> For the complete documentation index, see [llms.txt](https://docs.kton.io/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.kton.io/getting-started/04-yield-and-exchange-rate.md). # Yield, Exchange Rate and Auto-Compounding KTON is a rate-appreciating liquid staking token. You stake Gram and receive KTON. Over time, each KTON becomes redeemable for more Gram. Your KTON balance never changes, but its value in Gram grows as the pool earns yield. This chapter explains exactly how that works, where the yield comes from, and why the APY you see is a live, variable figure rather than a fixed promise. ## The exchange rate in one line Every KTON represents a share of the pool's total Gram. The exchange rate is simply: ``` rate = total_balance / supply (Gram per KTON) ``` * `total_balance` is the total Gram the pool controls (idle Gram plus Gram out on validator loans plus accrued profit). * `supply` is the total amount of KTON in existence. When you deposit, the pool mints KTON in proportion to your share of the pool: ``` KTON minted = Gram deposited × supply / total_balance ``` When you unstake, you redeem at the same ratio: ``` Gram returned = KTON burned × total_balance / supply ``` The very first deposit into an empty pool mints 1:1 (when `supply` is 0, 1 Gram = 1 KTON). After that, the rate moves with the pool's earnings. As of this writing the public KTON pool sits at roughly **1.035 Gram per KTON**, meaning 1 KTON redeems for about 1.035 Gram. This number rises over time as the pool compounds. You can read the current pool figures on-chain from the public pool at `EQA9HwEZD_tONfVz6lJS0PVKR5viEiEGyj9AuQewGQVnXPg0`. ## How the rate rises: round-by-round auto-compounding KTON does not rebase. Your wallet balance of KTON stays exactly the same. Instead, the value of each KTON grows because the pool folds its earnings into `total_balance` while `supply` stays fixed. This happens at the end of each settlement round, when the pool finalizes the validator loans for that round. In order, the pool: 1. Takes the round's realized `profit` (the interest the validators paid back on their loans). 2. Subtracts the flat **1 Gram finalize-round fee** for that round. 3. Subtracts the **16% governance fee**, taken on the profit only, not on principal. 4. Floors a negative result at the pool's total balance (a loss can never exceed the pool's own funds). 5. Adds whatever profit remains to `total_balance`. Supply is untouched. Because `total_balance` goes up and `supply` does not, the rate `total_balance / supply` ticks upward. Every holder benefits proportionally, automatically, with no action required. There are no reward claims to make, no tokens to restake, and no transactions to sign. This is what "auto-compounding" means here: each round's net yield is permanently retained in the pool and starts earning in the next round. ### Discrete, not continuous The rate does not drift up second by second. It moves in discrete steps at validator-round rotation, when a lending round finalizes. Between finalizations the rate is flat. So if you check the rate twice within the same round, you may see the same number, and then a step up once the round closes. ## Where the yield comes from All KTON yield comes from one source: **interest on validator loans**. The pool lends its pooled Gram to validator-controllers. Those controllers stake the Gram with the TON Elector to participate in network validation, then recover the stake plus rewards after the validation round and its freeze period complete. The loan is granted with interest baked in from the start, so when the controller settles, the pool is repaid principal plus interest. That interest is the round's `profit`. There is no other yield mechanism. The protocol has no trading strategy, no external DeFi farming, and no auxiliary revenue stream. Yield is purely the interest validators pay on the Gram they borrow to validate. ### Net of the 16% governance fee The yield credited to holders is always **net of fees**. As shown in the finalization steps above, the pool first removes the 1 Gram finalize fee and then the 16% governance fee from each round's profit before adding the remainder to `total_balance`. This matters for how you read the APY: any APY figure shown in the app is the holder's net return. The 16% governance fee has already been deducted. You do not pay it again, and it is a commission on yield, not on your principal. See the **Fees** chapter for the full fee breakdown. ## APY is variable and computed live, not fixed KTON does not advertise a fixed or guaranteed APY. There is no target rate hardcoded into the contracts. The actual return depends on validator performance: how much was loaned out, how the validators performed, and the realized interest each round, all net of fees. The app derives a live APY by annualizing the recent observed per-round growth in the exchange rate. It uses **241 rounds per year** as the annualization basis, because each KTON settlement cycle is about 36 hours (365.25 days / roughly 36.4 hours per cycle is about 241 cycles a year). In plain terms: the app measures how much the rate grew over recent rounds and projects that forward across 241 rounds. Because the inputs change every round, the displayed APY changes too. Treat it as a live estimate based on recent performance, not a promise of future returns. | Concept | What it is | | --------------- | ---------------------------------------------------------------------------- | | Exchange rate | `total_balance / supply`, current Gram value of 1 KTON | | Rounds per year | 241 (one cycle is roughly 36 hours) | | APY | Recent per-round rate growth, annualized over 241 rounds, net of the 16% fee | | Updates | Discretely, at each round finalization | ## Current rate vs projected rate There are two rate figures worth distinguishing, because the protocol uses them in different places by design: * **Current rate** is `total_balance / supply` right now, reflecting profit already realized and folded in. * **Projected rate** is the expected rate at the end of the current round. It pre-credits the interest the pool expects to earn from this round's loans, after subtracting the expected governance fee and the finalize fee. This asymmetry is intentional. When you deposit, the pool mints your KTON at the **projected end-of-round rate**, so you are not unfairly diluting holders who have already waited through the round, and you start participating in this round's expected yield. When you make an optimistic withdrawal, conversion uses the **current** rate. The projected ratio is also exposed on-chain for tooling. The practical takeaway for a depositor: the amount of KTON you receive is computed against the projected rate, which is slightly higher than the bare current rate, because it already accounts for the round's expected (post-fee) earnings. ## How losses would be handled Validator staking carries the possibility of a round where the pool does not come out ahead. KTON handles this transparently by **socializing losses across all holders**. If a round's net profit is negative, that negative amount is subtracted from `total_balance`, which lowers the exchange rate for everyone proportionally. The loss is floored: it can never exceed the pool's own `total_balance`, so the rate cannot go below zero. No single holder is singled out, and there is no separate insurance token. A loss simply shows up as a lower Gram value per KTON, shared evenly, the same way gains are shared evenly. In normal operation the per-round interest is positive and the rate rises. The loss-sharing mechanism exists so that, in the rare event of an unprofitable round, the accounting stays consistent and fair rather than failing or favoring some holders over others. ## What this means for you as a holder * You hold KTON. You do nothing. * Your KTON balance never changes; its Gram value grows as the rate rises. * Yield compounds automatically each round, net of the 16% governance fee. * The APY you see is a live estimate from recent rounds, not a fixed rate. * The rate steps up at round finalization, not continuously. * In a losing round, the rate would step down slightly, shared by all holders. Next: **Fees** --- # Agent Instructions This documentation is published with GitBook. GitBook is the documentation platform designed so that both humans and AI agents can read, navigate, and reason over technical content effectively. Learn more at gitbook.com. ## Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. Perform an HTTP GET request on the current page URL with the `ask` query parameter: ``` GET https://docs.kton.io/getting-started/04-yield-and-exchange-rate.md?ask= ``` The question should be specific, self-contained, and written in natural language. The response will contain a direct answer to the question and relevant excerpts and sources from the documentation. Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.