Yield Generation & Distribution

• How yield is generated

  • $USDu is backed by real, on-chain lending positions on credit-rated markets.

  • The protocol manages these positions using vaults that supply liquidity to lending markets such as Morpho or Euler.

  • Borrowers pay interest to access the $USDu liquidity, creating a continuous yield stream.

  • Yield is sourced exclusively from this real economic activity, not through inflation or token emissions.

• How users earn yield

  • Users acquire $USDu and deposit it into a $USDu Lending Vault.

  • In return, they receive $sUSDu, a non-rebasing token that accrues yield automatically.

  • As the vault earns interest from borrowers, the value of $sUSDu increases versus $USDu.

  • No staking or lockups are required. Holding $sUSDu is sufficient to earn yield.

• Yield distribution flow

  • Interest from borrowers flows directly to $sUSDu holders via vault accounting.

  • The protocol mints its own $USDu and deposits it into the vault as additional lending liquidity.

  • As this protocol-owned $USDu is borrowed, it also generates yield for the protocol.

  • This yield revenue is used to fund incentives, not deducted from user returns.

• Protocol income usage

  • Protocol revenue (from its own $USDu lending positions) is used to fund ecosystem incentives such as:

    • Curve LP bribes to deepen liquidity.

    • Partnerships with other stablecoins and protocols.

    • Targeted incentives for borrowing, potentially achieving negative-interest rates on select positions.

    • Backstop reserves for added system safety.

• Dynamic rate model

  • Interest rates adjust dynamically based on vault utilization:

    • Higher utilization = higher rates, higher yield.

    • Lower utilization = lower rates, more liquidity availability.

  This mechanism helps maintain stable and attractive returns across market conditions.