How it works

Kestrel turns DeFi strategies into tokens. The token is the user's interface to the strategy: buy it, hold it, and later sell it back for the underlying asset.

Buying

When you buy a Kestrel token:

1. You choose a token and an amount of the underlying asset.
2. Your wallet builds and signs a transaction.
3. The protocol transfers the underlying asset into on-chain smart-contract accounts.
4. The protocol mints the corresponding Kestrel token to your wallet.

The amount of Kestrel tokens you receive depends on the token's current on-chain price and any applicable fees.

Holding

Each token has a strategy behind it. Depending on the token, that strategy may involve lending, borrowing, swaps, liquidity provision, staking, or other on-chain activity. For the mechanics of a specific strategy, see Strategies — for example Long Yield Carry.

Kestrel's automated services manage the strategy by calling protocol instructions. These services may rebalance positions, refresh accounting, deploy capital, or unwind positions when needed.

Selling

When you sell a Kestrel token:

1. The protocol burns the Kestrel token from your wallet.
2. The protocol calculates the amount of underlying asset owed using the current on-chain price.
3. If enough readily available liquidity exists, the underlying asset is transferred to your wallet.
4. If liquidity must be freed from deployed positions, the redemption may be queued for asynchronous settlement.

Why prices can change

The redemption price can change because of strategy performance, fees, price movement in assets held by the strategy, borrowing costs, slippage, losses, or stale/refreshed oracle data.

Positive strategy performance is not guaranteed. The redemption price can stay flat or decline.