NAV, decay & funding

A leveraged tracker is not a stock at 5×. Three forces separate it from the naive multiple, and all three are worth understanding before you rely on one as a floor.

NAV

A tracker's NAV is its backing — its share of the hedge account's equity on Lighter, plus the USDC sitting in its vault, plus any USDC on its way between the two — divided by its supply. The keeper computes it, signs it, and posts it on chain, where anyone can read it; mint and redeem are open at it — which is the arbitrage that keeps the traded price and the NAV together.

Everything the platform quotes in dollars for a bonded coin passes through NAV. It is the one number that turns "so many trackers" into "so many dollars".

The contracts refuse a stale NAV rather than act on it: if no fresh post has landed for 15 minutes (NAVOracle.maxStaleness, 900 seconds), minting and redeeming that tracker stop until one does. The keeper posts at least every 4 minutes, and sooner when NAV moves by 0.05%. Before a tracker has bonded, its NAV is pinned at exactly 1.0 and the oracle is not read at all. The keeper also refuses to post when its own books of dollars in transit, or its per-tracker ledger inside the shared hedge account, cannot be reconciled with the venue and the chains: a NAV it cannot stand behind is not posted.

The markets behind the trackers trade around the clock on Lighter, with no closed-market price band, so NAV keeps moving on nights and weekends — and the price can still jump when the underlying market reopens.

Volatility decay

A constant-leverage tracker rebalances to keep its multiple. That is what makes the multiple hold day to day, and it is also what makes it lose ground on a round trip.

Take an underlying that falls 10% and then rises back, against a 5× tracker:

underlying:   100 → 90 → 100          net  0%
5× tracker:   100 → 50 → 77.8         net −22%

The stock is unchanged. The tracker is down 22%. Nothing malfunctioned — this is the arithmetic of constant leverage, and it applies to every leveraged product that has ever existed. A lower multiple decays less; at 1× there is no rebalancing and no decay.

The keeper does not rebalance on every tick: it lets leverage drift within a band of 20% around the target (4× to 6× for a 5× tracker) before trading back, which trades less often at the cost of a looser multiple.

A tracker is not a long-term store of value. The more the underlying chops, the more it costs. If you are holding a bonded coin because you like where the stock is going, that thesis has a clock on it.

Funding and fees

The position lives on Lighter, and carrying it costs the tracker in a few ways. All of them are paid out of the tracker's own share of the hedge account — so they show up as drag on the NAV, not as a charge on your swap.

• Funding — settled every hour between longs and shorts on the same market, at the rate Lighter publishes for that market (its public API shows the current rate and the settled history). When longs pay shorts, a long tracker pays and a short tracker earns; the other way round when the rate is negative. A long and a short tracker on the same market net inside the shared account and pay nothing between them.
• Trading fees — none. Lighter charges a Standard account 0 maker and 0 taker fees, so the keeper's rebalancing trades — whenever backing arrives or leaves and whenever leverage drifts out of band — cost only the spread they cross.
• Moving money — deposits from Avalanche carry no Lighter fee (minimum 5 USDC). A fast withdrawal pays the fee Lighter's API quotes for it (3 USDC according to its docs; not measured live yet), minimum 4 USDC, and lands on Arbitrum; the bridge back to Avalanche (Circle's CCTP) may charge a fee, not measured on this route yet. Both are booked to the tracker when the leg leaves. Gas on both chains is paid by the operator, never out of a vault.
• Liquidation — if the account were liquidated, Lighter charges a 1% liquidation fee on top of the loss. The keeper's job is to de-lever long before that.

At 5×, all of it is levered: a rate that looks negligible on a spot position is five times that against the margin behind a tracker.

The tracker vaults themselves charge nothing today: mint, redeem and management fees are all zero at creation. The vault owner can set them, within hard caps written in the contract (5% on a mint or a redeem, 5% a year of management fee); any change is an on-chain event.

What this means for a coin's floor

The backing behind a bonded coin is a leveraged position, and it moves like one. It can be worth much more than the dollars that went in, and it can be worth much less. It is not a stablecoin reserve and nothing here pretends otherwise.

What it is, is real, on a venue with public prices, sized from dollars you can trace leaving the tracker's vault on Avalanche, landing on Arbitrum on the way back, and being minted back into it. See the hedge book.