# Rehypothecation Explained

In the realm of Skeleton Money and decentralised finance (DeFi), rehypothecation refers to the practice where crypto assets pledged as collateral by users are re-used by platforms or protocols to generate additional returns.

In traditional finance, rehypothecation is used by lenders to generate yield without providing any benefit to the collateral providers. It is one tool that banks and large financial institutions are able to produce so much yield for themselves, and one that we feel should be applied to Skeleton Money...with one major difference. ALL yields generated by rehypothicating the Skeleton Money collateral is given directly back to $BONE and $sKULL stakers in the form of increased yield.

Generating yield using rehypothication is incredibly innovative and creative for a few reasons. 

1. Increased yield for stakers
2. The increased yield does not increase the inflation of native tokens
3. Increased visibility and partnership potential of Skeleton Money

<figure><img src="https://59146853-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2FZGHWxDsI1QxzpLnOhK8t%2Fuploads%2FMZkZmA83bK9jsgc52dLb%2Fimage.png?alt=media&#x26;token=3ee77b3c-0d2d-4143-ae02-d025d4598472" alt=""><figcaption></figcaption></figure>

In simple terms, the liquidity deposited in Skeleton Money is automatically "hypothecated" and used to generate additional yields throughout the blockchain space. This includes both the native pairs (BONE-S, sKULL-S), the non native pairs, and the Skeleton Money Treasury. We will be utilising a variety of yield-generating platforms, including but not limited to Solidly V3 and Equaliser.&#x20;