# What is reUSD ?

## reUSD ( Basis - Plus )

> **TL;DR** reUSD is a principal‑protected, yield‑accruing token that tracks the greater of (i) the risk‑free rate **plus 250 bps** or (ii) the Ethena basis‑trade yield **plus 250 bps**. It earns on‑chain, deploys off‑chain via Surplus Notes to supply regulatory capital, and maintains transparent, oracle‑verified collateral reporting.

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### 1. Purpose & Positioning

reUSD is designed as the **“stable core”** of the Re Protocol. Holders receive a low‑volatility, USD‑denominated asset that:

* preserves principal at all times;
* automatically accrues yield daily; and
* remains redeemable, subject to actuarially‑defined liquidity limits, for the underlying admitted assets (e.g., USDC, T‑Bills).

This makes reUSD analogous to a tokenized money‑market fund with the added flexibility of blockchain composability and real‑world reinsurance yield capture.

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### 2. Yield Mechanism

#### 2.1 Dual‑Source Yield Floor

At each daily valuation point, the protocol selects the higher of the following reference rates:

| **Source**                  | **Formula**                                                                      | **Notes**                                                        |
| --------------------------- | -------------------------------------------------------------------------------- | ---------------------------------------------------------------- |
| **Risk‑Free Rate Path**     | 7‑day trailing average Risk Free Rate + **250 bps**                              | Provides a predictable floor aligned with short‑term Treasuries. |
| **Ethena Basis Trade Path** | Current annualized yield reported by Ethena (USDe hedged basis) **plus 250 bps** | Captures excess basis when the futures curve is steep.           |

#### 2.2 Daily APY & Price Update

* The chosen “Applicable APY” is converted to a **daily rate.**
* reUSD’s **token price** (rather than token quantity) increases every UTC day at 00:00.
* A JSON price feed is pushed on‑chain via Chainlink, enabling DeFi integrations and transparent compounding.
* A daily oracle guardrail rejects outsized single-day price changes above the configured threshold.

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### 3. Capital Deployment via Surplus Notes

1. **On‑Chain Staking** : Users mint reUSD by depositing admitted assets into the Insurance Capital Layer (ICL).
2. **Off‑Ramp to 114 Trust** : The protocol converts a portion of the pool into cash/T‑Bills held in a §114 Reinsurance Trust Account, providing regulatory collateral to partner reinsurers.
3. **Surplus Notes** : The off‑chain entity issues surplus notes to the ICL, contractually locking in principal protection and an interest rate matching the Applicable APY.
4. **Custody & Visibility** : All trust assets are held with an independent bank/custodian. Off-chain balances are attested daily by The Network Firm (with read-only account access) and published through a Chainlink oracle.

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### 4. Liquidity & Redemption Framework

| **Tier**                     | **Capacity**                                                   | **Settlement Speed**           | **Source of Funds**                                              |
| ---------------------------- | -------------------------------------------------------------- | ------------------------------ | ---------------------------------------------------------------- |
| **Instant “Smooth‑Buffer”**  | Up to an **actuarially determined** buffer (e.g., 10 % of NAV) | instant                        | Idle on‑chain liquidity + cash sweep                             |
| **Scheduled / Queue Window** | Once instant buffer is exhausted                               | Processed in queue/window mode | Matured trust assets + surplus‑note repayments                   |
| **Re‑Liquidity**             | As actuarial releases occur                                    | Continuous top‑up of buffer    | Actuary authorizes transfer of released collateral back on‑chain |

The protocol’s reserve policy targets keeping a substantial liquid on-chain share of reUSD backing to support immediate redemptions, with the remainder allocated under reinsurance and trust-account constraints. Redemption and transaction fees currently start at 6 bps (0.06%).

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### 5. Transparency & Risk Controls

* **Chainlink Feeds** : Real‑time NAV, buffer utilization, surplus‑note balances.
* **Fireblocks Custody** : Multisig policies governing idle on‑chain assets.
* **Audit Trail** : Smart-contract audits plus daily off-chain reserve attestations and custody ownership checks by The Network Firm.
* **No Redemption Gating Tokens** : Price increases accrue to *all* holders.

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### 6. Key Advantages vs. TradFi Alternatives

1. **Yield > Money‑Market Funds**: By dynamically switching to the basis trade when advantageous, reUSD often outperforms pure T‑Bill strategies.
2. **Regulatory Capital Utility**: Surplus Note structure channels DeFi liquidity into highly secure (NAIC‑compliant) reinsurance collateral.
3. **On‑Chain Composability**: Compatible with Curve, Pendle, and Morpho for secondary yield opportunities.
4. **Principal Protection**: Surplus note rank and segregated trust accounts shield depositor principal from operating losses.

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### 7. Disclaimer & Forward‑Looking Notes

reUSD is **not available to U.S. persons** and may be restricted in other jurisdictions. Yield sources and redemption schedules are subject to change based on market conditions, regulatory guidance, and Ethena program terms. This document is for informational purposes only and does not constitute investment advice.

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