tDOT - Tapio Protocol

tDOT is the first synthetic DOT asset aimed at standardizing different formats of DOT derivatives for increased usability, yield and liquidity efficiency. It's backed by native DOT and DOT derivatives*.
*DOT derivatives will be referenced as xDOT throughout this documentation
tDOT on Acala is currently made up of DOT and staking DOT (LDOT), which achieves the following:
Maintains a stable value peg against DOT powered by the Stable Asset system​
Maintains the underlying effective yield of LDOT and standardizes the process of yield aggregation and distribution amongst tDOT holders
Liquidity for traders to trade between DOT-LDOT
Benefits of tDOT
tDOT enables the standardization of DOT liquidity siloed in staking and crowdloan applications. Furthermore, Parachains with DOT and xDOT liquidity can leverage tDOT and the Stable Asset system to achieve the following benefits:
Parachain Builders
DOT-xDOT liquidity is locked in the original Parachain while the minting of tDOT happens on Acala through XCM, enabling Parachains to attain the usability of tDOT without sacrificing TVL
tDOT can be used as a cross-chain swap medium. Assume that bDOT is native in Parachain B and cDOT is native in Parachain C. Users can mint tDOT with bDOT and then redeem tDOT to cDOT. This operation has effectively swapped bDOT on Parachain B to cDOT in Parachain C
Liquidity Providers and Holders
LPs can enjoy unprecedented and sustainable yield with tDOT. The yield composition of tDOT is made up of 3 different sources: (i) Underlying yield from LDOT (ii) Swap and redemption fees collected from DOT-LDOT liquidity pool (iii) TAP token incentives
As demonstrated via our taiKSM implementation, the Stable Asset system proves to be highly efficient in aggregating and distributing yield from the underlying staking assets. This means tDOT holders can enjoy enhanced utility without sacrificing underlying yield from LDOT
Traders
DOT-xDOT liquidity pool provides a highly efficient stable swap between DOT and xDOT. Specifically, traders can potentially seek profit from arbitrage opportunities which helps maintain a stable peg between tDOT and DOT. Furthermore, as demonstrated with taiKSM on Karura, the Stable Asset system provides tremendous cost savings for large trades between uniform assets (ie. DOT-LDOT).
Application Builders
tDOT minted on Acala can be transferred to any XCM enabled Parachains and it can be integrated into various applications (ie. DeFi, GameFi, privacy, etc.). This allows application builders to support tDOT rather than integrating with different versions of DOT derivatives.
How tDOT Works?
All tDOT will be minted on Acala as it serves as the primary DeFi hub on Polkadot. The Acala ecosystem has an abundance of use cases and economic value for tDOT as it holds a significant amount of Staking DOT and Crowdloan DOT.
The composition of tDOT is designed to support any DOT-xDOT asset pairs. For more architectural details, please read here.
1.Stable Asset system can be deployed as a Substrate pallet or EVM module across different Parachains
2.tDOT is backed by DOT-DOT derivative liquidity pools (ie. DOT-LDOT, DOT-LCDOT)
3.tDOT accrues yield and swap fees from the underlying liquidity pools
4.tDOT minter function is deployed on Acala, which serves as the hub for minting tDOT
5.XCM enables the transfer of tDOT across parachains
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Benefits of tDOT

How tDOT Works?