sCUSD (Staked CUSD)
Introduction
sCUSD is a yield-bearing derivative of CUSD, implemented as an ERC-4626 vault. Users deposit CUSD into the vault to mint sCUSD, which accrues yield over time based on the protocol’s fee revenue.
Technical Implementation
ERC-4626 Vault:
The sCUSD vault adheres to the ERC-4626 tokenized vault standard, ensuring interoperability with other DeFi protocols.
Users deposit CUSD to mint sCUSD at a 1:1 ratio initially, with the sCUSD balance appreciating over time as vault assets increase.
Yield Generation:
Yield is generated through the auctioning of protocol-collected swap fees, as described in the Chad Swap section.
Auction proceeds, denominated in CUSD, are deposited into the sCUSD vault, increasing the total assets under management (AUM).
The vault’s share price, ( P ), is calculated as:
P=(Total Assets/Total sCUSD Supply)
where total assets include deposited CUSD plus accumulated auction proceeds.
Volatility-Driven Yield:
The yield for sCUSD is directly tied to market volatility, as higher volatility increases trading volume on Chad Swap, leading to higher fee collection and, consequently, higher auction proceeds.
This creates a risk-free yield stream, as sCUSD holders are not exposed to collateral risk, unlike traditional vault strategies.
Redemption Support
The auction mechanism also serves as a secondary redemption mechanism for CUSD, supporting its price in the secondary market:
Arbitrage Opportunity: If CUSD trades below its peg, arbitrageurs can purchase CUSD at a discount and use it to bid in fee auctions, profiting from the difference.
Price Support: This creates additional demand for CUSD, helping to stabilize its peg in the secondary market.
Risk Considerations
Yield Variability: Yield is not fixed and depends on trading volume and market volatility. Periods of low volatility may result in lower yields.
Smart Contract Risk: The sCUSD vault is subject to smart contract risks, mitigated through rigorous auditing and formal verification.
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