# How the Re Protocol Works

The **Re Protocol** channels on‑chain capital into real‑world reinsurance treaties through a fully transparent, blockchain‑native workflow. Participants stake stablecoins, receive yield‑bearing tokens, and earn diversified insurance returns, all while every dollar of collateral and every premium payment is visible on‑chain.

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### 1. Capital Staking & Tokenization

| Step        | What happens                                                                                                                     | Resulting Token                            |
| ----------- | -------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ |
| **Deposit** | Users stake admitted assets (e.g., USDC) into the **Insurance Capital Layer (ICL)** smart contracts.                             | —                                          |
| **Mint**    | The ICL mints either **reUSD, the** principal‑protected, low‑volatility token, or **reUSDe,** the profit‑sharing junior tranche. | reUSD / reUSDe appear in the user’s wallet |
| **Custody** | Idle funds are held in a Fireblocks vault under multisig. Balances are published daily to a **Chainlink oracle**.                | Proof‑of‑reserves, publicly auditable      |

#### reUSD Yield Path

*Daily price increases* track the **higher** of:

1. *7‑day avg.* Secured Overnight Financing Rate (*SOFR) + 250 bps* (risk‑free floor)
2. *Ethena sUSDe basis yield + 250 bps*

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Price is updated every UTC day at 00:00 via an on‑chain feed, with guardrails on maximum daily price-step size.

#### reUSDe Yield Path

Holders absorb portfolio losses **and** capture surplus profits, historically **16 – 25 %** IRR net of underwriting & ops fees. A **Target NAV** (tNAV) is struck quarterly; price auto‑compounds daily toward that tNAV. Idle, undeployed reUSDe capital earns the sUSDe rate.

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### 2. Intelligent Deployment via Surplus Notes

1. **Vetted Reinsurer** : Each cedent passes KYB/AML, rating, and underwriting due‑diligence screens.
2. **Surplus Note** : The ICL lends capital under a legally binding Surplus Note, ranking junior to policyholders.
3. **§114 Trust Account** : Drawn funds move off‑chain into a U.S. domiciled trust bank, providing admitted collateral for the reinsurer’s policies.
4. **On‑Chain Mirror** : Trust balances, premium inflows, and claim outflows are hashed and pushed to Chainlink, giving 24/7 proof of funds.

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### 3. Liquidity & Redemption Logic

| Token      | Instant Buffer                                 | Scheduled Window                           | Source of Liquidity                               |
| ---------- | ---------------------------------------------- | ------------------------------------------ | ------------------------------------------------- |
| **reUSD**  | Up to an **actuarially‑set** percentage of NAV | Queue/Window mode when instant is depleted | On‑chain idle cash → matured trust assets         |
| **reUSDe** | —                                              | Quarterly (request window, pro‑rata fill)  | Surplus released by actuary + idle sUSDe earnings |

Any unfilled request auto‑rolls to the next window and continues to earn yield until settled. Redemption and transaction fees currently start at 6 bps (0.06%).

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### 4. Transparency & Risk Management

* **Chainlink Oracles** : Publish price feeds, trust balances, surplus‑note schedules, and redemption queues.
* **Actuarial Analysis** : Signs off on loss reserves and surplus release cadence.
* **Smart‑Contract Audits** – All ICL, token, and oracle contracts undergo regular third‑party audits.
* **Fireblocks Policies** – Multisig approvals and whitelisted addresses mitigate operational risk.
* **KYC/KYB Controls** – Minting and redemption are permissioned for verified users only.
* **Third-Party Reserve Verification** – Off-chain balances are attested daily by The Network Firm and published via Chainlink.

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### 5. Participant Benefits

* **Access** – Enter a once‑institution‑only asset class.
* **Yield Choices** – Pick between stable **reUSD** or higher‑beta **reUSDe** according to risk appetite.
* **Composability** – Use tokens as collateral in Curve, Pendle, Morpho, or other DeFi venues.
* **Real‑Time Data** – Monitor portfolio balances and collateral 24/7 on‑chain.

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Re Protocol bridges DeFi capital and global reinsurance, offering transparent, collateral‑backed yields while strengthening the resilience of insurers worldwide.