Example Scenarios
A step-by-step walkthrough of how REFI2 operates from mortgage origination through yield distribution.
Scenario Overview
This example follows a $1,000,000 Canadian residential mortgage loan through the complete REFI2 lifecycle, from origination to yield distribution. The scenario demonstrates how real-world mortgage interest flows to token stakers.
Process Flow
1. Mortgage Origination
A Canadian residential mortgage loan of $1,000,000 CAD is originated at a loan-to-value of 75% and is secured against real property. The loan carries a 12.0% annual interest rate, generating $120,000 CAD in annual interest payments.
- •Mortgage is secured by Canadian real estate collateral
- •Loan-to-value ratio maintained within risk parameters
- •Interest payments scheduled monthly or quarterly
2. Token Minting
REFI2 tokens are minted to represent the mortgage collateral. Token token supply is backed by equivalent collateral, plus the origination mortgages, and token supply is limited to not go any lower than a collateralization rate of 102%.
3. User Staking & Yield
Token holders stake their REFI2 tokens to earn yield. The yield is generated from the mortgage interest payments. Stakers can unstake at any time with no lockup period.
4. Liquidity Event
A portion of the mortgage interest spread is allocated to maintain liquidity reserves. These reserves ensure that token redemptions can be processed immediately without waiting for loan maturity.
- •Liquidity reserves maintained at target levels
- •Reserves enable on-demand token redemption
- •Reserve levels adjusted based on redemption activity
5. Yield Distribution
Mortgage interest payments are collected and distributed to the treasury. Staked users can claim their accrued yield at any time, pulling from the treasury.
6. Surplus Allocation
Any surplus yield beyond the target distribution rate is allocated according to protocol parameters. Surplus may be added to reserves, distributed as additional yield, or allocated to protocol development.
Where Does the Surplus Yield Go?
When mortgage interest exceeds the target yield distribution, surplus funds are allocated as follows:
- •Yield Paid to Stakers ($80,000 / 66.7%): Distributed to stakers as yield from mortgage interest payments
- •Cost of Operations and Compliance ($20,000 / 16.7%): Covers operational costs, audits, and compliance requirements
- •Added to Liquidity ($10,000 / 8.3%): Maintains sufficient reserves for immediate token redemptions and market stability
- •Added to Protocol Reserve ($10,000 / 8.3%): Additional buffer for unexpected events or market volatility
The Flow of Funds
A structured breakdown of how funds move through the REFI2 system from mortgage interest collection to final distribution.
| Category | Amount (CAD) | Percentage |
|---|---|---|
| Total Interest Collected | $120,000 | 100% |
| Operations and Compliance | $20,000 | 16.7% |
| Yield Paid to Stakers | $80,000 | 66.7% |
| Added to Liquidity | $10,000 | 8.3% |
| Added to Protocol Reserve | $10,000 | 8.3% |