Why Unreal is Real: Protocol Overview & Use Cases of Unreal Finance

Unreal Finance
6 min readMay 31, 2021

As Unreal Finance is a truly revolutionary protocol in the DeFi space, it can be difficult to fully appreciate the gravity of what our team is creating.

To put things into perspective, the global lending market size is currently over $6.9 trillion with a compounded annual growth rate of 14.8%. However, the market size of decentralized lending protocols on Ethereum is currently only $30 billion, which represents only 0.43% of the total global lending markets.

Enabling a higher fund utilization ratio for decentralized lending unlocks a tremendous amount of liquidity that can be freely traded through the ecosystems, thus helping to stabilize yield and further mature the ecosystems that support the building blocks within decentralized finance.

The concept of adding an additional yield futures layer to the existing DeFi network is complex but it is exactly the type of development our burgeoning ecosystem needs in order to thrive. This article should serve as the community’s introductory guide to the Unreal Finance protocol and its use cases.


  • OT (Ownership Token): Represents your share in the total deposited asset pool. If you deposit 100 DAI you will get 100 OT.
  • YT (Yield Token): Represents the variable yield gain over a term for a locked base asset. Importantly, a yield token does not represent the locked base asset itself, only the yield.

Protocol Overview

Deposit Process

Unreal Finance Deposit Process

Unreal Finance offers a simple, easy to use interface that allows users to provide liquidity on their underlying protocol of choice e.g. Aave, Compound, and Yearn for any time duration or term. In this regard we function as a one-stop-shop for all yield related activities.

This is how it works:

  1. User selects the underlying protocol & the time duration or term.
  2. User approves and deposits the principal, for example100 DAI.
  3. Protocol deposits the assets into the specified underlying protocol and gives the user 2 types of tokens: OT & YT tokens. For depositing 100 DAI, a user will receive 100 OT and 100 YT tokens
Redemption Process for OT and YT Tokens

The principal and yield can now be used as two distinct tokens, OT and YT. The 100 Ownership Tokens (OT) represent 100 DAI in principal, while the 100 Yield Tokens (YT) represent the yield from the principal over the time duration (say, 1 month). At the end of the time duration, the OT can be redeemed to receive the principal of 100 DAI & the YT can be redeemed to receive the yield earned (1.66 DAI, assuming the position yields 20% APY).

We will create AMM markets for Ownership Tokens (OTs) & Yield Tokens (YTs) using Balancer Perpetual Synthetic Pool. This will allow anyone to trade OT & YT tokens.

Instant Future Yield Using YTs

As an example, let’s say a user deposits 1000 DAI on Unreal Finance for a 3-month term at 16% APY with Aave as the underlying protocol. The YT tokens received from the deposit on Unreal Finance can now be sold on the AMM at the current price. Selling the token, at say 12% APY (4% discount on the actual APY), earns 30 DAI (12% APY) immediately for the seller, while the buyer can generate an instant 4% yield at term completion without having to put in the required liquidity.

Fixed Interest Using OTs

Just like YTs, OTs can also be sold on the AMM. Buying OT tokens essentially means buying the locked liquidity for the remaining period of the term at a discounted price. Buying 1000 OTs with 3 months of remaining term for 980 DAI (2% discount) guarantees the buyer 20 DAI in future profit, or in other words, a fixed interest. On the other hand, selling OT tokens frees up the seller’s liquidity, while generating returns (yield from staking APY or selling YTs — discount from the sale of OT). The freed-up liquidity can be further invested in Unreal itself to generate more yield.

New Opportunities & Strategies with Unreal Finance

Summary of all Tokens and Incentives to Buy/Sell

As you will read below, Unreal Finance opens up a whole raft of new opportunities:

  • Staking OT and YT tokens on AMMs: Post-deposit users can provide liquidity for OT and YT tokens on the AMM to gain trading fees and liquidity mining rewards.
  • Leveraging whilst mitigating your liquidation risk: Users can sell their OT tokens, get back whatever they deposited minus the discount (mentioned in sections above), then use this new capital to re-deposit and accumulate more YT tokens - essentially giving them more yield without putting in more capital!
  • Hedge against falling rates: User can sell their YT tokens and buy more OT tokens from the market if they are bearish on the interest rate in the coming months for an asset and an underlying platform.
  • Long yields: Users can sell their OT tokens and buy YT tokens from the market if they believe that there will be an increase in yields.
  • Raise money for your DAO without increasing debt: Protocols like Yearn could get their future revenue in cash instead of minting new tokens or raising money from investors.

These are just some of the strategies that one could employ whilst using the Unreal platform, but as you can imagine with an additional layer on top of the existing protocols, there is an infinite multiplicity of options and strategies for maximizing your potential returns. We will release a detailed blog in the coming weeks to describe further use cases of Unreal Finance.

We are giving you the tools to take control of your yield.

The future is Unreal, will you join us?

About Unreal Finance

Unreal Finance is a decentralized protocol that allows users to tokenize the yield generated by popular lending protocols such as Compound, Aave, UniLend etc. By tokenizing their yield, users can lock in their interest rate thus getting a fixed interest rate; using Unreal Finance, a user can instantly sell their unrealised yield, effectively locking their interest rate at a fixed price. Moreover, traders can now speculate on the unrealised yield.

The Unreal Finance team would like to thank all of our early supporters for their interest and support thus far. We’re at the beginning of a long and very exciting journey. Future yield will be tokenized, and together we’re about to usher in this new paradigm in decentralized finance.

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