How does tDOT work?
tDOT is first minted by providing both DOT, and the DOT derivative into a dedicated liquidity pool.
For example, on Acala, you can contribute DOT and LDOT into the Tapio pool, where you then receive tDOT in return.
This tDOT can then be held, as if you were simply holding native DOT, however it will be accumulating rewards from the underlying yield generating assets (like LDOT), swap fees (from users swapping DOT to LDOT and vice versa) and token incentives (such as $TAP), which can then be claimed.
However, the tDOT can also be redeemed for native DOT or LDOT at anytime due to the inherent peg that’s sustained by the pool allowing you to maintain the stability of holding DOT while not sacrificing any upside.