What is a Principal Token?
Last updated: July 9, 2026
What a Principal Token is
A Principal Token is a token that is tied to the principal of an Etherfuse Stablebond. It stays at a fixed value, in contrast to the Stablebond itself, which continues to accumulate in value as it earns yield. When you hold a Principal Token you hold the principal of the underlying bond, while the yield that bond earns is left behind in the vault.
For example, MEXe is the Principal Token for CETES.
Principal vs. yield: how the split works
A Stablebond is yield-bearing — it continues to accumulate in value over time as the underlying government debt (for example CETES) earns yield. A Stablebond therefore holds two things together:
Principal — the base amount you put in.
Yield — the return that accrues on top of it over time.
A Principal Token separates the two:
The Stablebond (e.g. CETES) is tied to the principal and the yield, so it continues to accumulate in value as yield accrues.
The Principal Token (e.g. MEXe) is tied only to the principal, so it stays at a fixed value — it does not accumulate the yield.
The yield the Principal Token leaves behind is held in the vault and accrues. So a Principal Token gives you a clean claim on your principal at a fixed value, while the bond’s yield stays in the vault.
How Principal Tokens work
Principal Tokens are created by wrapping a Stablebond and redeemed by unwrapping back into the bond. This happens automatically inside Etherfuse products, you don’t do it by hand.
Wrapping (creating a Principal Token)
Stablebonds are deposited and locked in a secure vault.
An equivalent amount of Principal Tokens is created for you, based on the bond’s value at that moment. For example, deposit 100 CETES and receive about 100 MEXe.
While you hold the Principal Token
The Stablebonds sitting in the vault keep earning yield. That accrued yield stays with Etherfuse, it does not increase your Principal Token balance. That is the whole point of the split: the token holds the principal, the vault holds the yield.
Unwrapping (redeeming a Principal Token)
The Principal Tokens are burned.
The matching value of Stablebonds is released from the vault back to you.
Because the bond has earned yield since it was locked, redeeming returns slightly fewer bond tokens than were originally deposited — that difference is the yield the vault retained. For example, after the bonds have earned about 10%, redeeming 100 MEXe returns about 91 CETES; the ~9 CETES of yield stays in the vault.
Your principal is protected
The key promise: a Principal Token is always redeemable for its full principal. Redeeming 100 MEXe returns 100 units of principal value.
Where you’ll see Principal Tokens
On-ramps: when you convert local currency into a Principal Token (like MEXe), the underlying bond is created and wrapped, and the Principal Token is delivered to you.
Holding & transfers: the Principal Token is the form you hold and move, separate from the yield sitting in the vault.
Off-ramps: when you cash out, your Principal Tokens are unwrapped back into the underlying bond and settled to local currency.
Backing & safety
Fully backed: every Principal Token in circulation is backed by Stablebonds locked in the vault. Principal Tokens are only created when bonds are deposited, and only redeemed by releasing those bonds.
Principal is never touched: Etherfuse can only take out the yield, and only after a check confirms enough bonds remain in the vault to cover every outstanding Principal Token.
Pausable: creating and redeeming can be paused in an emergency without affecting the backing held in the vault.
Quick reference
Stablebond — a yield-bearing tokenized sovereign bond (e.g. CETES). Continues to accumulate in value as it earns yield.
Principal Token — a token tied to the principal of a Stablebond (e.g. MEXe). Stays at a fixed value; the yield is left in the vault.
Wrap — lock bonds in the vault to create Principal Tokens.
Unwrap — burn Principal Tokens to release bonds from the vault.
Vault — where the bonds that back every Principal Token are held.