> For the complete documentation index, see [llms.txt](https://usdu.gitbook.io/docs/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://usdu.gitbook.io/docs/how-usdusdu-works/protocol-minting.md).

# Protocol Minting

* **Only protocol can mint $USDu**
  * $USDu is a protocol-minted stablecoin.
  * Regular users cannot mint $USDu themselves.
  * New $USDu is only created when the protocol mints it against verified yield-bearing collateral in credit-rated vaults.
* **Minting process**
  * The protocol acquires yield-bearing positions in credit-rated markets.
  * Based on strict risk models and LTV limits, $USDu is minted against these positions.
  * All minted $USDu is fully backed by productive, on-chain lending positions.
* **Controlled issuance**
  * $USDu supply grows only when the protocol identifies sufficient, safe lending opportunities.
  * This ensures that $USDu is always overcollateralized and sustainable.
* **No user-based minting**
  * Users cannot arbitrarily mint $USDu by depositing volatile assets or stablecoins.
  * This avoids risks of bad debt, misspriced collateral, or governance attacks.
* **Protocol-owned liquidity**
  * The protocol or governance cannot freely transfer or move $USDu once minted.
  * To provide liquidity in major markets such as Curve or lending protocols, governance must first approve and deploy a new minting module.
  * These modules allow the protocol to mint $USDu directly into approved pools in return for pool share tokens held by the protocol.
  * This ensures full transparency, immutability of core $USDu design, and strong on-chain governance oversight over liquidity deployment.
* **Resulting benefits**
  * Strong supply discipline and risk control.
  * $USDu retains high confidence as a yield-backed and overcollateralized stablecoin.
  * No dilution of user yield through inflationary emissions.