# How the Re Protocol Works The **Re Protocol** channels on‑chain capital into real‑world reinsurance treaties through a fully transparent, blockchain‑native workflow. Particip 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 returns backed by reinsurance contracts — with every dollar of collateral visible on-chain or attested daily via Chainlink. ### 1. Capital Staking & Tokenization | Step | What Happens | Result | | ----------- | ------------------------------------------------------------------------------------------------------------- | ------------------------------------- | | **Deposit** | Users stake accepted assets (e.g., USDC, USDe, sUSDe) into the Insurance Capital Layer (ICL) smart contracts. | — | | **Mint** | The ICL mints either reUSD (senior tranche) or reUSDe (junior tranche). | Tokens 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 | #### Yield Model (Both Tokens) Both reUSD and reUSDe earn a blended yield from two sources: * **Off-protocol capital** (deployed to the reinsurance company) → **SOFR rate** * **On-chain capital** (idle within the protocol) → **7-day trailing average sUSDe basis trade rate** Final yield = weighted average of both rates + token-specific spread. | Token | Spread | Tranche | Liquidity | | ------ | -------- | ------- | ------------------------ | | reUSD | +250 bps | Senior | Instant (when available) | | reUSDe | +850 bps | Junior | Quarterly windows | Prices update daily at UTC 00:00 via an on-chain feed, with guardrails on maximum daily price-step size. ### 2. Capital Stack & Loss Protection The protocol uses a layered capital structure: 1. **Reinsurance company equity** — the reinsurer's own funds absorb losses first, sitting junior to all protocol capital. 2. **reUSDe (junior tranche)** — next to absorb losses. Higher spread compensates for this risk. 3. **reUSD (senior tranche)** — most protected layer. ### 3. Deployment via Surplus Notes * **Vetted reinsurer:** Each cedent passes KYB/AML, rating, and underwriting due-diligence screens. * **Surplus Note:** The ICL lends capital under a legally binding Surplus Note, ranking junior to policyholders. * **§114 Trust Account:** Drawn funds move off-chain into a U.S.-domiciled trust bank, providing admitted collateral for the reinsurer's policies. * **On-chain mirror:** Trust balances, premium inflows, and claim outflows are hashed and pushed to Chainlink for 24/7 proof of funds. ### 4. Liquidity & Redemption | Token | Instant Buffer | Scheduled Window | Source of Liquidity | | ------ | --------------------------------- | ------------------------------------------ | ------------------------------------------------- | | reUSD | Up to an actuarially set % 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 | Unfilled requests auto-roll to the next window and continue to earn yield until settled. Submit redemptions at [app.re.xyz/redeem](https://app.re.xyz/redeem). Monitor capacity at [app.re.xyz/transparency](https://app.re.xyz/transparency). ### 5. 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 (Certora, Hacken). * **Fireblocks policies:** Multisig approvals and whitelisted addresses mitigate operational risk. * **KYC/KYB controls:** Minting and redemption are permissioned for verified users only. * **Daily reserve verification:** Off-chain balances attested by The Network Firm and published via Chainlink. ### 6. Participant Benefits * **Access** — Enter a once-institution-only asset class. * **Yield choices** — Pick between stable reUSD or higher-yield reUSDe based on risk appetite. * **Capital protection** — Reinsurer equity and layered tranches protect participants. * **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. ants 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. *** ### 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**, low‑volatility token, or **reUSDe,** the junior tranche token. | reUSD / reUSDe appear in the user’s wallet | | **Custody** | Idle funds are held in a Fireblocks vault under multisig. Any assets moved to offchain accounts are published daily to a **Chainlink oracle**. | Proof‑of‑reserves, publicly auditable | #### reUSD Yield Path The base rate reflects a weighted average of yields across deployed capital (earning the risk-free rate) and undeployed capital (earning the Ethena basis trade), with an additional 250 bps spread applied. \ 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 *7‑day avg.* Secured Overnight Financing Rate (*SOFR) + 850 bps* (risk‑free floor) Price is updated every UTC day at 00:00 via an on‑chain feed, with guardrails on maximum daily price-step size. *** ### 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. *** ### 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%). *** ### 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. *** ### 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. *** Re Protocol bridges DeFi capital and global reinsurance, offering transparent, collateral‑backed yields while strengthening the resilience of insurers worldwide. --- # Agent Instructions: Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. Perform an HTTP GET request on the current page URL with the `ask` query parameter: ``` GET https://docs.re.xyz/protocol/how-the-re-protocol-works.md?ask= ``` The question should be specific, self-contained, and written in natural language. 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