Wrapping, Liquidity & Collateral

Gally answers a hard question: how can a custom, yield-bearing real-world asset also work like a normal DeFi token? The answer is the wrapping machine — a one-to-one bridge that lets you flip your position between two forms depending on whether you want yield or liquidity. This page is the complete picture: the mechanism, the rules around it, what each form is for, and why the wrapped coin is collateral a lender can actually trust.

The two states of your position

At any moment your position is in exactly one of two forms, and you choose which:

Neither form is "better" — they serve different goals. The whole design lets you move between them freely and without penalty.

How wrapping works

The bridge is burn-on-wrap, mint-on-unwrap at a strict 1:1 rate. There are no price oracles — one share is always one coin unit, and one coin unit always redeems to one share.

sequenceDiagram
    actor U as You
    participant P as Protocol (accumulator)
    rect rgb(235,245,235)
    Note over U,P: WRAP — deed → coin
    U->>P: wrap a GallyShare deed
    P-->>U: 1. auto-withdraw any pending yield to you (force-claim)
    P->>P: 2. burn the deed · increase wrapped supply
    P->>U: 3. mint an equal amount of Coin<T>
    end
    rect rgb(245,235,235)
    Note over U,P: UNWRAP — coin → deed
    U->>P: return Coin<T>
    P->>P: 1. burn the coins · decrease wrapped supply
    P->>U: 2. mint a fresh deed at the CURRENT yield index
    P->>P: 3. sweep in any revenue parked while supply was fully wrapped
    end

Yield is withdrawn automatically when you wrap

You never lose unclaimed yield by wrapping. Step one of every wrap is a force-claim: any yield your deed had accrued is paid out to you before the deed is burned. This matters because a wrapped coin is ineligible for yield — so the protocol settles your history first, automatically, rather than letting it strand. You don't have to remember to claim before wrapping; it's built in.

Unwrapping mints a fresh deed at the current index

When you unwrap, you get a brand-new deed whose yield clock is set to the current index. That single rule is what guarantees zero retroactive yield for the time your position spent wrapped — by construction, regardless of timing. The same step also sweeps in any revenue that was parked while everything was wrapped, so the first holder to unwrap shares in it. The math is in The Economic Model.

What you let go of — and what you gain

• Wrapping, you give up yield eligibility. While wrapped, your coins earn none of the project's revenue. That yield doesn't vanish — it flows to the holders who stayed unwrapped.
• Wrapping, you gain full liquidity and composability. The coin is a vanilla token with no custom logic, so it works everywhere a normal coin does, instantly.
• Unwrapping, you give up liquidity (it's a custom object again) and regain yield eligibility — with no penalty for the time spent wrapped.

The conditions and rules around wrapping

Wrapping is powerful, so a few precise rules govern it:

• You can always unwrap. Unwrapping is a protected exit — it is never blocked by an emergency pause. Wrapping (an entry action) can be paused, but unwrapping cannot.
• A short cooldown applies between wrapping and unwrapping. It's defense-in-depth against rapidly oscillating supply around a known large deposit; for normal use you'll never notice it.
• Wrap part of a position by splitting your deed first, then wrapping the piece — your position doesn't have to be all-or-nothing. (Unwrapping any amount is natural, since coins are fungible.)
• During a compensation grace window, wrapping is frozen. After a slashing or default, the protocol freezes wrapping and opens a window so everyone can unwrap and become eligible for the compensation payout — wrapped holders are never excluded from principal restitution. Unwrapping stays open throughout.
• The peg can never drift. The amount of Coin<T> in existence always equals the number of wrapped deeds — never more. This is enforced, not assumed (see below).

What the wrapped coin is for

Because Coin<T> is an ordinary Sui coin, it plugs into the whole ecosystem with no special handling:

• Trading on a DEX. List it or swap it on an automated market maker, or provide it as liquidity in a pool to earn trading fees.
• Lending and borrowing. Deposit it into a money market as collateral to borrow stablecoins, or supply it to earn lending interest. This is the classic use case: you need cash but don't want to sell your position — wrap, borrow against the coin, and unwrap later to keep your exposure.
• Payments and composability. Send it, escrow it, or use it as a building block in any other protocol that accepts standard coins.

This is the liquidity half of Gally's promise: a real-world-asset position that you can actually use in DeFi, not a locked certificate.

Why it's collateral a lender can trust

A lender only accepts collateral they can value and redeem with confidence. The wrapped coin earns that confidence because the bridge back to the underlying asset is contractually binding, not a promise:

• The only way to create the coin is to wrap a real deed. The mint authority lives inside the protocol forever; nobody — not the team, not the project, not an admin — can mint coins any other way.
• Supply is pinned to backing. Total coin supply always equals wrapped deeds, so every coin is backed one-to-one by a real position in the underlying project.
• Redemption is permissionless and unconditional. Anyone holding the coin can unwrap it back into a yield-earning deed at any time, at 1:1, with no oracle and no gatekeeper.

So a coin isn't a synthetic IOU whose value depends on trusting an issuer — it is a faithful, redeemable claim on the actual asset. And the deed it redeems to is itself a legally-backed claim under the asset's Smart Trust, so the collateral is sound on both layers — code and courts. A lending market can treat it as exactly that. That contractual binding is the difference between "a token that represents an asset" and "a token you can responsibly lend against."

Staying unwrapped pushes your APY up

Here's the elegant part. Because only unwrapped deeds earn yield, every deposit's investor cut is divided among unwrapped holders alone. So as others wrap their deeds to chase liquidity, the pool of yield-earning holders shrinks and each remaining unwrapped holder's effective APY rises:

This "Diamond-Hand multiplier" isn't a setting anyone controls — it falls straight out of the yield math. It rewards conviction: holders who stay in earn the yield that liquidity-seekers give up. In the limit, if everyone else wraps, you receive essentially the entire investor portion of every deposit. The full derivation lives in The Economic Model.

So: wrap, or hold?

There's no wrong answer — it's your call based on what you need right now:

And whenever your situation changes, flip back — unwrapping is always open, always 1:1, and never costs you retroactive yield. For the click-by-click steps, see the Investor Guide.