Yield Generation Mechanism for Staked USC

stUSC: The Stablecoin with Native USC Yield and LST Rewards

Interest Generation for Staked USC with USC Native Yield

The Chi Protocol enables USC stakers (stUSC) to earn additional USC through the dual stability mechanism. SC rewards specifically originate from the arbitrage contract when the stablecoin trades below the target price and the protocol possesses excess reserves to back USC debt. In more specific terms, if the USC price falls below 1 USD, the arbitrage contract purchases USC on Uniswap to drive the price up to the target. Instead of burning the repurchased stablecoins, the protocol redirects them to USC stakers, preserving value within the protocol’s participants. The distribution and claiming process of USC interest payments consists of the following steps:

  • Arbitrage Contract: Verifies whether the USC price is below the target and if the protocol has excess reserves. It then performs a delta calculation to determine the amount of ETH needed to add to the USC/ETH pair on Uniswap to restabilise the price at 1 USD. The contract buys this delta amount of USC using ETH from the reserve contract and sends it 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:

ObjectAliceBobCathy

stUSC

$20,000

$30,000

$50,000

Share

20%

30%

50%

Total stUSC

$100,000

USC Rewards

$10,000

Rewards per Staker

20% * $10,000 = $2,000

30% * $10,000 = $3,000

50%*$10,000 = $5,000

stCHI Incentives and stETH Yield to USC Stakers

By staking USC with the Chi Protocol, users not only earn the native USC yield but also gain stETH from the protocol’s reserves and staked CHI (stCHI), which itself earns stETH. These assets must be locked for a minimum of four weeks. This mechanism is key to the protocol's design, aligning long-term incentives for users while maintaining a stable network.

*Note: The Chi DAO implements different phases of Liquidity Mining Programs that directly influence the allocation of stCHI incentives to 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: 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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