Pre-Udon

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Introduction: What is PreUdon?

PreUdon is our protocol’s temporary, on-chain reward asset, designed to catalyze growth and reward active participants on the Chromia network. It functions as an asset, providing a transparent incentive layer across our lending and borrowing markets.

Core Purpose: PreUdon's primary function is to enhance the Net APY for users, strategically driving liquidity (TVL) and ensuring balanced borrowing activity across various assets.

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How PreUdon Works

Earning PreUdon is directly linked to your contribution to the protocol's stability and activity over time.

The Bi-Weekly Cycle and Snapshot

The reward mechanism operates on a two-week schedule.

• Continuous Tracking: Throughout the bi-weekly cycle, the protocol’s smart contracts continuously log the time and volume of your Supply and Borrow positions.

• The Contribution Metric: Your contribution is quantified by the accrued interest (for suppliers) or accrued debt (for borrowers) during that period. This metric fairly measures your sustained impact on the market.

• Snapshot: A precise snapshot is taken at the end of the cycle. This snapshot finalizes contributions and locks reward calculations.

Strategic Reward Pools and Weights (The Allocation Model)

A fixed pool of PreUdon is issued each cycle and allocated based on strategic priorities.

• Weighting System: Every asset and action (e.g., Supplying CHR, Borrowing D) is assigned a specific Weight—a multiplier that determines the size of its individual Reward Pool.

  • High Weight: Used to attract liquidity to a low-TVL asset or encourage a critical borrowing action.

  • Low Weight: Applied to pools where liquidity is already abundant or stable.

• Calculating Your Share: Your final PreUdon reward is your proportionate share of the specific pool you contributed to. It is calculated by dividing your individual contribution metric by the total contribution metric of all users in that same pool, then multiplying the result by the pool's allocated PreUdon.

The formula:

$$\text{Share}(u; t_0,t_1) = \frac{ r_{s,u}(t_0,t_1)\cdot w_s \;+\; r_{b,u}(t_0,t_1)\cdot w_b } { \sum\limits_{i \in \mathcal{U}_{eligible}} \big( r_{s,i}(t_0,t_1)\cdot w_s \;+\; r_{b,i}(t_0,t_1)\cdot w_b \big) } \times 100$$

Where:

• r_{s,u}(t0,t1): Interest earned from supply of user u in period [t₀, t₁]

• r_{b,u}(t0,t1): Loan interest of borrow of user u in period [t₀, t₁]

• w_s, w_b: weights for supply and borrow

• 𝒰_{eligible}: the set of eligible users (those who satisfy program rules, e.g. no withdrawal in restricted period)

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Current Weight Allocation Table

The table below illustrates current weights assigned to core assets. These weights determine how the total PreUdon reward pool is distributed among different markets.

Asset	Supply Weight	Borrow Weight
D, ALICE, CHR	0.4	0.6
USDC	0.2	0.8

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Understanding APY

The UI consolidates financial dynamics into the Net APY, separating base earnings from incentive rewards.

The relation:

$$\text{Net APY} = \text{Interest APY} \pm \text{Incentive APY}$$

Activity breakdown:

• Supply (Lenders): Interest APY + Incentive APY — Enhanced yield; PreUdon boosts returns on supplied assets.

• Borrow (Borrowers): Interest APY − Incentive APY — Reduces borrowing costs; in highly incentivized markets Net APY can be positive (you may be paid to borrow).

Note on Incentive APY: the Incentive APY is calculated based on the internally configured USD value of the PreUdon issued for that cycle.

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Claiming, Conversion, and Eligibility Rules

Understanding the claiming schedule and eligibility requirements is vital.

Claiming Process

• After the bi-weekly snapshot and reward distribution, earned PreUdon is immediately available.

• You can claim tokens starting 1 week through the protocol's reward interface, transferring them to your wallet.

• You must claim within 7 days after the claiming window opens. If you fail to claim within this period, rewards for that cycle expire permanently.

If you fail to claim within 7 days after the claim window opens, your PreUdon rewards for that cycle will expire permanently and cannot be recovered.

Conversion to Udon

PreUdon tokens are designed to be held until the official launch of the Udon token. At launch, a migration event will allow a guaranteed conversion (1:1).

Crucial Eligibility and Withdrawal Rules

Each 14-day cycle has a two-phase eligibility rule:

• Week 1 (Days 1–7): Deposits and withdrawals are allowed. Accrued contribution continues to be tracked; early withdrawals in Week 1 do not disqualify you.

• Week 2 (Days 8–14): Stability & Check-in Period.

  • You must maintain your position without executing any withdrawal until the snapshot.

  • You are required to perform a "Check-in" action within Week 2 to confirm active participation.

Failure to complete the Check-in during Week 2 will result in ineligibility for the current reward cycle, even if no withdrawals were made.

Ineligibility Rule: Any withdrawal of supplied assets in Week 2, or failure to perform the Check-in, forfeits all PreUdon rewards for that entire cycle.

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Example Walkthrough: Weighted Reward Calculation

Hypothetical cycle with total reward pool = 10,000 PreUdon.

Pools:

• Asset A Supply — Strategic Weight: 3 — Pool Allocation: 7,500 PreUdon

• Asset B Borrow — Strategic Weight: 1 — Pool Allocation: 2,500 PreUdon

Alice's actions:

• Supplies Asset A, withdraws 50% on Day 5 (Week 1), re-supplies on Day 9 (Week 2), holds full position from Day 9 until Snapshot on Day 14.

• Alice's accrued interest (active days) totals $15 USD for the cycle.

• Total pool contribution (all users in Asset A Supply) = $150 USD.

Alice's final reward calculation:

1. Contribution share:

$$\frac{\$15}{\$150} = 10\%$$

1. PreUdon earned:

$$10\% \times 7{,}500\ \text{PreUdon} = \mathbf{750\ PreUdon}$$

Crucial Check: Alice did not withdraw during Week 2, so she is eligible to claim 750 PreUdon.

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Frequently Asked Questions (FAQ)

What is the USD value of PreUdon?

The USD value is an internal metric used to calculate the Incentive APR displayed on the UI. This value is determined by the protocol and may be adjusted to meet strategic goals.

Why is there a withdrawal restriction in Week 2?

The restriction promotes stability. Rewards compensate users who provide sustained liquidity during the crucial calculation phase before the snapshot, ensuring lending pool health.

Can I sell or trade PreUdon?

No. PreUdon is an internal, non-transferable reward credential. Its value is realized only through the guaranteed 1:1 conversion to the liquid Udon token when it officially launches.

If I withdraw partially in Week 2, do I still get a reward?

No. Any withdrawal (full or partial) of supplied assets, or full repayment of borrowed amount, executed during Week 2 (Days 8–14) makes you ineligible for PreUdon for that entire 14-day cycle.

If I repay, supply more, or borrow more in Week 2, what happens?

These actions are permitted and will not disqualify you:

• Repaying debt is allowed and does not cause ineligibility.

• Supplying or borrowing more is allowed and increases your contribution metric for the remainder of the cycle.

Why are the Incentive APR percentages for some pool actions so high?

High APRs occur when TVL for that action is low. Because reward allocation per action is fixed, dividing by small TVL yields high APRs. As TVL grows, APRs decrease. This mechanism boots activity by giving higher incentives to early participants.

If I forget to Check-in during Week 2, will I still be included in the snapshot?

No. You will not be included in the snapshot and will not receive rewards for that cycle. The Check-in step is mandatory during Week 2.

What happens if I don’t claim my PreUdon within 1 week after the claiming opens?

If you fail to claim within 7 days of the claiming window opening, your rewards for that cycle will expire and be permanently forfeited. There is no option to reclaim or appeal.

Why is there a 1-week claim?

The 1-week claim limit ensures efficient distribution and prevents unclaimed rewards from accumulating indefinitely. It encourages user engagement and maintains timely reward cycles.