Traditional fiat-collateralized stablecoins maintain their value by holding reserves in fiat currency or highly liquid, low-risk assets equal to the value of stablecoins in circulation. However, the yield and interest generated from these reserves benefit only the stablecoin issuer, leaving users without a share in the financial returns.
This mirrors a problem in traditional finance, where individuals don’t fully benefit from the use of their capital, making the system less equitable and reinforcing financial inequality—issues cryptocurrency was designed to solve.
Solayer USD (sUSD) seeks to bridge this gap by introducing the first yield-bearing stablecoin on Solana. It is pegged to the U.S. dollar and backed by real-world assets (RWAs) like U.S. Treasury Bills, bonds, and gold. Unlike traditional stablecoins, sUSD redistributes the yield generated from these assets directly to users.
What is Solayer USD (sUSD)?
sUSD is a yield-bearing stablecoin on Solana that maintains a 1:1 peg with the U.S. dollar through backing from U.S. Treasury Bills, which is considered one of the safest short-term government debt instruments.
In addition to maintaining its peg, T-bill backing also allows it to generate a 4-5% yield, which is automatically redistributed to users through a token multiplier mechanism.
The sUSD yield-bearing mechanism
The Solana blockchain’s account model makes minting and distributing tokens as yield to user accounts difficult due to rent fees, complex transaction handling, and the need for frequent state updates in a system with many accounts.
To handle this, sUSD employs Solana’s token22 program and a token multiplier mechanism that works by changing the multiplier of your sUSD holdings with the interest accumulation rather than changing the amount.
The value of your holdings is then calculated by applying a multiplier to the number of sUSD tokens you’re holding. For example, if you have 1000 (one thousand) $sSUD tokens, assuming a 5% annual yield, the multiplier on your tokens would be 1.05x at the end of the year.
The multiplier is calculated by considering the annual yield and the compounding period, i.e., Multiplier=1+n/r, where r is the annual yield (in this case, 5% or 0.05), and n is the number of compounding periods per year.
Thus, the actual value of your 1000 $sUSD tokens would be calculated by Number of Tokens * Multiplier, i.e. USD 1000 * 1.05, which equals USD 1050.
This allows the value of sUSD in a wallet to increase natively without losing its peg or increasing the number of $sUSD tokens in your wallet.
In addition to getting yield from holding $sUSD tokens, you can delegate them exogenous Actively Validated Services (exoAVSs) to gain additional yields and further secure the decentralized network. However, this feature is still under development at the time of writing.
How does sUSD work?
sUSD is built upon Solayer’s Request for Quote (RFQ) protocol, which is essentially a marketplace matching engine. The RFQ protocol matches USDC quotes with a liquidity provider that has the most optimized interest rates for the quote.
This approach distributes risk and maximizes yield opportunities by leveraging the strengths of different liquidity providers. It also plays a crucial role in the sUSD subscription (buying sUSD) and the redemption process (selling sUSD).
The sUSD subscription process
The sUSD subscription process involves locking USDC to mint sUSD. To achieve this, you’ll need a Solana wallet like Phantom, some SOL tokens for gas, and USDC.
Navigate to the Solayer app on https://app.solayer.org/ and click on sUSD Restaking, as shown in the image below.
This takes you to the sUSD restaking page, where you can mint sUSD tokens with USDC on a 1:1 basis. On the restaking page, connect your Solana wallet containing your USDC and some SOL for gas, enter the amount of USDC you want to lock for sUSD and click the Deposit button that appears.
Clicking the Deposit button locks your USDC and automatically creates a quote that specifies the amount of USDC, the expiry time, and the commission rate for the trade. The RFQ system then broadcasts the quote to all qualified liquidity providers who compete to fulfil the order and receive the offered commission.
The selected liquidity provider fulfils the buy order by transferring the USDC out and sending back a wrapped T-bill (a tokenized representation of a T-bill) as proof. The RFQ protocol then forwards the wrapped T-bill to the sUSD minting program and locks it there.
Finally, the USD minting program mints sUSD based on the value of the wrapped T-Bill, maintaining a 1:1 price peg with USDC, thus depositing your sUSD tokens in your wallet. This process takes a while to finalize and is usually completed in 1 working day.
You should see a processing transaction indicator on the restaking page during this wait time, as shown in the image below.
You will receive an equivalent number of sUSD tokens when this process is complete.
The sUSD redemption process
The sUSD redemption process involves converting your sUSD back to USDC. This conversion does not occur on a 1:1 basis with your sUSD, as a multiplier based on your accumulated yield is applied to your token value, giving you more USDC than you initially locked.
To start your sUSD redemption process, you have to unstake your sUSD tokens (if you staked or used them for collateral) and send them back to the Solayer sUSD program. Then, navigate to the sUSD restaking dashboard, enter the amount you want to withdraw and click the Withdraw button, as shown in the image below.
Clicking the withdraw button will trigger a pop-up modal that provides information about your withdrawal process, such as the fact that it can take up to 2 days to process. Click the Withdraw button on the modal to start your withdrawal process, as shown in the image below.
When you click the withdrawal button, the program calculates the corresponding amount of wrapped T-Bills that need to be redeemed based on your request and forwards it to the RFQ protocol.
The RFQ protocol matches the redemption request to a qualified liquidity provider who receives the wrapped T-Bill and fulfils the withdrawal order by transferring out the wrapped T-Bill and sending the equivalent amount of USDC back to the protocol.
After the liquidity provider fulfils the withdrawal order, the RFQ protocol returns the corresponding amount of USDC to the user, completing the withdrawal process.
As mentioned in the pop-up modal, this process will take about 2 days. During this wait time, you should see a processing transaction indicator on the restaking page, as shown in the image below.
Use cases for sUSD
Solayer’s stablecoin, sUSD, has multiple use cases aside from being a stable store of value. Some of them are covered below.
sUSD as a savings account on Solana
You can use sUSD as a decentralized savings account that offers a higher yield, 4-5%, compared to traditional banks. It also provides greater transparency, as the entire process is on-chain. You can see how yield is generated, which assets back it, and where funds are held.
sUSD is also decentralized and permissionless, meaning anyone can participate regardless of geographical restrictions or access to banking services. It also gives you full control over your assets, unlike a traditional savings account, which relies on financial institutions.
Securing decentralized systems
sUSD not only functions as a stable, yield-generating asset, but it also provides opportunities to contribute to the security of decentralized systems such as Oracles and Bridges by delegating your tokens to them. For example, delegating your sUSD tokens to an exoAVS, which is coming soon to Solayer.
The exoAVS system utilizes the delegated sUSD as part of its security mechanism, ensuring that operations like data validation, cross-chain communication, or decentralized governance are carried out securely.
In exchange, the system compensates you with additional yield, providing an extra incentive beyond the base 4-5% interest from T-bills.
sUSD as Collateral
sUSD can serve as collateral within decentralized finance (DeFi) ecosystems due to its stable value and yield-bearing characteristics. You can lock your sUSD on DeFi lending platforms to access liquidity without selling your sUSD holdings.
A unique feature of sUSD as collateral is that it is yield-bearing. This makes it a more efficient form of collateral than standard stablecoins, as you can maintain a healthy collateral ratio more easily because the interest helps increase the effective value of your collateral over time.
The yield-bearing nature also of sUSD ensures that you continue to benefit from the underlying asset growth even when locked as collateral, providing a buffer against minor market fluctuations.
sUSD for Payments
sUSD is an ideal payment solution due to its stability, low fees, and high speed on the Solana network. Additionally, due to its permissionless and decentralized nature, it is an ideal solution for cross-border payments as it eliminates the need for intermediaries like banks, which often delay and add fees to international payments.
Payments made with sUSD are recorded on-chain, providing full transparency. This can be valuable for businesses that need to maintain an accurate record of transactions or for users who want to track their payment history.
Earn yield on your stablecoins with sUSD
Solayer USD (sUSD) marks a significant innovation in the stablecoin landscape by offering a yield-bearing, real-world asset (RWA)-backed model on Solana. Its permissionless design removes barriers to entry, making sUSD accessible to anyone globally, regardless of their location or financial background.
sUSD shifts the stablecoin model toward prioritizing user yield over centralized profits, contributing to a more decentralized financial ecosystem.
Want to earn a stable RWA-backed yield on your stablecoin reserves and contribute to a more decentralized financial ecosystem? Mint sUSD tokens on https://app.solayer.org/ today!
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