Prerequisites:

To understand this article, you should be familiar with how the Silo works and its related terminology. See this article for reference:

Tour of the Farm: Understanding the Silo or Visit the docs

Key Terms Refresh

• LP tokens: Tokens representing a user's liquidity position in a Pinto Exchange pool, known as a Well.

• Stalk: An asset linked to Silo Deposits that represents a user’s proportional share of future Silo yield.

• Seeds: An asset linked to Silo Deposits that determines how quickly the Deposit's Stalk grows.

• Grown Stalk: Stalk linked to a Deposit that has accumulated over time from Seeds. All Grown Stalk is lost upon Withdrawal of the linked Deposit, creating an opportunity cost to exiting the system.

Converts 101

Converts are user-initiated actions within the Silo that enable users to exchange one whitelisted asset for another, including Pinto and LP tokens, and play a key role in curbing Pinto's price volatility. Any Deposit in the Silo can be Converted into another whitelisted asset at any time, resulting in a gain or loss of Stalk and/or Seeds, a change in the user’s asset exposure, and a potential impact on Pinto’s market price. It is worth noting that users can Withdraw in order to achieve the same objective (but at the cost of all of their Grown Stalk).

Users can execute two types of Converts within the Silo:

1. Converting Between Pinto and LP Tokens

The Silo allows you to Convert between Pinto and LP tokens under certain conditions. These Conversions are a key part of how Pinto returns its price to $1, and also create opportunities for users to earn yield, seeds or arbitrage gains. In the case of arbitrage, it is important to note that the gain can only be realized if Pinto returns back to its value target.

When Pinto is below $1

If Pinto trades below its $1 target, the protocol incentivizes users to Convert their LP tokens into plain Pinto. This results in a reduction in the user’s exposure to the paired volatile asset (like ETH or USDC) and allows users to effectively buy Pinto at a discount. Since LP tokens still hold a portion of the non-Pinto asset, this conversion uses that portion to “buy” discounted Pinto, creating buying pressure and helping push the price back up.

To encourage this action, the protocol increases the Seeds for plain Pinto Deposits relative to LP tokens, giving users a stronger incentive to Convert.

Example:

Let’s say the price of Pinto is $0.90, and a user has $100 worth of PINTO:USDC LP tokens in the Silo. These LP tokens consist of ~50% Pinto and ~50% USDC. If the system sets Seeds at 3 for plain Pinto and 2 for the LP, the user can Convert their LP tokens into Pinto directly inside the Silo without having to Withdraw, avoiding the loss of Stalk or Seeds. This effectively buys discounted Pinto with the USDC portion of the Deposit. If Pinto returns to $1, the user captures an 11% arbitrage gain on the USDC portion Converted and benefits from faster Stalk growth thanks to the higher Pinto Seeds.

A Convert is a single-sided removal of Pinto from a liquidity pool, pushing the price up.

When Pinto is above $1

If Pinto trades above its $1 target, the protocol allows the opposite behavior: Converting from plain Pinto into LP tokens. In this case, users can sell Pinto at a premium while gaining exposure to a paired asset like ETH or USDC, helping bring the price back down toward the target.

To encourage this, the protocol lowers the Seeds for plain Pinto and increases them for LP tokens, giving users a greater incentive to Convert.

Example:

Suppose Pinto is trading at $1.10, and a user has 100 plain Pinto deposited in the Silo. The system sets Seeds at 2 for Pinto and 3 for PINTO:ETH LP. The user wants exposure to ETH and also wants to take advantage of the higher Seeds and the premium Pinto price. They can Convert their Deposit into PINTO:ETH LP, essentially selling half their Pinto for ETH while staying in the Silo and “locking in” a portion of the arbitrage gain in anticipation that Pinto will cross its target later.

Both for Pinto to LP and from LP to Pinto Converts, the protocol’s official UI will make suggestions, to encourage behavior mutually beneficial for the user and the protocol. Check if you can Convert your Deposits in the overview page: https://pinto.money/overview

2. Converts between LP Tokens

Deposited LP tokens can be Converted to any other deposited LP token in the Silo at any time. There are two primary scenarios in which it may be beneficial for a user to do so:

First, a user might want to take advantage of differences in Seed rewards between two LP tokens. In the Silo, Seed rewards for each LP token are dynamically adjusted based on their target value allocations. Each LP token has an initial target percentage of total Silo value set by the protocol. If the current deposited value of a token falls below its target, its Seed reward increases to incentivize more Deposits and Conversions to it. Conversely, if the deposited value exceeds the target, its Seed reward is reduced to discourage over-allocation.

For example, suppose that there are only 2 LP tokens whitelisted in the Silo, each with a target allocation of 50% and $1000 worth of total value deposited, (1) PINTO:ETH LP and (2) PINTO:BTC LP. The first LP token currently has $300 total deposited and a Seed reward of 3 while the 2nd has $700 deposited with a Seed reward of 2. The discrepancy between the Seed of the 2 tokens stems from the imbalance in value deposited. A user can consider performing an LP to LP Convert to take advantage of the higher number of Seeds.

Read more about the seed allocation system, also known as the Seed Gauge here: https://docs.pinto.money/advanced/seed-gauge-system

Second, by exchanging between LP tokens, a user can trade volatile non-Pinto asset exposure without exiting the Silo, thus avoiding the loss of Grown Stalk.

For example, suppose that there are only 2 LP tokens whitelisted in the Silo. PINTO:ETH LP and PINTO:BTC LP. A user has PINTO:WETH LP deposited but sees that ETH is underperforming lately in terms of price. With LP to LP Converts, the user can swap their WETH LP tokens for BTC LP tokens, thus changing their asset exposure all from the Pinto UI and without ever having to Withdraw and redeposit.

Stalk bonus and penalty

In addition to arbitrage opportunities and Seed rewards, Pinto also directly adjusts Stalk as an incentive or disincentive for Conversions—granting a Convert Bonus or applying a Convert Penalty, depending on the action and the state of the system.

Convert Up Bonus

When the price of Pinto has been below its value target of $1 for more than 12 hours, the system starts to issue Stalk as bonus for Converting up from LP into Pinto. The more time passes, the higher the bonus becomes per dollar value Converted. Alongside the bonus itself, Pinto uses a dynamic Convert Bonus Capacity that updates every hour. When users perform Conversions that qualify for the bonus, the system interprets this as having found the appropriate market rate for the Stalk bonus and gradually reduces the bonus and increases the capacity. Similar to the Field Snowball, Pinto wants to sustain Conversions back to peg by creating an environment where when a Convert occurs, participants that are waiting for the bonus to be increased are incentivized to act quickly before the available capacity is used up.

Convert Down Penalty

When Pinto trades above its $1 target, and depending on whether recent hours have been spent above or below that target, a Convert Stalk Penalty may be applied for downward Conversions (Conversions from Pinto to LP). This penalty only affects a user’s total Grown Stalk and can range from 0% to 100%, based on the protocol’s health metrics. As more time is spent above the price target, the penalty gradually decreases. This creates a dynamic where users are essentially bidding with their Grown Stalk, deciding how much Grown Stalk they’re willing to give up for the opportunity to Convert downward. The bonus was designed to balance the Convert Down incentives and to give the token some “breathing room” to freely oscillate both above and below its price target.

Relevant Links:

Pinto App: https://pinto.money/overview

X: https://x.com/pintodotmoney

Docs: https://docs.pinto.money/