Xero Protocol creates tradable dividend markets for Robinhood Stock Tokens. Reinvested dividends are trapped inside each token’s uiMultiplier. Xero separates base equity exposure (PT) from reinvested dividend exposure (YT), enabling independent trading and onchain dividend yield curves.
Keep the stock. Trade the dividends.
Xero Protocol creates tradable dividend markets for tokenized equities.
Robinhood Stock Tokens do not distribute cash dividends directly to holders. Instead, dividends are automatically reinvested and reflected through the token’s onchain uiMultiplier(), causing each raw Stock Token to represent progressively more underlying shares.
That mechanism preserves the economic value of dividends, but it also bundles two fundamentally different return streams into a single asset:
base equity exposure
reinvested dividend exposure
Xero separates them.
A supported Robinhood Stock Token can be deposited into Xero and split into two independently tradable claims:
Principal Token (PT) — represents the original equity exposure deposited by the user.
Yield Token (YT) — represents the incremental share exposure created by reinvested dividends until maturity.
For example:
PT and YT can trade independently and can also be recombined before maturity to recover the corresponding Stock Token collateral.
The result is a new onchain market where users can trade dividend expectations separately from stock-price exposure.
Tokenized equities have largely reproduced the same bundled exposure found in traditional stock markets.
When someone buys a stock, they receive both:
exposure to changes in the company’s share price; and
exposure to distributions such as dividends.
Those two return sources are economically distinct, yet retail investors generally cannot trade them independently.
Institutional markets have long used instruments such as dividend swaps, dividend futures, structured products, and other derivatives to isolate specific components of equity returns. These products are typically complex, opaque, permissioned, or inaccessible to ordinary users.
Tokenized stocks create an opportunity to redesign this market.
Robinhood’s Stock Token architecture makes this especially interesting because dividends are not paid out as separate cash flows. They are reinvested directly into the token through changes in uiMultiplier().
The dividend value is therefore already embedded programmatically inside the token.
Xero turns that embedded value into a separately tradable asset.
A user deposits a supported Stock Token into a maturity-specific Xero Vault.
For example:
Assume the dividend index at the time of deposit is:
I₀ = 1.00The vault records the depositor’s economic units and issues matching PT and YT claims.
The user receives:
The two assets represent different components of the deposited Stock Token.
PT represents the original share-equivalent exposure locked into the position when it was created.
A PT holder primarily retains the base equity exposure.
YT represents the additional share-equivalent exposure generated when dividends are reinvested into the Stock Token before maturity.
A YT holder therefore gains direct exposure to dividend reinvestment without needing to own the full underlying stock position.
Xero tracks Robinhood’s uiMultiplier() while separately accounting for structural corporate actions.
If the dividend-related index increases from:
then the deposited Stock Token now represents more underlying shares.
The additional share-equivalent value belongs economically to the YT side of the position.
Xero can express this as:
Rather than manufacturing synthetic yield, Xero redistributes the economic components already contained inside the collateral.
YT holders can claim dividend-generated Stock Token fractions as yield accrues.
Conceptually:
YT Yield
=
Units × (1 / Previous Index − 1 / Current Index)This means dividend exposure is paid from the real additional economic value accumulated inside the deposited Stock Token.
No unbacked yield is created.
Before maturity, an equal quantity of PT and YT can be recombined.
This closes the stripped position and returns the corresponding collateral.
The protocol is designed so that the stripped claims remain economically tied to the underlying deposited Stock Tokens.
Xero does more than split a token.
It creates an entirely new financial market for future corporate distributions.
A user who wants stock-price exposure but does not particularly value upcoming dividends can:
They have effectively monetized expected dividend exposure separately.
Another user may believe a company’s future dividends are underestimated.
They can simply buy YT.
A third participant may want income-oriented exposure without holding the full directional equity risk.
They can also buy YT.
This enables market participants to express views such as:
a company will increase its dividend;
its dividend will remain stable;
its dividend expectations are overpriced;
its dividend will be cut;
one company offers better dividend value than another.
Those views become directly tradeable.
Xero markets can exist across multiple maturities.
For example:
Each YT market produces an implied yield.
Together, those prices create an:
This allows users and applications to observe how the market values a company’s future dividend generation across time.
For example:
3-month implied yield → 0.42%
6-month implied yield → 0.91%
1-year implied yield → 1.86%
2-year implied yield → 3.94%This becomes useful not only for traders, but also for:
market makers;
structured-product protocols;
portfolio managers;
lending protocols;
AI trading agents;
risk systems;
financial-data applications.
Xero therefore creates both a new financial asset class and a new market-data layer.
One important complication is that Robinhood uses uiMultiplier() for more than dividends.
Stock splits and certain other corporate actions can also change the multiplier.
A naive protocol could mistakenly interpret a stock split as enormous dividend yield.
Xero explicitly prevents this.
The protocol separates:
uiMultiplier
│
├── Structural changes
│ splits / stock dividends
│
└── Economic yield changes
reinvested dividendsXero maintains a structural factor:
and derives a dividend index:
I = M / Swhere:
M = Stock Token uiMultiplier()
S = structural adjustment factor
I = dividend-only index
This means a 4-for-1 stock split does not suddenly become 300% dividend yield.
Only dividend-related changes accrue to YT holders.
Xero is intentionally conservative.
If the multiplier changes unexpectedly and Xero cannot immediately classify the event, the affected vault freezes.
While frozen:
new deposits are blocked;
yield accrual pauses;
trading can be restricted;
no uncertain value is assigned as dividend yield.
However:
users can still recombine PT + YT and exit.
The protocol never requires users to remain trapped while an ambiguous corporate action is resolved.
Once a quorum of reporters verifies the corporate action, Xero classifies the multiplier change and resumes normal operation.
Xero includes dedicated markets for trading YT.
YT is fundamentally different from an ordinary ERC-20.
Its economic life is finite.
As maturity approaches, the amount of future dividend exposure remaining inside YT naturally decreases.
A 2-year dividend claim should not behave like a 2-day dividend claim.
Xero therefore uses a maturity-aware pricing model.
Conceptually:
YT Price = Implied Yield × Time RemainingAs:
Time Remaining → 0the value of future dividend exposure also converges toward zero.
This gives Xero markets a natural financial interpretation rather than forcing YT into a generic AMM model designed for perpetual assets.
Some of Xero’s most computationally expensive logic lives in its pricing engine.
The protocol includes a bisection-based solver used when calculating trades and market states.
The Solidity implementation can consume roughly hundreds of thousands of gas for this computation.
Xero therefore implements the pricing engine twice:
Solidity
Rust using Arbitrum Stylus
Both implementations conform to the same IXeroMath interface.
A shared parity suite containing hundreds of vectors verifies that both engines produce bit-identical outputs.
This allows Xero to use Stylus where more complex financial mathematics benefits from efficient Rust/WASM execution, while retaining full EVM compatibility across the rest of the protocol.
Stylus is therefore not included as a decorative hackathon integration.
It directly addresses one of Xero’s expensive computational workloads.
Xero is purpose-built around the economic design of Robinhood Stock Tokens.
Instead of treating them as generic ERC-20 assets with stock tickers attached, Xero builds directly around:
uiMultiplier();
dividend reinvestment;
corporate actions;
tokenized-equity price feeds;
maturity-based structured equity claims.
Robinhood Chain gives Xero a natural environment in which equities themselves are programmable blockchain assets.
Xero explores the next step after stock tokenization:
Once stocks are programmable, what parts of a stock can become independent markets?
Xero begins with dividends.
Xero is live across:
Robinhood Chain testnet
Arbitrum Sepolia
The Robinhood Chain deployment includes markets for Robinhood Stock Tokens alongside ERC-8056-compatible dividend-paying test assets used to demonstrate dividend mechanics.
Arbitrum Sepolia provides an additional EVM deployment of the Xero protocol and its maturity markets.
The live application is available at:
The protocol supports multiple maturity structures across assets such as:
with maturities ranging from short-duration markets to multi-year instruments.
This makes it possible to observe an entire dividend term structure rather than a single annualized yield number.
The Xero protocol is composed of several specialized modules.
Custodies Stock Tokens and manages:
stripping;
dividend-index accounting;
PT/YT issuance;
yield accrual;
maturity;
redemption;
recombination.
Represents the principal component of a stripped Stock Token position.
Represents dividend-reinvestment exposure through maturity.
Receives verified corporate actions and differentiates:
cash-dividend reinvestment;
stock dividends;
forward splits;
reverse splits;
other structural adjustments.
Provides the protocol’s pricing and numerical solver layer.
Implementations include:
Solidity;
Rust via Arbitrum Stylus.
Provides secondary-market liquidity for YT instruments.
Exposes maturity and implied-yield information for building the onchain dividend curve.
Reads tokenized-equity price feeds and applies asset-specific staleness rules.
Oracle prices are informational and are not used to fabricate dividend settlement.
Provides protocol safety controls.
It may pause:
new deposits;
new market activity;
affected vault operations.
It cannot:
take user funds;
arbitrarily redeem collateral;
prevent users from using supported exit paths.
Xero is built around one core invariant:
The protocol does not create artificial dividend yield.
Yield comes from incremental share exposure already generated through the underlying Stock Token’s dividend-reinvestment mechanics.
Additional safeguards include:
fail-closed multiplier handling;
corporate-action quorum;
stale-oracle rejection;
fuzz testing;
invariant testing;
parity testing;
Robinhood mainnet-fork testing;
explicit maturity accounting;
emergency pause controls;
timelocked administration;
Safe-based governance;
unrestricted recombination exits during certain emergency states.
The guardian can stop risky new activity, but cannot move protocol collateral.
Xero includes a substantial testing suite covering:
unit tests;
fuzz tests;
invariant tests;
Solidity/Rust parity tests;
Robinhood Chain mainnet-fork tests;
keeper tests;
frontend end-to-end flows.
Mainnet-fork tests exercise actual Robinhood Stock Token behavior, including corporate-action multiplier changes such as stock splits.
The pricing engines are checked against hundreds of shared vectors to guarantee consistent behavior across Solidity and Stylus.
Most tokenized-stock applications reproduce existing financial actions:
Xero starts from a different question:
What new financial primitives become possible only because the stock itself is programmable?
Robinhood already embeds dividend reinvestment inside the Stock Token.
Xero makes that previously inseparable economic component:
independently ownable;
independently tradeable;
independently priceable;
composable;
market-driven;
machine-readable.
The protocol does not merely put another interface on top of tokenized equities.
It creates a new market inside the equity itself.
Keep PT and sell YT.
The investor retains base equity exposure while monetizing expected dividend reinvestment.
Buy YT without taking the full economic exposure of owning the underlying stock.
Trade expectations around:
dividend increases;
dividend cuts;
payout stability;
company-specific dividend events.
Provide liquidity across YT maturities and capture fees while helping establish an onchain dividend curve.
Combine PT and YT instruments into new products such as:
dividend baskets;
dividend ladders;
principal-focused strategies;
income vaults;
sector dividend products.
Consume Xero’s implied dividend curve and independently trade dividend expectations instead of merely predicting stock direction.
For example:
Long AAPL dividend yieldShort SCHD dividend yield
Neutral underlying stock exposureXero therefore gives autonomous trading systems an entirely new financial dimension to reason about.
Dividend stripping is only the first primitive.
Xero’s broader vision is to become a financial decomposition protocol.
Today:
Stock Token
↓
Principal + Dividend Reinvestment YieldTomorrow, the same philosophy can extend to:
Equity
↓
Base Equity + Event-Specific ClaimsFinancial assets are bundles of different risks and cash flows.
Xero’s thesis is simple:
Once those assets exist onchain, those components no longer need to remain bundled.
The first era of tokenization asked:
How do we put existing assets onchain?
Stablecoins brought currencies onchain.
Tokenized treasuries brought government debt onchain.
Stock Tokens bring equities onchain.
Xero focuses on what comes next:
What can we do with these assets now that they are programmable?
The next generation of tokenized finance should not simply recreate existing brokerage interfaces on blockchain rails.
It should create instruments that were previously difficult, inaccessible, or impossible to compose.
Xero starts by transforming reinvested dividends from an invisible component of equity returns into a transparent, programmable market.
Built Xero Protocol from concept to a working multi-network prototype: designed and deployed the PT/YT stripping system, corporate-action accounting, yield markets, Stylus pricing engine, Robinhood Chain and Arbitrum Sepolia deployments, keeper infrastructure, frontend, and comprehensive unit, fuzz, invariant, parity, fork, and end-to-end tests.
Seed
