Pre-Udon

1. Introduction: What is PreUdon?

PreUdon is our protocol’s temporary, on-chain reward asset, designed to catalyze growth and reward active participants on the Chromia network. It functions as asset, providing a transparent incentive layer across our lending and borrowing markets.

Core Purpose: PreUdon's primary function is to enhance the Net APY for users, strategically driving liquidity (TVL) and ensuring balanced borrowing activity across various assets.

2. How PreUdon Works

Earning PreUdon is directly linked to your contribution to the protocol's stability and activity over time.

The Bi-Weekly Cycle and Snapshot

The reward mechanism operates on a rigorous, two-week schedule.

  1. Continuous Tracking: Throughout the bi-weekly cycle, the protocol’s smart contracts continuously log the time and volume of your Supply and Borrow positions.

  2. The Contribution Metric: Your contribution is quantified by the accrued interest (for suppliers) or accrued debt (for borrowers) during that period. This metric fairly measures your sustained impact on the market.

  3. Snapshot: A precise snapshot is taken at the end of the cycle. This snapshot is the decisive moment when all contributions are finalized, and reward calculations are locked in.

Strategic Reward Pools and Weights (The Allocation Model)

A fixed pool of PreUdon is issued each cycle. This pool is allocated based on strategic priorities set by the protocol.

  • Weighting System: Every asset and action (e.g., Supplying CHR, Borrowing D) is assigned a specific Weight—a multiplier that determines the size of its individual Reward Pool.

    • High Weight: Used to urgently attract liquidity to a low-TVL asset or strongly encourage a critical borrowing action.

    • Low Weight: Applied to pools where liquidity is already abundant or stable.

  • Calculating Your Share: Your final PreUdon reward is your proportionate share of the specific pool you contributed to. It is calculated by dividing your individual contribution metric by the total contribution metric of all users in that same pool, then multiplying the result by the pool's allocated PreUdon.

Share(u;t0,t1)=rs,u(t0,t1)⋅ws  +  rb,u(t0,t1)⋅wb∑i∈Ueligible(rs,i(t0,t1)⋅ws  +  rb,i(t0,t1)⋅wb)×100\text{Share}(u; t_0,t_1) = \frac{ r_{s,u}(t_0,t_1)\cdot w_s \;+\; r_{b,u}(t_0,t_1)\cdot w_b } { \sum\limits_{i \in \mathcal{U}_{eligible}} \big( r_{s,i}(t_0,t_1)\cdot w_s \;+\; r_{b,i}(t_0,t_1)\cdot w_b \big) } \times 100

Where:

  • rs,u(t0,t1)r_{s,u}(t_0,t_1): Interest earned of supply of user u in period [t₀, t₁]

  • rb,u(t0,t1)r_{b,u}(t_0,t_1): Loan interest of borrow of user u in period [t₀, t₁]

  • ws,wbw_s, w_b: weights for supply and borrow

  • 𝒰eligible𝒰_{eligible}: the set of eligible users (those who satisfy program rules, e.g. no withdrawal in restricted period)

Current Weight Allocation Table

The table below illustrates the current weights assigned to core assets. These weights determine how the total PreUdon reward pool is distributed among different markets.

Asset
Supply Weight
Borrow Weight

D, ALICE, CHR

0.4

0.6

USDC

0.2

0.8

3. Understanding APY

The User Interface (UI) consolidates all your financial dynamics into the transparent Net APY, clearly separating base earnings from incentive rewards.

Net APY=Interest APY±Incentive APY\text{Net APY} = \text{Interest APY} \pm \text{Incentive APY}
Activity
Formula
Strategic Benefit

Supply (Lenders)

InterestAPY+IncentiveAPYInterest APY+Incentive APY

Enhanced Yield. PreUdon dramatically boosts the returns on your supplied assets, making our platform highly competitive.

Borrow (Borrowers)

InterestAPY–IncentiveAPYInterest APY–Incentive APY

Cost Reduction/Profitability. The incentive acts as a subsidy, minimizing your borrowing costs or, in highly incentivized markets, resulting in a positive Net APY (meaning you are paid to borrow).

Note on Incentive APY: The Incentive APY is calculated based on the internally configured USD value of the PreUdon issued for that cycle.

4. Claiming, Conversion, and Eligibility Rules

Understanding the claiming schedule and eligibility requirements is vital to securing your earnings.

Claiming Process

Once the bi-weekly snapshot is complete and rewards are distributed, your earned PreUdon is immediately available. You can Claim these tokens at 1 week through the protocol's dedicated reward interface, transferring them directly to your wallet.

Conversion to Udon

PreUdon tokens are designed to be held until the official launch of the Udon token. At that time, a migration event will allow for a seamless, guaranteed conversion.

Crucial Eligibility and Withdrawal Rules

To ensure rewards are granted only to users who provide sustained stability in the critical period leading up to the snapshot, a two-phase eligibility rule applies to each 14-day cycle:

Week 1 (Days 1–7): You are free to deposit or withdraw assets. Your accrued contribution is still tracked, and early withdrawals in this period will not disqualify you from the reward pool.

Week 2 (Days 8–14): Stability & Check-in Period This is the Stability Period. To remain eligible for the reward pool, you must maintain your position without executing any withdrawal until the snapshot occurs. Additionally, you are required to perform a “Check-in” action within Week 2. This step confirms your active participation and ensures your position will be included in the final snapshot at the end of the cycle.

⚠️ Failure to complete the Check-in during Week 2 will result in ineligibility for the current reward cycle, even if no withdrawals were made.

Ineligibility Rule: If you execute any withdrawal of your supplied assets in Week 2, or fail to perform the Check-in, you will forfeit all accumulated PreUdon rewards for that entire cycle. This rule emphasizes the need for both stability and active confirmation during the final reward calculation phase.

5. Example Walkthrough: Weighted Reward Calculation

Let’s trace a hypothetical user, Alice, over a single cycle with a total reward pool of 10,000 PreUdon.

Pool
Strategic Weight
Pool Allocation

Asset A Supply

3

7,500 PreUdon

Asset B Borrow

1

2,500 PreUdon

  • Alice's Action: Alice supplies Asset A. She withdraws 50% on Day 5 (Week 1), then re-supplies it on Day 9 (Week 2). She holds the full position from Day 9 until the Snapshot on Day 14.

  • Alice's Contribution: Her accrued interest is calculated only for the days her position was active (Days 1-5 and Days 9-14). Her contribution totals $15 USD for the cycle.

  • Total Pool Contribution: The accrued interest generated by all users in the Asset A Supply pool totals $150 USD.

Alice's Final Reward Calculation:

  1. Determine Contribution Share: Alice's contribution share within the pool is:

    $15 USD$150 USD=10%\frac{\$15 \text{ USD}}{\$150 \text{ USD}} = 10\%

  2. Calculate PreUdon Earned: Alice receives 10% of the PreUdon allocated to the Asset A Supply pool:

    10%×7,500 PreUdon=750 PreUdon10\% \times 7,500 \text{ PreUdon} = \mathbf{750 \text{ PreUdon}}

Crucial Check: Alice did not perform any withdrawal during Week 2, so she is eligible to claim 750 PreUdon.

6. Frequently Asked Questions (FAQ)

Q: What is the USD value of PreUdon?

A: The USD value is an internal metric used to calculate the Incentive APR displayed on the UI. This value is determined by the protocol and may be adjusted to meet strategic goals.

Q: Why is there a withdrawal restriction in Week 2?

A: The restriction promotes stability. Rewards are meant to compensate users who provide sustained liquidity, particularly during the crucial calculation phase right before the snapshot, which ensures the health of the lending pools.

Q: Can I sell or trade PreUdon?

A: No. PreUdon is an internal, non-transferable reward credential. Its value is realized only through the guaranteed 1:1 conversion to the liquid Udon token when it officially launches.

Q: If I withdraw partially in Week 2, do I still get a reward?

A: No, absolutely not. Our rule is strict: Any withdrawal (full or partial) of your supplied assets, or full repayment of your borrowed amount, executed during Week 2 (Days 8–14) will immediately make you ineligible to receive any PreUdon for that entire 14-day cycle. You must maintain your position without executing any withdrawal in Week 2.

Q: If I repay, supply more, or borrow more in Week 2, what happens?

A: These actions are permitted and will not disqualify you.

  • Repaying Debt: You are fully permitted to repay any portion of your borrowed debt in Week 2. This action will not result in ineligibility.

  • Supplying/Borrowing More: You are encouraged to deposit more assets (supply more) or borrow more assets.

These actions increase your overall position, are not penalized, and will increase your contribution metric for the remainder of the cycle.

Q: Why are the Incentive APR percentages for some pool actions so high?

A: This happens because the TVL (total supplied or borrowed assets) for that specific action is still relatively low. Since the reward allocation per action is fixed, dividing it by a small TVL results in a very high APR. As more users supply or borrow into that action and the TVL grows, the APR percentage will naturally decrease. This mechanism is intentional — it is designed to bootstrap activity by giving higher incentives to early participants.

Q: If I forget to Check-in during Week 2, will I still be included in the snapshot?

A: No. You will not be included in the snapshot and will not receive any rewards for that cycle. The Check-in step is a mandatory requirement that must be completed during Week 2 to confirm your eligibility before the snapshot occurs.

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