> For the complete documentation index, see [llms.txt](https://docs.tapir.money/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.tapir.money/readme/how-it-works.md).

# How It Works

Tapir uses three steps to separate depeg exposure from a yield-bearing position.

## 1. Split the base asset

During a pool's **ACTIVE** period, depositing 1 base-asset unit creates **0.5 DP + 0.5 YB**. Amounts are accounted for in the base asset's smallest units; an odd input rounds down to an even amount.

| Token                    | Role                                                                                                            |
| ------------------------ | --------------------------------------------------------------------------------------------------------------- |
| **DP — Depeg Protected** | Receives additional base-asset units at resolution if the oracle records a qualifying depeg, subject to the cap |
| **YB — Yield Boosted**   | Gives up collateral to DP in that event, in exchange for the economics of selling protection                    |

The base asset remains in the pool. Its yield-bearing economics remain in the backing; DP and YB do not each receive a second copy of the yield. Returns depend on the entry price, fees, asset performance, and settlement.

## 2. Trade your exposure

Trade DP for YB, or YB for DP, on the market's AMM. Selling YB to acquire more DP increases protection exposure; selling DP to acquire YB increases first-loss exposure. The exchange rate is market-priced.

You can also provide concentrated liquidity to earn swap fees. Trading and execution depend on available liquidity, slippage limits, and whether the AMM is paused. An equal pair of DP and YB can be recombined into the base asset while the pool is ACTIVE, subject to its fee and pause state.

## 3. Resolve, then redeem

Expiry starts **COOLDOWN**, rather than immediate redemption. The configured oracle submits a high watermark and resolution price. Once cooldown and minimum price age have passed, anyone can call `resolvePriceDepeg()`. The pool then enters **REDEMPTIONS** and holders can redeem each token independently.

* **No recorded depeg:** each DP and YB redeems for 1 base-asset unit before fees.
* **Recorded depeg:** DP's redemption rate rises, up to 2 base-asset units per DP; YB's rate falls by the same amount, down to zero. The two rates sum to 2.

The cap can offset an oracle-measured decline of up to 50% before fees and entry premiums, assuming the pool's collateral remains available. Protection follows the configured oracle's measurement; a temporary discount, withdrawal delay, or loss the oracle does not capture need not produce a payout.

Oracle preparation and submission depend on authorised operators. Admin controls, pauses, manual backup paths, and data availability can affect settlement. See [Oracle Resolution](/protocol-mechanics/tapir-mechanics/oracle-resolution.md), [Redeem](/system-workflow/redeem.md), and the [Core V1 lifecycle specification](https://github.com/tapir-protocol/public-tapir-core-v1/blob/main/docs/tapir_pool_lifecycle_risk_controls.md).