---
title: "How It Works"
description: "The four protocol-native actions — mint, redeem, stake and unstake — and how the overlaid asset relates to its staked representation."
keywords:
  - "mint"
  - "redeem"
  - "stake"
  - "unstake"
  - "overlaid asset"
  - "exchange rate"
canonical_url: https://docs.overlayer.fi/start_here/how_it_works
md_url: https://docs.overlayer.fi/start_here/how_it_works.md
last_updated: 2026-05-05T15:42:56.000Z
---

# How It Works

> The four protocol-native actions — mint, redeem, stake and unstake — and how the overlaid asset relates to its staked representation.

Overlayer works through four core actions: mint, redeem, stake, and unstake. These are the protocol-native operations, enforced on-chain and designed to be permissionless and deterministic.

1. **Mint:** A user supplies a supported underlying stablecoin and receives the corresponding overlaid asset at a deterministic ratio of 1:1.
2. **Hold or use:** The overlaid asset is liquid, non-rebasing, and transferable. It can be held, moved, or used across DeFi.
3. **Stake:** If the user wants yield, they stake the overlaid asset and receive the staking representation. Yield accrues via exchange-rate appreciation, not wallet rebasing.
4. **Exit:** The user can *Unstake* to return from the staking representation to the base overlaid asset, or *Redeem* to return from the overlaid asset to the underlying stablecoin.

:::info Critical Distinction

* **Unstake** = exit yield participation.
* **Redeem** = exit the overlaid asset itself.

:::