> For the complete documentation index, see [llms.txt](https://docs.sierra.money/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.sierra.money/overview/core-concepts.md). # Core Concepts **Vault:** A vault is a portfolio of yield-generating assets powered by Sierra's infrastructure stack. A vault can hold a single yield source or a diversified mix of onchain and offchain assets, which can be actively managed and tailored to provide the exact risk, liquidity, and yield profile that depositors want. **Liquid Vault Token (LVT):** An ERC20 token representing a deposit in a Vault, which is composable and interoperable with DeFi and CeFi. LVTs also have secondary market liquidity on decentralized and centralized exchanges, which allow users to buy and sell LVTs without depositing directly into a Vault. The minting and redemption price of the LVT increases daily to reflect yield generated by the underlying reserves. All LVTs appreciate by the same amount, so holders do not have to stake LVTs or claim rewards to earn yield. **OpenTrade Technology:** London headquartered software firm responsible for developing and maintaining the OpenTrade Platform, which supports Sierra deploying reserves to the OpenTrade SPC. **OpenTrade Segregated Portfolio Company (SPC):** A Cayman Islands legal structure that keeps assets legally separated between portfolios. For each Vault or LVT, all Reserve Assets deployed into Yield Sources are held in their own dedicated segregated portfolio, ensuring Reserve Assets cannot be used to satisfy the liabilities of Sierra, OpenTrade Technology, or other OpenTrade SPC lenders. **Reserve Assets:** The underlying portfolio of assets backing a Vault or LVT, which generate yield through OpenTrade's platform. The reserve assets backing each Vault or LVT are held in a segregated wallet secured by Fireblocks MPC custody. Reserve compositions differ across each Vault and LVT, which are determined by the corresponding [Reserve Management Strategy](/building-with-sierra/reserve-management-strategy.md) and managed by the [Advisory Council](/building-with-sierra/advisory-council.md). **Yield Sources:** Each underlying type of RWA and DeFi yield generation strategy available through Sierra. The current set of [Available Yield Sources](/building-with-sierra/available-yield-sources.md) include RWAs (U.S. Treasuries, Investment-Grade Commercial Paper, AAA-rated CLOs, Trade Finance, Investment-Grade Corporate Bonds etc.) and DeFi (Morpho, AAVE etc.) yield sources. All new yield sources are subject to underwriting by the Advisory Council. Each Vault or LVT allocates to a subset of available yield sources based on its respective [Reserve Management Strategy](/building-with-sierra/reserve-management-strategy.md). **Net Asset Value (NAV):** The underlying value of Reserve Assets backing a Vault or LVT. NAV is calculated by summing up the total value of reserves deployed into each Yield Source. **Exchange Rate:** The NAV for a Vault or LVT divided by the total amount of Vault tokens or LVTs issued. This is the price used for [Minting and Redeeming](/building-with-sierra/minting-and-redeeming.md) by [Authorized Participants](/additional-resources/authorized-participant-onboarding.md). The Exchange Rate for Vaults and LVTs are updated onchain each hour to reflect the accrued yield generated by Reserve Assets. The Exchange Rate for each Vault and LVT is available in the respective [smart contract](/building-with-sierra/blockchain-addresses.md) using "exchangeRate". **Segregated Portfolio Company (SPC):** A Cayman Islands legal structure that keeps assets legally separated between portfolios. For each Vault or LVT, all Reserve Assets deployed into Yield Sources are held in their own dedicated segregated portfolio, ensuring Reserve Assets cannot be used to satisfy the liabilities of Sierra, OpenTrade, or other OpenTrade customers. **Bankruptcy-Remote Structure:** The combination of Sierra Reserve Limited, the British Virgin Islands entity enabling issuance of Vaults and LVTs, and OpenTrade's Cayman SPC is designed to keep Reserve Assets separate from the operating entities of Sierra and OpenTrade. If either company becomes insolvent, the reserve assets remain isolated and are not available to general creditors. Independent, third-party trustees oversee the structure and security interests are fully perfected. **Authorized Participants:** Institutional entities that have completed [onboarding](/additional-resources/authorized-participant-onboarding.md) and Know Your Business (KYB) with Sierra Reserve Limited. Once complete, their onchain addresses are whitelisted for Minting and Redeeming Vault tokens and LVTs. **Issuance or Minting:** Vault tokens and LVTs are issued or minted by calling the "deposit" function on the respective smart contract. Only Authorized Participants that have been whitelisted can mint a Vault token or LVT. Issuance or minting occurs by buying Vault tokens or LVTs at the prevailing exchange rate using the underlying liquidity asset (i.e. native USDC on Ethereum). **Redemptions:** Vault tokens and LVTs are redeemed by the [Issuer role](broken://pages/RDcyGDa30ggxRC2Nq0xE) calling the "processRedemption" function on the respective smart contract. Only Authorized Participants that have been whitelisted can request a redemption for a Vault token or LVT. Redemptions occur by selling Vault tokens or LVTs at the prevailing exchange rate and receiving the underlying liquidity asset (i.e. native USDC on Ethereum). **LayerZero OFT:** Sierra uses LayerZero's Omnichain Fungible Token (OFT) standard to enable native transfers of LVTs across blockchains. Tokens are locked on the source chain and minted on the destination chain, allowing a single unified token supply across networks. Sierra uses a 5/5 DVN configuration with Google, LayerZero Labs, Canary, Nethermind and Deutsche Telekom. These validators are diversified across multiple cloud providers and client implementations. **Sierra Governance Token (SGT):** The governance token to be issued by Sierra Governance Limited in the British Virgin Islands. SGT will be the only governance token for the Sierra Protocol and will be issued in October 2026. Peaks from the [Summit Program](https://blog.sierra.money/blog/sierra-summit-program) will convert to SGT at the Token Generation Event (TGE). SIERRA and all other LVTs issued by the Sierra Protocol do not have governance functionality. --- # Agent Instructions This documentation is published with GitBook. GitBook is the documentation platform designed so that both humans and AI agents can read, navigate, and reason over technical content effectively. Learn more at gitbook.com. ## Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. 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