core concepts
One reserve. Divided, never multiplied.
Everything on Cleave follows from a single rule: the shield and the probe of a tranche always add up to the token. This page walks through the reserve, the tranches, the two claims, the invariant, the write-off and the restrike, with the formulas the vault will use.
If you only want the picture: a house has a senior claim and an equity stub. Cleave writes those two claims as tokens. Nobody lent you the house.
The reserve
A market holds one token. The bonding curve on Pons prices that token in the pair asset the creator chose at launch: ETH, USDG, cbBTC, a tokenized stock, an ETF, gold, silver, oil, treasuries. The pair is the reserve. Cleave converts the curve price to USD with the pair’s Chainlink or Coinbase feed so every claim can be quoted in USDG.
Nothing on Cleave multiplies that reserve. Claims are slices of the token, and the slices always sum to one token.
Tranches
Every market runs three tranches: Shallow, Mid and Deep. A tranche is defined by two numbers. The shield target f is the fraction of each token move the shield is meant to feel. The strike weight w is the share of the token that is shield at the strike price.
| Tranche | Shield target f | Probe target at max leverage L |
|---|---|---|
| Shallow | 0.5 | 1 + (L − 1) / 3 |
| Mid | 0.35 | 1 + (L − 1) · 2 / 3 |
| Deep | 0.2 | L |
Given the target probe elasticity Lt of a tranche, the strike weight solves the probe’s opening elasticity Lt = (1 − f·w) / (1 − w), which gives w = (Lt − 1) / (Lt − f). The Deep tranche of a 3× market therefore opens with w = 2 / 2.8 = 0.714: 71.4 percent of the token is shield and 28.6 percent is probe.
Shields and probes
Against each tranche Cleave issues two claims. Shield claims are named sTICKER, probe claims xTICKER.
Shield value. At token price P with strike P0:
D(P) = min( P , w · P0 · (P / P0)^f )
The power term is the shield’s cushioned track: it moves with elasticity f, so a Shallow shield feels half of every move. The min caps it at the token price, which only binds after a write-off.
Probe value.
X(P) = P − D(P)
The probe takes the residual. Its elasticity is (P − f·D) / (P − D) while X > 0, which is above 1× and rises as the token falls toward the write-off point. That is why the ladder shows a live elasticity per rung, not a fixed multiplier.
The invariant
For any tranche, at any price, D(P) + X(P) = P. The two claims are a partition of the token. This is not a target or a peg; it is the definition of the probe. It means:
- There is no lender, because nothing is borrowed.
- There is no funding rate, because nothing is rented.
- There is no liquidation price, because there is no debt to cover.
Leverage exists only because the shield agreed to take less. The probe is leveraged the way the equity of a house is leveraged: the senior claim absorbs the first part of every move.
Write-off
As the token falls the cushioned shield track falls slower than the token, so the probe shrinks. At
P / P0 = w ^ (1 / (1 − f))
the shield track meets the token price and the probe is worth exactly zero. Below that point D(P) = P: the shield is the whole token and takes the whole move. Nothing is force-closed. The probe is written to zero by arithmetic, and a written-off probe cannot be bought.
The ladder shows each probe’s buffer: how far the token can fall from the current price before that probe is written off. A Deep probe in a 5× market has a much thinner buffer than a Shallow probe in a 2× market. Read it before you buy.
Restrike
When a probe is written to zero the tranche restrikes at the current price. The new P0 is the current P, the new w is recomputed from the tranche’s target elasticity, and a restrikes counter increments.
Shield holders keep value continuity: at the restrike D = P before and after, so no value moves between holders. Probe holders who were written off hold zero. New probes can be bought at the restruck tranche with a fresh buffer.
The ladder
Every market publishes seven rungs, ordered from most protected to most leveraged. Each rung shows its live price in USDG, its current elasticity and, for probes, the buffer to write-off.
ladder ┌ shield Shallow 0.50× ├ shield Mid 0.35× ├ shield Deep 0.20× ├ token 1.00× ├ probe Shallow 1.67× buffer 62% ├ probe Mid 2.33× buffer 41% └ probe Deep 3.00× buffer 26%
Prices refresh from the curve. If the last price is older than 60 seconds trades are refused with a stale price error rather than filled at a guess.