Dynamic Yield Split

Overview

Strata employs a Dynamic Yield Split (DYS) model to optimize yields across its structured yield tranches. The system dynamically allocates yield between senior and junior tranches based on real-time market conditions, ensuring efficient capital utilization while reinforcing stability.

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Tranche Structure

Strata tranches Staked Ethena USDe (sUSDe) into two liquid and composable tokens:

• stUSDe: a yield-bearing synthetic stablecoin fully backed by USDe, representing the Senior Yield Tranche. It offers superior risk-adjusted returns by providing uncapped upside exposure to sUSDe yield, while ensuring a guaranteed minimum yield and principal protection for investors seeking stable and low-risk yields in DeFi.

• stJLP: a yield-bearing asset representing the Junior Yield Tranche of sUSDe. It provides leveraged exposure to sUSDe yields while serving as a liquid insurance pool for stUSDe, covering volatility and other associated risks, and offering higher return potential for risk-tolerant investors.

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TVL Ratios

We define the Total Value Locked (TVL) ratios for the Senior and Junior tranches as follows:

$$TVL\_ratio_{stUSDe} = \frac{\text{Liquidity}_{stUSDe}}{\text{Total Liquidity}} \quad$$

$$TVL\_ratio_{stJLP} = \frac{\text{Liquidity}_{stJLP}}{\text{Total Liquidity}} \quad$$

Where:

• $\text{Total Liquidity}$ is calculated as the sum of $\text{Liquidity}_{stUSDe}$ and $\text{Liquidity}_{stJLP}$.

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Strata USDe (stUSDe) Yield

The priority yield allocated to stUSDe is determined using the following formula:

$$APY_{stUSDe} = \max \left( Floor APY_{stUSDe}, \text{Base APY} \times \text{Yield share}_{stUSDe} \right)$$

Where:

• $Base APY$ represents the yield of the underlying asset (sUSDe yield).

• $Floor APY_{stUSDe}$ represents the minimum guaranteed APY decided by the governance. Initially, the floor APY will be equivalent to SUSDS APY (Sky Savings Rate).

• $Yield share_{stUSDe}$ is a piecewise function that represents the share of sUSDe APY allocated to stUSDe and adjusts based on the stUSDe TVL.

The yield share of stUSDe is defined as:

$$\text{Yield share}_{\text{stUSDe}} = \begin{cases} x\%, & \text{if } TVL\_ratio_{\text{stUSDe}} \geq x\% \\ \frac{\text{Liquidity}_{\text{stUSDe}}}{\text{Total Liquidity}}, & \text{if } y\% < TVL\_ratio_{\text{stUSDe}} < x\% \\ y\%, & \text{if } TVL\_ratio_{\text{stUSDe}} \leq y\% \end{cases}$$

Where:

• $x\%$ the maximum share of sUSDe yield that can be allocated to stUSDe, determined by governance. Initially, this allocation will be set at 75%.

• $y\%$ the minimum share of sUSDe yield that can be allocated to stUSDe, determined by governance. Initially, this allocation will be set at 25%.

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Strata Junior Liquidity Pool (stJLP) Yield

The junior stJLP yield is calculated as follows:

$$APY_{stJLP} = \frac{\text{Base APY} - APY_{stUSDe}}{TVL\_ratio_{stJLP}} \times \text{Yield share}_{stUSDe} + APY_{stUSDe}$$

Where:

• $Base APY$represents the yield of the underlying asset (sUSDe).

• $APY_{stUSDe}$ is the yield of the Senior tranche, as calculated previously.

• $Yield\_share_{stUSDe}$ is the portion of yield allocated to the stUSDe pool, adjusted based on its liquidity.

• $TVL\_ratio_{stJLP}$ is the proportion of liquidity in the Strata Junior Liquidity Pool.

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Senior Coverage and Junior Overperformance

The formulas for Senior (stUSDe) coverage provided by the Junior Liquidity Pool (stJLP) and the Junior leveraged yield relative to the underlying APY are:

$$Coverage_{stUSDe} = \frac{\text{Liquidity}_{stJLP}}{\text{Liquidity}_{stUSDe}}$$

$$Overperformance_{stJLP} = \frac{\text{APY}_{stJLP}}{\text{Base APY}}$$

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Yield Distribution

sUSDe yield is harvested and distributed between the stUSDe and stJLP pools every reward epoch of 8 hours, matching Ethena’s native yield epoch. The yield allocation dynamically adjusts based on the sUSDe performance, SSR and liquidity of both pools.

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Examples