🪙Embedded Yield

The protocol earns yield from staked Ethereum as a liquid staking derivative (LSD)!

Because the VBUSD collateral initially consists of half wstETH holdings and half 1x ETH short, the protocol earns income from two sources:

• Ethereum staking (guaranteed to be profitable), and

• Funding fees paid by longs to shorts on GMX (expected to be profitable)

This Embedded Yield makes VBUSD an interest-bearing stablecoin when wrapped into wVBUSD. The yield is given to users as an increasing ratio of VBUSD/wVBUSD obtained when they unwrap.

Incoming embedded yield is divided between three destinations:

• 50%: wVBUSD holders

• 33.3%: Infrastructure/Team

• 16.7%: Sinking Fund

To process earned income, the protocol initially rebalances yield received as ETH staking income, GMX funding rate income, and from other sources to an appropriate ratio of wstETH and ETH short. Then, VBUSD corresponding to wVBUSD holder's share is minted to the wVBUSD contract, increasing the amount of VBUSD users get when unwrapping wVBUSD.