# Underlying Token

In iGain IRS, the way we select underlying assets varies from object to object. In order to boost capital efficiency, we can use "deposit certificates" , such as yToken on Yearn or cToken on Compound, as the underlying asset in lending/borrowing protocols or yield aggregators except for Aave. By doing so, users can get Short tokens directly with the certificate after they deposit, and no additional capital will be needed.

In the previous example, if users want fixed interest rate lending, they have to spend more money to buy Short tokens to realize fixed interest rate lending after they deposit into the lending protocols.

<img src="https://4196414977-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2F-MQNETCwx08rZueTzj3I%2Fuploads%2FGpdAaWp6KF21sa2RlO6U%2Fp-e.png?alt=media&#x26;token=d1b39969-792d-471b-a4d8-4d999cc53611" alt="" data-size="original">

**For example:** if users deposit 1000 DAI in Yearn, they will receive 800 yDAI as a deposit certificate. Nevertheless, if we use DAI as the underlying asset in iGain IRS, then users will need additional DAI to buy Short tokens. On the other hand, if we use yDAI instead as the underlying asset in iGain IRS, then users can use yDAI to acquire Short tokens directly without additional expenses and thus improve capital efficiency!

However, if yDAI is used as the underlying asset, then Long and Short tokens will be priced as yDAI, and users will need to deposit on Yearn on their own first and then buy Long and Short tokens on iGain IRS afterward. Which is not optimal.

**In order to simplify the procedure, we have integrated the Yearn service directly into iGain IRS.** Users now only need to put DAI in, and the proxy contract will do the rest automatically, i.e. deposit DAI into Yearn for yDAI first and then trade yDAI on iGain.<br>

Below are the procedures proxy contract executes:

#### **Buy Long/Short tokens**

1. Put DAI in
2. Deposit DAI into Yearn and get yDAI&#x20;
3. Use yDAI as the certificate to buy Long or Short tokens

#### **Sell Long/Short tokens**

1. Sell Long or Short tokens in iGain IRS and get yDAI&#x20;
2. Exchange yDAI for DAI in Yearn&#x20;
3. Return DAI to sellers

#### Add liquidity

1. Put DAI in
2. Deposit DAI into Yearn and get yDAI
3. Deposit yDAI into iGain IRS for LP&#x20;

#### Remove liquidity

1. Exchange LP for yDAI in iGain
2. Exchange yDAI for DAI in Yearn&#x20;
3. Return DAI to users&#x20;

According to the steps described above, we can notice that yDAI is needed in every single transaction. Thankfully, the frontend side and Proxy Contract will significantly simplify the procedure. So users can finish most of the transactions on iGain directly instead of going back and forth between two different protocols.

Therefore, with the Proxy Contract support, the user experience of fixed interest rate lending on Yearn will be as seamless as on Aave. Users will no longer need to deposit on Yearn by themselves to get yToken, but have significantly optimized capital allocation by using the fixed APY lending function.

In addition to convenient user experience and improved capital utilization, the value of yDAI will appreciate as time goes on. As a result, you can earn additional fluctuant lending interest rates just by holding Long/Short tokens or LP.
