Interest Generation Mechanism for staked USC with Stablecoin Yield and LSTs Yield

stUSC: The stablecoin with native USC yield and LST rewards

Interest Generation for staked USC with USC Interest Payments

Chi Protocol allows USC stakers (stUSC) to earn additional USC arising from the dual stability mechanism. USC rewards derive specifically from the arbitrage contract and the case where the stablecoin trades below the target price and the protocol has excess reserves to back USC debt. In more specific terms, since USC price < 1 USD, the arbitrage contract buys USC on Uniswap to drive the price up to target, and instead of burning the repurchased stablecoins, it redirects them to USC stakers so that value is preserved within protocol's participants. The distribution and claiming process of USC interest payments consists of the following steps:

  • Arbitrage Contract: Verifies if USC price is below target and if the protocol has excess reserves, performs delta calculation (amount of ETH to add in the USC/ETH pair on Uniswap to re-stabilize the price at $1), buys the delta amount of USC using ETH from the reserve contract, and sends the delta to stUSC.

  • Distribution of USC Rewards: USC is uniformly distributed across all stUSC.

Example: USC Yield Distribution

  • Alice stakes 20,000 USC, Bob stakes 30,000 USC, and Cathy stakes 50,000 USC (Total Staked USC = 100,000 USC)

  • Assume 1 month passes from when they staked, and the protocol has accrued 10,000 USC available for interest payments

  • USC yield distribution occurs as follows:

stCHI Incentives to USC Stakers

By staking USC with Chi Protocol, in addition to USC native interest, users will earn staked CHI (stCHI), which already earns stETH, and they must lock for a minimum period of 4 weeks. This mechanism is key to the protocol's design, aligning long-term incentives for users while maintaining a stable network.

Note* Chi DAO has different phases of Liquidity Mining Programs that directly affect the amount of stCHI incentives directed towards stUSC.

USC Staking APR Calculation

The USC Staking Annual Percentage Rate (APR) is determined through a formula that considers various factors, such as the accrued USC earnings, CHI rewards, LSTs rewards on stCHI incentives, and the total amount of staked USC.

Note* that since stCHI is distributed to stUSC it automatically entitles it to stETH yield.

APR is computed every week (since there are weekly CHI epochs), and all calculations are performed in USD.

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