Yield Distribution Framework

SAFUs Yield Distribution Framework (YDF) allows for the transformation of any yield-bearing asset into a hybridized version, offering additional layers of security through decentralized coverage mechanisms. You can think of it as the tool that enables an efficient pricing on the robustness in terms of solvency of any yield bearing asset.

How it works?

The user deposits the Yield Bearing Token into SAFU and receives the insured version of the original token which increase in price by [ Yield from underlying minus % fee given to restakers], and the yield they sacrifice is sent to the Restakers as rewards from the AVS.

For instance, USDe from Ethena, which already accrues a native yield, could be converted into safuUSDe through SAFU. In this case, safuUSDe holders would accept a reduction in yield in return for the added security provided by staked assets, protecting them in case of certain failure or depeg conditions, whle restakers that feel comfortable with Ethena can get some extra yield by "selling Ethena insurance"

Example of Ethena being secured by ETH

Another example would be stETH from Lido, which could be hybridized into safustETH. Holders of safuETH would benefit from the native stETH yield, along with additional insurance provided by restaked assets such as stablecoins. Restakers opting into the safustETH AVS (Actively Validated Service) would earning a portion of the underlying yield of stEth in exchange of covering stETH holders against slashing risk.

So let's take a look to some examples more in detail:

Example 1: Insured eEth from EtherFi

Example 2: Insured version of Ethena's USDe

PS: a 0.1 Version of this is live in Testnet at eagerprotocol.xyz.

To make it easier to understand, in these two examples, we will implement a Fixed Yield Distribution (YDF) model. Simultaneously, we are working with Risk Curators and economic auditors to develop a Variable YDF framework, creating the most efficient insurance platform possible:

This Variable YDF model will leverage an interest rate curve designed to target an optimal coverage level for each market. The yield sacrificed by coverage purchasers will adjust dynamically based on proximity to the target coverage level. Think of it as analogous to the target and current rates used in lending platforms like Aave or Morpho, where adjustments are made to balance supply and demand efficiently