pool (pETH–POLAR) - GOLD Pool (GOLDp–ETH) - Split TriPool (pETH–fpETH–vpETH) Image: The Liquidity interface listing Polaris pools with liquidity, APR and pool share Relevant app/search vocabulary: app, official app, testnet app, app.testnet.polarisfinance.io, connect wallet, testnet, Sepolia, Sepolia ETH, chain ID 11155111, faucet. --- ## Mint URL: https://docs.polaris.finance/testnet/mint Markdown URL: https://docs.polaris.finance/testnet/mint.md This one is where collateralized positions are created and managed. Using pETH as collateral, you can mint USDp or GOLDp. Existing positions can also be adjusted from this page by adding collateral, repaying debt or closing the position. Before confirming any transaction, review your collateral ratio, interest rate and the resulting position. Image: The Mint interface for creating and managing collateralized USDp and GOLDp positions Relevant app/search vocabulary: app, official app, testnet app, app.testnet.polarisfinance.io, connect wallet, testnet, Sepolia, Sepolia ETH, chain ID 11155111, faucet, Mint, borrow, issue, trove, troves, open trove, manage trove, collateralized debt position, CDP, open borrow position, manage position, repay, close borrow position, USDp, GOLDp, LTV, loan-to-value. --- ## Reserve Loan URL: https://docs.polaris.finance/testnet/reserve-loan Markdown URL: https://docs.polaris.finance/testnet/reserve-loan.md Reserve Loans enable you to borrow ETH by using fpETH as collateral. From here you can open and manage non-liquidatable Reserve Loans, view your active positions, and repay or close existing loans. It is designed to provide a clear overview of your Reserve Loans and the actions available to manage them. Image: The Reserve Loan interface for opening and managing non-liquidatable ETH loans against fpETH Relevant app/search vocabulary: app, official app, testnet app, app.testnet.polarisfinance.io, connect wallet, testnet, Sepolia, Sepolia ETH, chain ID 11155111, faucet, Reserve Loan, Reserve Loans, borrow ETH, non-liquidatable, fpETH collateral. --- ## Split URL: https://docs.polaris.finance/testnet/split Markdown URL: https://docs.polaris.finance/testnet/split.md Split allows you to separate pETH into fpETH and vpETH, or merge those two assets back into pETH whenever you choose. Because the operation is entirely internal to Polaris, splitting and merging never changes the total economic value represented by your position. It simply separates the floor component from the market premium, allowing each asset to be used independently. Image: The Split interface for separating pETH into fpETH and vpETH or merging them back Relevant app/search vocabulary: app, official app, testnet app, app.testnet.polarisfinance.io, connect wallet, testnet, Sepolia, Sepolia ETH, chain ID 11155111, faucet, Swap, swap, Split, fpETH, vpETH, pETH, floor price. --- ## Swap URL: https://docs.polaris.finance/testnet/swap Markdown URL: https://docs.polaris.finance/testnet/swap.md Swap lets you exchange supported assets across Polaris, which currently are the Core Assets. All pETH swaps are executed through the Polaris bonding curve, while additional trading routes may be available depending on the assets involved. Before confirming a swap, review the quoted output, price impact, fees and minimum received. Image: The Swap interface with quoted output, price impact, fees and minimum received Relevant app/search vocabulary: app, official app, testnet app, app.testnet.polarisfinance.io, connect wallet, testnet, Sepolia, Sepolia ETH, chain ID 11155111, faucet, Swap, swap, Split, fpETH, vpETH, pETH, floor price. --- ## vePOLAR URL: https://docs.polaris.finance/testnet/vepolar Markdown URL: https://docs.polaris.finance/testnet/vepolar.md This is where you commit POLAR to receive vePOLAR voting power. From here you can create and manage lock positions, monitor your voting power and rewards, and participate in protocol stewardship. Each position is created independently, letting you choose a different amount and commitment period for every lock. Image: The vePOLAR interface for creating and managing POLAR lock positions Relevant app/search vocabulary: app, official app, testnet app, app.testnet.polarisfinance.io, connect wallet, testnet, Sepolia, Sepolia ETH, chain ID 11155111, faucet. --- ## vpETH URL: https://docs.polaris.finance/testnet/vpeth Markdown URL: https://docs.polaris.finance/testnet/vpeth.md The vpETH Lending Market allows users to supply vpETH to earn lending yield or borrow vpETH against ETH collateral. Borrowed vpETH can be sold to create a hedged position, helping reduce exposure to pETH price movements while maintaining collateral onchain. From here you can supply or withdraw vpETH, manage collateral and debt, and monitor key market metrics including utilization, available liquidity, maximum LTV, and the current vpETH price. Image: The vpETH Lending Market interface for supplying vpETH and borrowing against ETH collateral Relevant app/search vocabulary: app, official app, testnet app, app.testnet.polarisfinance.io, connect wallet, testnet, Sepolia, Sepolia ETH, chain ID 11155111, faucet. --- ## Risks URL: https://docs.polaris.finance/risks Markdown URL: https://docs.polaris.finance/risks.md Polaris is built as immutable onchain infrastructure. This reduces reliance on trusted intermediaries, admin keys and offchain counterparties, but it does not remove risk. The following risks are not exhaustive. Users should understand the protocol, their own positions and the assets they interact with before using Polaris. ## Smart Contract Risk Polaris depends on smart contracts to manage pETH, pAsset markets, Earn Vaults, liquidations, conversions, Reserve Loans and other protocol mechanisms. Bugs, implementation errors or unexpected interactions between contracts could lead to loss of funds or incorrect protocol behaviour. Immutability also means that core contracts are not designed to be upgraded or paused after deployment which reduces admin-key risk but increases the importance of audits, testing and careful use. ## Market And Collateral Risk pETH is the shared collateral asset of Polaris. It has a market price and a mathematically derived floor price, but its market price can still move over time. The premium above the pETH floor may expand or contract depending on demand, liquidity and broader market conditions. Since the pETH floor is denominated in ETH, users also remain exposed to ETH price movements against USD, gold or any other reference asset. Users who mint pAssets against pETH collateral can be liquidated if their position becomes too risky. ## Peg And Liquidity Risk USDp, GOLDp and future pAssets are designed to track external reference values, but they may trade above or below those values during periods of volatility, low liquidity, oracle disruption or market stress. Polaris uses permissionless minting, redemptions and interest-rate mechanisms to support pAsset pegs, but these mechanisms depend on arbitrage incentives, available liquidity, Ethereum execution and market participation. ## Oracle Risk Polaris keeps pETH pricing internal to the bonding curve, but pAsset markets still require external reference prices such as ETH/USD or XAU/USD. If an oracle feed is stale, unavailable, manipulated or misconfigured, the protocol may value collateral or pAssets incorrectly. This could affect minting, redemptions, liquidations and market safety. Polaris uses a Medianiser to reduce reliance on a single oracle source where multiple feeds are available, but oracle risk cannot be fully removed. ## Earn Vault And Liquidation Risk Earn Vaults provide yield by helping absorb liquidations in their pAsset market. When a position is liquidated, Earn Vault deposits may be burned to cancel debt, with the vault receiving pETH collateral in return. This can generate liquidation gains, but it also means Earn Vault depositors act as a first-loss backstop. Losses may occur if collateral value falls quickly, liquidations are delayed, oracle prices are wrong, or received collateral later falls in value. ## Stewardship and Parameter Risk Polaris uses bounded stewardship rather than open-ended governance. Stewards cannot rewrite the core protocol, change the bonding curve or introduce arbitrary new collateral. However, stewardship can still influence certain parts of the ecosystem, including protocol parameters, oracle feed replacement, flow recipients and incentive programs. As a result, these decisions can shape liquidity, integrations, yields and other economic dynamics across Polaris. ## Execution And Integration Risk Polaris runs on Ethereum and inherits Ethereum-related risks, including congestion, high gas costs, transaction failure, MEV, reorgs and censorship by some validators. Users may also interact with Polaris through third-party interfaces, vaults, markets or integrations. Those systems can introduce their own smart contract, admin, liquidity and frontend risks, even if Polaris itself operates as intended. Users should verify official contract addresses, review transaction details before signing and avoid unofficial links or support channels. Relevant app/search vocabulary: risk, risks, risk disclosure, smart contract risk, liquidation risk. --- ## Security Guarantees URL: https://docs.polaris.finance/risks/security-properties Markdown URL: https://docs.polaris.finance/risks/security-properties.md Polaris is designed to minimize trust wherever possible, although some sources of uncertainty remain unavoidable and are covered in the dedicated Risks section. Some considerations remain unavoidable and are covered in the dedicated Risks section. The architectural decisions below remove many of the trust assumptions commonly found in DeFi, allowing users to interact directly with transparent onchain mechanisms. **The core protocol has no admin privileges.** Once deployed, no individual or organization can move user funds or change the protocol rules. **The core protocol is immutable.** Its fundamental mechanics cannot be upgraded or replaced after deployment. **Assets cannot be frozen.** Neither pETH nor any pAsset includes blacklist or freeze functionality, allowing users to retain control over their assets without depending on a centralized party. **All collateral remains onchain.** Every pAsset is backed by pETH, removing the need to trust banks or custodians to safeguard the assets supporting the protocol. **pAssets are issued directly by protocol rules.** USDp, GOLDp and every future pAsset are created according to transparent onchain mechanisms, without a company deciding when assets can be issued or redeemed. **Every pAsset is fully collateralized at minting.** The protocol does not allow privileged actors, multisigs or administrators to create unbacked assets outside the normal minting process. **Stewardship remains bounded.** Ecosystem parameters can evolve over time without giving anyone the ability to rewrite the core protocol or introduce new collateral. Relevant app/search vocabulary: risk, risks, risk disclosure, smart contract risk, liquidation risk.