Cap

Cap is a stablecoin protocol providing credible financial guarantees through two primary products: cUSD, a dollar-denominated stablecoin backed by blue-chip stablecoins like USDC and USDT, and stcUSD, a yield-bearing stablecoin that enables users to earn rewards. The protocol operates as a three-sided marketplace designed to run autonomously via economic incentives, outsourcing yield generation to a diverse layer of institutional operators including banks, HFT firms, and market makers.

Yield for stcUSD holders comes from two main sources: idle reserve yield and operator borrowing strategies.

Idle reserve yield: When capital in the vault is not being borrowed, it is automatically put to work in yield-generating activities. These include earning interest from U.S. Treasury bills and lending to crypto markets through established platforms like Aave and Morpho. The rewards are set automatically based on current market rates.

Operator borrowing strategies: Approved operators can borrow liquidity from Cap's reserves to run their own strategies. To qualify, they must beat a dynamic hurdle rate. This hurdle rate is calculated from market benchmarks and how much of the reserves are already in use—it rises quickly if reserves become too busy. Operators also need to get overcollateralized backing from restakers, who provide collateral from shared security networks.

How yield is shared: When an operator earns more than the hurdle rate, the profit is split three ways:

• The hurdle rate portion goes to stcUSD holders.
• A pre-agreed rate goes to the restakers who provided collateral.
• Any remaining profit stays with the operator.

All borrowing is overcollateralized, meaning operators put up more value than they borrow. If the collateral value drops too low or an operator fails to repay, a slashing mechanism takes effect. Slashed funds from restakers are sold back to the reserve through Dutch auctions, helping keep the cUSD stablecoin fully backed.

Fees: The protocol charges dynamic mint and burn fees that change based on how assets are allocated, plus fixed fees for redeeming tokens proportionally.