> For the complete documentation index, see [llms.txt](https://docs.elemental.fund/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.elemental.fund/elemental-fixed-deposit/infographic.md).

# Fixed Deposit Mechanics

<figure><img src="/files/i7e4RFqubtgqat80L0nz" alt=""><figcaption><p>Elemental Fixed Deposit Mechanics</p></figcaption></figure>

### Key Characteristics

This diagram outlines how capital flows through Elemental’s Fixed Deposit system, from deposit to yield distribution.

At a high level, the process is designed to separate user experience from backend operations, allowing for a simple interface while maintaining disciplined capital management behind the scenes.

### Step-by-Step Flow

**1. Deposit**\
Depositors deposit funds into Elemental’s Fixed Deposit vaults.

**2. Deployment**\
Capital is deployed on-chain across a range of market-neutral strategies. Allocation is actively managed and adjusted over time.

**3. Yield Distribution**\
Users receive a fixed yield for the duration of the epoch. This is defined at the start of each cycle.

**4. Profit Allocation**\
Any excess returns generated beyond the fixed yield are split into two areas:

* Operational costs
* The Compound Fund

**5. System Reinforcement**\
The Compound Fund acts as an internal reserve. In periods where strategy returns are lower than expected, it may be used to support yield consistency.

### Design Principles

The system is built around a few core ideas:

* **Separation of layers**\
  User-facing simplicity is maintained, while backend capital allocation remains flexible and adaptive.
* **Controlled distribution**\
  Yields are defined per epoch, allowing for clarity without exposing users to intra-cycle volatility.
* **Long-term reinforcement**\
  A portion of excess returns is retained within the system to strengthen its ability to operate across different market conditions.