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Fund with variable issuance

The fund with variable issuance model is designed for heterogeneous assets or evolving portfolios where each acquisition mints tokens proportional to acquisition NAV. This produces fund-like behavior—minting aligns with contributed value, not item count.

Key distinction: In this model, users are investing in the issuer's ability to grow the fund and manage the portfolio, not just the underlying assets themselves. Unlike asset-backed tokens where participants acquire exposure to specific commodities, here participants acquire exposure to the issuer's curation and portfolio management—the fund's ability to acquire assets at favorable prices and grow NAV over time.

The design goal is flexibility: portfolios can grow organically with acquisitions at varying price points, and minting naturally reflects the value contributed. A mint-to-NAV pool behaves like an open-ended fund—fair and investor-aligned when valuations are honest, but reliant on issuer integrity for acquisition pricing.

When to use​

Choose variable issuance when:

  • Mixed assets with varying valuations: diverse watch portfolios, loan pools, or tokenized treasuries with different terms
  • Dynamic portfolios: frequent acquisitions/dispositions where fixed-per-asset issuance would be impractical
  • Value-proportional minting: scenarios where minting should reflect contributed value, not item count
  • Issuer expertise exposure: when participants want exposure to issuer's ability to grow the fund and manage portfolios

This model is less suited for narrow reference classes where assets are economically equivalent—asset-backed tokens offer simpler math and lower trust requirements in those cases.

Issuance mechanics​

For an acquisition with NAV value and a target token price PP, the number of tokens minted is NAVP\frac{\text{NAV}}{P}.

Total supply grows with acquisitions. Unlike asset-backed tokens, supply doesn't scale linearly with item count—it scales with contributed value, creating a more flexible but more complex model. Note: redemptions would require governance approval and are not automatic—the default model is mint-only with secondary market trading for exits.

Pricing and backstops​

Spot pricing flows from the CL AMM, providing continuous price discovery based on executable liquidity. When market price deviates from objective NAV, mark-to-truth auctions reconcile deviations and restore price alignment.

The combination ensures prices reflect real asset value while maintaining 24/7 tradability and composability. The model's dependence on issuer-provided NAV inputs means trust is required that the issuer acquires assets at correct prices—the primary trust assumption.

Illustrative example​

Consider a collection acquiring two assets:

  • Asset A: acquired at $20,000 NAV
  • Asset B: acquired at $30,000 NAV
  • Target token price: $5 USDC

Minting:

  • TA=20,0005=4,000T_A = \frac{20{,}000}{5} = 4{,}000 tokens
  • TB=30,0005=6,000T_B = \frac{30{,}000}{5} = 6{,}000 tokens
  • Total supply: S=10,000S = 10{,}000 tokens

The math reflects value contributed, not item count. This flexibility enables portfolios to grow organically while maintaining proportional representation of underlying assets.

Trust assumptions​

Variable issuance requires trust that the issuer acquires assets at correct prices—this is the primary trust assumption. The issuer must:

  • Acquire assets at fair prices: purchases must reflect market value, not inflated acquisition costs
  • Provide transparent acquisition records: clear documentation of purchases, prices, and custody
  • Demonstrate portfolio management capability: ability to grow NAV through strategic acquisitions

NAV calculations can be done on-chain using the values provided by the issuer—the math is verifiable and transparent. The trust requirement is not about the calculation itself, but about whether the issuer acquired assets at correct prices and manages the portfolio effectively.

The model requires trust on the issuer compared to asset-backed tokens—specifically trust in acquisition pricing and portfolio management decisions. However, this tradeoff enables flexibility that asset-backed tokens cannot provide for heterogeneous portfolios, and allows participants to gain exposure to issuer expertise and portfolio growth potential.