Deposit transactions issue units in return for helping increase available liquidity.
When a deposit is initiated, the depositor’s funds are transferred from their account, and into the selected FeederPool. The depositor is issued FeederPool units, representing their investment into the respective FeederPool. In the same transaction, these funds are transferred from the FeederPool into the MasterPool (all funds are pooled in the MasterPool), and the FeederPool is issued MasterPool units, which reflects its investment in the overall MasterPool.
Deposit Funds and Unit Flow
The protocol utilizes the following equations to update the system upon deposit initiation. The first equation determines the quantity of new FeederPool units to be issued to the depositor. The second equation calculates the number of new MasterPool units to be issued to the respective FeederPool. Lastly, the third equation increases the MasterPool Value by the deposited funds, representing the overall increase in funds within the MasterPool.
It can be shown that a Depositor's Value will increase by their deposit amount following a deposit transaction, and that the values of all other depositors remain unaltered.