Fission Finance enables splitting yield bearing tokens such as (but not limited to) the vault tokens created by Apollo DAO into a principal token and a yield token. The principal token represents a claim on the underlying token (known as a zero coupon bond in traditional finance), while the yield token accrues all of the yield from the yield bearing token. These two tokens have a maturity date at which point no more yield accrues to the yield token and only the principal token is needed to redeem the underlying token.
This functionality enables many features and use cases, such as betting on whether yields for a particular token will rise or fall, creating liquidation free leverage, but most importantly creating fixed rate borrowing and lending.
Fixed rate lending is enabled by buying principal tokens at a discount and waiting until maturity before redeeming them for the underlying token, thus earning a fixed rate of interest during this period.
Fixed rate borrowing is enabled by minting principal tokens with exogenous collateral and selling the principal tokens at a discount. At the end of the maturity the user can unlock their collateral with either the underlying token or principal tokens which are now equal in value to the underlying token. This means that the borrowing paid a fixed rate of interest for their loan as the interest is determined at the point when the principal token is sold.
