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Asset Lifecycle

TODO

This section is mostly AI fluff and requires substantial revision to reflect actual protocol design decisions.

An asset's journey through Rarity follows a structured path from physical acquisition to on-chain liquidity and beyond. The lifecycle is designed to be transparent, auditable, and programmatic, ensuring every token represents a verifiable claim on real assets while remaining fully composable with DeFi primitives.

Phase 1: Collection creation​

Acquisition and documentation​

The lifecycle begins when an issuer acquires authenticated assets and prepares them for tokenization. The issuer evaluates authenticity, condition, provenance, and market value, then purchases the asset at a verifiable price. That acquisition price becomes the foundation for everything that follows: the floor for token sales, the reference for mark-to-truth auctions, and the anchor for price discovery.

The issuer must provide complete documentation about the assets being tokenized—authentication certificates, provenance records, custody arrangements, and relevant legal or regulatory documentation. This ensures transparency and auditability, enabling participants to verify what they're buying. Every asset enters Rarity with a complete paper trail, recorded either on-chain via IPFS hashes or through verifiable links.

Verification and whitelisting​

Once acquired, the asset moves to a whitelisted custodian for independent verification. The custodian confirms authenticity, assesses condition, and documents everything on-chain. This transforms a physical object into a verifiable on-chain fact—the bridge between legal truth (off-chain) and economic truth (on-chain).

The issuer must also provide identification and credentials to demonstrate reputation and legitimacy. The protocol maintains a whitelist of approved issuers who have passed due diligence checks, ensuring only reputable parties can launch collections. This permissioned issuance layer protects participants while maintaining the permissionless trading that follows.

Minting​

With the asset verified and documented, the issuer mints the corresponding on-chain tokens according to the collection model. For asset-backed tokens, each asset mints a fixed number of tokens. For fund-variable issuance, tokens are minted proportional to acquisition NAV. Every token is born with a provenance—you can trace any token back to its minting event, see the acquisition price, verify the custodian attestation, and audit the documentation.

The collection defines the economic scope of tokenization—what assets back the tokens, how supply scales, and what pricing mechanisms apply. This mapping determines how the tokenized assets interact with DeFi primitives: AMMs, lending markets, yield optimizers, and futures contracts.

Phase 2: Raredrop (initial offer)​

The newly issued token is listed at a fixed price equal to the acquisition value of the underlying assets on a concentrated liquidity AMM. During this window, the token's issued supply is the only liquidity in the pool, creating a controlled launch environment where early participants can acquire exposure at the objective acquisition price.

The Raredrop price is anchored to acquisition value, not market speculation. This ensures initial participants acquire tokens at a price that reflects the real cost basis of the underlying assets, creating a fair launch mechanism that aligns issuer and participant interests.

Transition conditions​

The Raredrop transitions to permissionless trading when two conditions are met:

Sufficient distribution: A minimum percentage of issued tokens must be sold, ensuring broad distribution and initial liquidity depth.

Time threshold: A minimum time period must have elapsed, ensuring adequate opportunity for participation.

These conditions are programmatic and transparent—encoded in smart contracts, removing governance bottlenecks.

Liquidity reserves​

The issuer reserves a percentage of the issued assets and funds raised during the Raredrop to provide liquidity during the trading phase. By default, this is 10% of the assets and 10% of the funds raised (denominated in a USD-stablecoin). These reserves ensure the issuer can actively market make post-launch, maintaining tight spreads and sufficient depth for composability with other DeFi protocols.

Phase 3: Post-offer trading​

Once the transition conditions are met, the same pool remains open for permissionless secondary trading. The transition is seamless—no migration, no new contracts, no liquidity fragmentation. The pool that launched the collection becomes the permanent trading venue, and the issuer's liquidity reserves are deployed to provide initial market depth.

Price discovery​

The primary venue for price discovery is the concentrated liquidity AMM. Unlike traditional constant-product AMMs, Rarity's CL AMM adapts its curve based on market conditions—behaving more like constant-sum when calm (tight spreads, low slippage) and more like constant-product when volatile (wider spreads, better protection).

Every swap reveals information about market consensus. TWAP and RWAP weight prices by liquidity depth and time, creating manipulation-resistant references that feed into lending, liquidations, and supply management. The guarded pool price uses max⁡(pool,TWAP,RWAP)\max(\text{pool}, \text{TWAP}, \text{RWAP}) to resist manipulation, ensuring no single metric can be gamed.

DeFi composability​

Tokens become fully composable DeFi primitives. They can be supplied to lending markets to earn yield, or borrowed against to access liquidity without selling. Rarity's lending is market-aware—loan-to-value ratios and interest rates adapt based on the same depth and volatility signals that govern trading. When liquidity is deep and volatility low, you can borrow more. When markets stress, limits tighten gracefully.

Tokens can also serve as collateral for perpetual futures positions, enabling leveraged exposure without selling the underlying. Rarity's futures are oracleless—they use the AMM's own pricing (TWAP/RWAP) as the reference, eliminating external oracle dependencies. Cross-margin in the permissioned pool means one deposit can back loans, orders, and futures simultaneously.

Phase 4: Active market making and growth​

Issuer stewardship​

The issuer acts as an active market maker in the pool, providing depth and stewarding healthy price discovery. This isn't passive custody—it's programmatic stewardship that ensures the token maintains tight spreads and sufficient liquidity for composability with other DeFi protocols.

Ongoing minting​

As the collection grows, new assets are acquired and tokenized through the minting process. The minting process follows a two-path structure depending on asset ownership:

Issuer-acquired assets: The issuer acquires an asset directly, authenticates it, and mints the corresponding tokens. Newly minted tokens enter through supply management mechanisms—hold periods, release curves, and open interest—ensuring orderly market entry and preventing disorderly price movements.

Custodian-verified assets: An external owner sends their asset to the custodian for tokenization. The issuer verifies authenticity and quality, attests to it on-chain, and mints the corresponding tokens. The original owner retains ownership and can use them across the protocol: spot trading, lending, borrowing, futures, or other DeFi primitives.

Price re-anchoring​

Markets drift over time. Assets appreciate or depreciate. New information emerges. Rarity maintains synchronization between market price and asset value through periodic re-anchoring.

When market price deviates significantly from fundamentals, mark-to-truth auctions discover objective value through committed capital. Unlike oracle feeds that report what someone else decided, auctions reveal what participants are willing to pay right now with real money. The clearing price becomes the new NAV reference, and future minting references the updated anchor.

Ongoing verification​

Assets don't verify once and stay verified forever. Custodians conduct periodic inspections to ensure assets remain in stated condition. For collections with many assets, this happens on a rolling basis—a subset inspected each quarter, with full portfolio coverage annually. If condition materially changes, it triggers a mark-to-truth auction to update pricing.

The continuous cycle​

The lifecycle doesn't end—it loops. As long as the collection exists:

  • New assets are acquired and tokenized (Phase 1 & 4)
  • Tokens trade, lend, and serve as collateral (Phase 3)
  • Prices re-anchor to fundamentals (Phase 4)
  • The issuer provides active market-making (Phase 4)

This creates a living system where on-chain tokens and off-chain assets remain synchronized through verifiable mechanisms, market discipline, and programmatic enforcement.