# Vaults

## Why Vaults?

bUSD0 is a composable product designed to access DeFi opportunities while preserving its productive nature. With **Usual Vaults**, bUSD0 holders can deposit bUSD0 directly into Vaults and gain exposure to integrated external strategies **in addition to** bUSD0’s ongoing USUAL token rewards.

This integration delivers three outcomes:

* **Stronger demand for bUSD0** by adding utility beyond holding to maturity or providing liquidity
* **Sustainable revenue for the USUAL DAO** via management and performance fees
* **Active deployment into high-yield DeFi strategies**, supporting long-term ecosystem growth and stability

As described in the protocol’s product taxonomy, Vaults extend the Liquid Bond Token (LBT) composability principle: bUSD0 can be deployed across DeFi while remaining productive. Vaults formalize that composability into a managed, curated experience.

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## How Usual Vaults work

Vaults leverage partnerships, most notably **Lagoon Finance,** to provide “managed composability.” Each Vault is managed by a **curator**, who is responsible for:

* Selecting investment strategies, including Real-World Asset (RWA) opportunities with **T+1 settlement**
* Ensuring fair valuation of Vault shares using **oracle pricing**
* Reducing front-running risk through **epoch-based settlement**

### Deposit flow (epoch-based)

When depositing into a Vault, users convert bUSD0 **1:1 into USD0**. Deposits are processed through an epoch mechanism:

1. **Epoch initialization**\
   The first epoch begins at contract initialization.
2. **Deposit request**\
   Users submit a deposit request (e.g., `300 bUSD0`) and transfer assets into a secure **silo**.
3. **Settlement**\
   The curator calls `settleDeposit`, which:
   * secures the deposited tokens, and
   * mints Vault shares at a fair valuation based on current **oracle pricing**.
4. **Optional cancellation (pre-settlement)**\
   Before settlement, users can cancel the deposit request and recover their tokens from the silo.

### Withdrawal flow (epoch-based)

To redeem Vault shares, users follow this process:

1. **Withdrawal request**\
   Users submit a redemption request and place their Vault shares into a **silo**.
2. **Epoch transition**\
   The curator updates total assets, closing the current epoch and opening the next.
3. **Redemption settlement**\
   The curator executes `settleRedeem`, which burns Vault shares and transfers the equivalent **bUSD0 plus accrued interest** back into the Vault (for user claiming).
4. **Claiming funds**\
   Users call `redeem` to transfer the redeemed assets to their wallet. This step is optional, but prompt redemption is generally better for financial optimization.

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## Vault fees

Vaults apply a performance fee only to returns above a base yield (the **reference rate**) set by the DAO (e.g., **4% APY/APR**). For example, the stUSR Vault charges a **20% fee** on yields exceeding this reference rate.

| Fee type        | Description                                 | Typical rate                  |
| --------------- | ------------------------------------------- | ----------------------------- |
| Management fee  | DAO retains yield up to the reference rate  | Reference rate (e.g., 4% APR) |
| Performance fee | Charged on returns above the reference rate | 20%                           |
| Entry/exit fee  | None for standard deposit/withdrawal        | 0%                            |

This structure ensures the DAO captures a baseline return on Vault capital (supporting the protocol’s insurance fund and treasury operations), while users benefit from outperformance above the reference rate.

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## Available Vaults

### ustUSR++ Vault

The inaugural Vault strategy, the **ustUSR++ Vault**, deploys bUSD0-sourced USD0 into **stUSR** (Resolv’s staked USR token), a delta-neutral yield product.

Key characteristics:

* **Underlying strategy:** stUSR (Resolv’s staked USR token)
* **Yield source:** delta-neutral cash-and-carry strategies, similar in concept to USD0a (Alpha USD0)
* **Settlement:** T+1 settlement for RWA-related components
* **Performance fee:** 20% on yields above the reference rate
* **Curator:** managed by a dedicated Lagoon Finance curator

### Superstate Vault

### Syrup Vault

### Sky Vault

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## Risk considerations

Vaults introduce additional risks compared to holding bUSD0 directly:

| Risk category           | Description                                                                                                         | Mitigation                                                                                                                     |
| ----------------------- | ------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------ |
| **Smart contract risk** | Reliance on Lagoon vault infrastructure and underlying protocols introduces smart contract vulnerabilities          | Usual Protocol has undergone 20+ audits by leading firms; Lagoon Finance contracts are independently audited                   |
| **Strategy risk**       | Strategies (e.g., stUSR) face market risks such as negative perpetual funding rates driven by long/short imbalances | Curator selects proven, audited strategies; diversification across strategy types                                              |
| **Counterparty risk**   | Exposure to external trading platforms (e.g., exchange hacks)                                                       | Use of institutional-grade counterparties; the protocol’s multi-layered counterparty risk framework informs strategy selection |
| **Liquidity risk**      | Epoch-based settlement can delay withdrawals                                                                        | Deposits can be canceled before settlement; epoch durations are kept short                                                     |
| **Curator risk**        | Performance depends on curator strategy selection and execution                                                     | Curators are vetted; DAO governance can adjust parameters and curator appointments                                             |

> **Important:** Vault users should assess these risks against potential returns. Vault strategy yield introduces exposures beyond the conservative collateral profile of USD0’s underlying T-Bill backing, which maintains zero tolerance for credit and FX risk and limits duration to under 0.33 years.

### Holding bUSD0 vs. depositing into a Vault

| Feature                 | Holding bUSD0                      | Vault deposit                       |
| ----------------------- | ---------------------------------- | ----------------------------------- |
| USUAL daily coupons     | ✅ Yes                              | ✅ Yes                               |
| External strategy yield | ❌ No                               | ✅ Yes                               |
| Smart contract risk     | bUSD0 contract only                | bUSD0 + Lagoon + strategy contracts |
| Liquidity               | Immediate (secondary market)       | Epoch-based withdrawal              |
| DeFi composability      | Full (Pendle, Morpho, Curve, etc.) | Limited to the Vault position       |
| 1:1 maturity redemption | ✅ Guaranteed (June 2028)           | ✅ Via bUSD0 redemption at exit      |

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## Key takeaways

* **Two yield streams:** bUSD0’s native USUAL rewards plus external strategy returns.
* **Epoch-based settlement:** curator-managed epochs support fair valuation and reduce front-running.
* **Fee model:** the DAO retains yield up to the reference rate; users earn excess returns minus a \~20% performance fee.
* **Risk/reward trade-off:** higher potential yield comes with additional smart contract, strategy, and counterparty risk.
* **Pre-settlement cancellation:** users can cancel deposit requests before settlement.
* **Powered by Lagoon Finance:** Vaults use Lagoon’s managed vault framework for security and operational efficiency.