# GROW Token (ERC-20) ### What is GROW Token? The Grow Token is a liquid, yield-bearing representation of the Senior Tranche within each loan bundle. It is designed for passive investors seeking predictable, fixed returns and prioritizes principal protection through the protocol’s repayment waterfall. Key features: * **Minted** when USDC is deposited into the senior pool * **Burned** upon withdrawal or redemption * **Fixed interest rate**, set by the lending partner at bundle creation * **Partial redemptions** allowed at any time, subject to liquidity * **Auto-redeemed** at loan maturity with no fees * **Early redemption** allowed with a 1% protocol fee, subject to liquidity and a FIFO withdrawal queue ### **How Grow Token Value Increases** Grow Tokens do not receive direct interest payouts. Instead, their value grows through an increase in their **Net Asset Value (NAV)** over time. As the lending partner deposits loan repayments into the protocol, the smart contract allocates these funds first to cover: 1. **Senior Principal** – ensuring full capital protection 2. **Senior Interest** – added to the value of the senior pool This increase is reflected in the internal accounting of the protocol. As repayments accumulate, the NAV of the senior pool rises. Because Grow Tokens are redeemable based on this NAV, their redemption value increases over time. ### **Net Asset Value (NAV) Calculation** The NAV represents the total value of all active senior positions in a specific loan bundle, including accrued but unpaid interest. It is calculated as: **NAV = (Total Repaid to Senior Pool – Remaining Senior Principal Outstanding) / Total Grow Tokens in Circulation** The NAV per Grow Token increases as more senior interest is repaid. Upon redemption, investors receive USDC proportional to the NAV at that point in time. This structure allows Grow Token holders to benefit from a predictable and transparent yield mechanism without the need for manual interest claims. Their earnings are realized upon redemption—either at maturity (without fee) or through early withdrawal (with fee and queue constraints). --- # Agent Instructions: 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. Perform an HTTP GET request on the current page URL with the `ask` query parameter: ``` GET https://pencil-finance.gitbook.io/pencilfinancedocs/protocol-overview/grow-token-erc-20.md?ask= ``` The question should be specific, self-contained, and written in natural language. The response will contain a direct answer to the question and relevant excerpts and sources from the documentation. Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.