> For the complete documentation index, see [llms.txt](https://docs.ledgity.finance/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.ledgity.finance/technical-information/technical-architecture/vault-factory-and-l-token-architecture.md).

# Vault Factory & L-Token architecture

Ledgity vaults are built to provide stable, predictable real yield while remaining **fully composable** and **non-custodial**. The architecture is modular: each stablecoin vault is instantiated from a **Vault Factory**, and each vault issues its own **L-Token**, representing a claim on underlying assets.

***

### **Vault Factory**

The **Vault Factory** is the contract responsible for deploying new vault instances (lyUSDC, lyEURC, future stable yield strategies, chain deployments, etc.).

#### **Key Responsibilities**

| Function                     | Description                                                           |
| ---------------------------- | --------------------------------------------------------------------- |
| **Deploy new vaults**        | Creates new L-Token vaults from a standardized implementation.        |
| **Register vault metadata**  | Keeps an on-chain registry of all active Ledgity vaults.              |
| **Parameter configuration**  | Sets initial parameters: stablecoin type, decimals, risk status, etc. |
| **Access & safety controls** | Ensures only governance-mandated vault deployments occur.             |

This allows Ledgity to:

* Expand yield products to new stablecoins (e.g., USDC / EURC / USDT in the future)
* Deploy the protocol across multiple chains
* Maintain a **single consistent logic base** for all vaults

> **No vault is deployed manually.**\
> Vault creation always occurs through the Factory to ensure consistency, auditing, and governance control.

***

### **L-Token (lyUSDC / lyEURC)**

When users deposit stablecoins into a vault, they receive **L-Tokens**.\
These tokens represent their share of the vault and **automatically accrue yield** via **PPS (price-per-share) increase**, not by minting additional tokens.

#### **Core Properties**

| Property                                | Value                                           |
| --------------------------------------- | ----------------------------------------------- |
| **1:1 deposit / redeem ratio at entry** | 1 USDC → 1 lyUSDC on deposit                    |
| **Non-rebase**                          | Balance stays constant, PPS increases over time |
| **ERC-20 standard**                     | Fully composable across DeFi                    |
| **Auto-compounding**                    | Yield reflected directly in redeem value        |

#### **Why PPS (Non-Rebase)?**

The move from rebase tokens (V1) → **non-rebase PPS tokens (V2)** solves the main DeFi integration problem:

| Model               | Issue                                            | Result                             |
| ------------------- | ------------------------------------------------ | ---------------------------------- |
| Rebase tokens (V1)  | Changing balances break DeFi pools & LP math     | Poor composability                 |
| **PPS tokens (V2)** | Yield reflected in share value, not token supply | **Plug-and-play with all of DeFi** |

This makes **lyUSDC / lyEURC integrable** into:

* DEX liquidity pools
* Lending & borrowing markets (Euler, Morpho, etc.)
* LP concentration strategies
* Index products
* Structured vaults

***

### **How Yield is Accrued**

Yield does not come from emissions or token inflation.\
It comes from **cash flows** generated by **short-duration RWA strategies** and reflected on-chain:

```
Yield generated → Forwarded to Vault → PPS increases
```

Users never need to:

* Claim rewards
* Stake separately
* Compound manually

**Holding the token = earning the yield.**


---

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