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USDC Vault


The USDC Vault increases deposited USDC. It does this by combining yields from recursive staking, lending, and market-making. Users can deposit USDC. Assets are dynamically spread across strategies. The allocation is based on optimal ratios adjusted to market conditions.

The market-making strategy's assets let users earn yields from trading fees. They provide liquidity to the most profitable pools on Swaap Maker based on market conditions.

The assets are allocated to the lending strategy. They let users earn yields from lending interest by supplying assets on AAVE.

The staking strategy's assets let users boost their ETH's yield by borrowing up to 3x on AAVE. They do this by using Paraswap or Odos as the main swap aggregator. This vault's APR is set by the positive yield from staking and supply APRs. It is reduced by the borrowing rate, reflecting the difference between them.

The formula calculates the total APR of the USDC vault from its strategies. We will illustrate it using 3x leverage as an example.

TotalAPR = Market-making APR + Lending APR + (3x (stETH Staking Yield APR + stETH Supply APR)) - (2x ETH Borrow Rate).

Note: Swap fees are incurred when creating or withdrawing. They include gas fees and swap slippage, mainly during withdrawal. A breakeven period is necessary. Depending on the on-chain swap rate and strategy APR, the breakeven period may vary.


The next part outlines the backend workflows for user deposit and withdrawal. All the steps are executed automatically in 1 transaction.

A) Deposit

We will illustrate with example below:

  • deposit of 1000 USDC (for illustration convenience, we set conversion rate at 1ETH = 1000 USDC)
  • strategy allocation of 10% on market-making strategy and 90% on recursive staking strategy:

a) 900 USDC is supplied on AAVE V3

b) 100 USDC is provided as liquidity in market-making pools (can be ETH-denominated or not, depending on market conditions to LP into best performing pools)

e) Using this collateral of 900 USDC, borrow 0.81 ETH under E-mode on AAVE;

f) 0.81 ETH is swapped into 0.81 stETH (or flashloan with ETH to get stETH, depending on which approach is more cost-effective)

g) 0.81 stETH supplied on AAVE V3 as collateral (total 1.71 stETH);

h) Repeat steps E, F & G until the position reaches 2.7 stETH supplied as collateral on AAVE (3x). Since the user initially deposited 0.9 ETH, 1.8 ETH had to be borrowed in order to fully leverage his position.

The user ends up with 100 USDC LPed, 2.7 stETH supplied, and 1.8 ETH borrowed.

B) Yield

Following the creation of the initial position for the market-making strategy, occasional transactions may take place to rebalance assets among different pools based on their performance, ensuring superior yield generation from market-making.

Once set up, the recursive strategy generates yield without the need for additional transactions*, as long as the borrowing rate stays below the staking APR. Despite the distribution of rewards becoming more widespread as more ETH is staked, which dilutes the stETH rate, returns persist under these conditions.

*In the event of an extreme market crash, the collateral ratio may need adjustment. If liquidity reserve for stETH decreases, leveraged stakers may be liquidated due to potential depegging. To mitigate this, Swaap Earn vaults feature a liquidation protection mechanism, enabling partial deleveraging to counter such risks.

C) Withdrawal

We will illustrate with example below:

  • USDC Vault APR = 10%
  • At 1-year maturity, withdraw total of 1100 USDC (principal of 1000 USDC + interest of 100 USDC)

a) Having 100USDC LPed, 2.7 stETH supplied, and 1.8 ETH borrowed, to return the user's assets, the ETH LPed has to be withdrawn and the ETH borrowed first has to be repaid. To do so, first withdraw a small part of the collateral (e.g. 0.5 stETH);

b) Swap 0.5 stETH to 0.5 ETH on Paraswap;

c) Repay 0.5 ETH from the active debt;

d) Repeat steps A, B & C multiple times until all the debt has been repaid (or flashloan with stETH to get ETH in one go to pay back the debt, depending on which approach is more cost-effective), leaving 0.9 stETH as collateral and withdraw the remaining collateral 900 USDC (and the profit from recurving staking strategy: 0.09 ETH).

e) Withdraw 110 USDC LPed on Swaap Maker (profit from market-making strategy: 10 USDC)

f) Withdraw 1100 UDSC from the vault, and then send it to the user's wallet.