High Yield USD (Base)Price

(HYUSD)

High Yield USD (hyUSD) is a decentralized "flatcoin" issued through the Reserve Protocol. Unlike traditional stablecoins that track the US dollar, hyUSD is designed to maintain purchasing power while providing access to decentralized finance (DeFi) yields. It operates as an rToken on the Base Layer 2 network. Its primary goal is to provide holders with a hedge against inflation by aggregating yields from various underlying assets within its collateral basket, effectively serving as an inflation-resistant digital asset.

hyUSD earns yield from its underlying collateral basket, which typically consists of yield-bearing assets sourced from various decentralized lending and liquidity protocols. The yield is generated through interest and rewards earned by these components. Depending on the specific integration, the value of hyUSD may increase relative to its target or rewards may be distributed directly to holders. This allows users to benefit from the performance of diversified DeFi protocols without needing to manually manage multiple positions across different platforms.

Governance of hyUSD is managed by Reserve Rights (RSR) stakers, who vote on critical protocol decisions such as the composition of the collateral basket and specific risk parameters. To ensure security, the protocol relies on smart contracts that have undergone multiple rigorous audits by reputable blockchain security firms. Furthermore, the system is designed to be overcollateralized, with RSR stakers providing a "first-loss" backstop to protect hyUSD holders in the event of a collateral default or significant devaluation.

hyUSD maintains its target value through a permissionless minting and redemption arbitrage mechanism. If the market price of hyUSD deviates from its target, market participants are incentivized to arbitrage the difference. For example, if the token trades below its target value, arbitragers can purchase it on the open market and redeem it through the protocol for the full value of the underlying collateral. This market-driven approach ensures that the token remains closely aligned with its intended value without relying on centralized or purely algorithmic stabilizers.

hyUSD is deployed on a Layer 2 network to provide users with significantly lower transaction costs compared to the Ethereum mainnet. While hyUSD is a USD-denominated token, all transaction fees on this network must be paid in ETH. Therefore, users must hold a small amount of ETH in their wallets to cover gas fees for minting, trading, or transferring the token. For moving assets between networks, users can utilize the official network bridge or various reputable third-party cross-chain bridging services.

To protect against collateral defaults, hyUSD utilizes a mechanism known as "RSR Slashing." RSR stakers provide insurance by backing the protocol with their staked assets. If a component of the collateral basket fails or loses value, the staked RSR is automatically sold to cover the loss and keep hyUSD holders whole. Additionally, the protocol incorporates "anti-bank run" mechanisms, including verifiable on-chain reserves and proportional distribution features, to maintain liquidity and stability even during periods of extreme market volatility.