Welcome to another DeFi Markets Update—your no-nonsense briefing on the cryptobanking plumbing and market pulse.

USDC Borrowings on Base

• Base has overtaken Ethereum Mainnet as the largest chain for USDC borrowings on Morpho, ending May with more than 65% more borrowings.

• Both Base and Mainnet had been growing consistently over 2024 and 2025, until the Stream Finance exploit at the early start of November 2025, which caused Mainnet borrowings to drop by more than $700m in a single week. From then on, borrowings on both chains remained fairly similar in size. The Resolv exploit on 22 March marked another turning point, after which the two chains diverged, with Base continuing to grow while Mainnet borrowings declined yet again.

• Furthermore, on Base, borrowing USDC against ETH has grown by more than 6.5x since Coinbase enabled its users to borrow USDC by posting WETH as collateral directly in Coinbase app, through its Morpho-powered borrowing product in late November 2025.

• However, even with ETH borrowing growing rapidly, BTC remains the dominant collateral on Base, accounting for over 90% of all USDC borrowings and more than $1.2b.

• Growth across the three Steakhouse Prime USDC vaults closely mirrors the growth in USDC borrowings on Base. As the vaults allocate primarily to the largest borrowing markets, increasing borrow demand has driven growth in vault assets.

Trezor Launches Stablecoin Earn

• Trezor, one of the original hardware wallet providers, launched a native Stablecoin Earn feature in Trezor Suite. Users can now deposit USDC and USDT into Steakhouse-curated Morpho vaults from within the app, with every transaction verified and signed on their hardware wallet.

• Deposits are routed into Morpho vaults, where capital is lent to borrowers and earns a variable yield generated from lending activity. Users receive a vault share token representing their position and can withdraw at any time through Ethereum.

• Trezor selected Steakhouse USDC Prime and USDT Prime as the underlying vaults powering the experience.

Summary:

• The integration turns Morpho lending into a native self-custody product, with Trezor handling the wallet flow and Steakhouse providing the risk curation layer underneath. Users get hardware-wallet signing, net APY visibility, and direct exposure to borrower-driven stablecoin yield, while the underlying vault strategy continues to manage allocations, liquidity, collateral quality, and market risk across Morpho lending markets.

High Yield Performance Across Chains

• Steakhouse High Yield V2 on Base has outperformed most large-curator USDC vaults on Morpho over the past month, delivering around 50 basis points of additional yield.

• Interesting to note is that over the weekend, the vault saw a liquidity squeeze as capital was reallocated across the underlying markets. The largest allocations were concentrated in cbXRP, SOL and cbDOGE, where available liquidity fell close to zero relative to market size. As liquidity tightened, rates across the three markets jumped above 20%, which pushed the Steakhouse HY vault APY higher.

• Furthermore, comparing the same V2 High Yield strategy across chains shows that Base now earns higher APY than the Mainnet one. Over the last month, the spread has been around 0.5-2%, likely driven by stronger borrowing demand across Base lending markets.

Welcome to another DeFi Markets Update—your no-nonsense briefing on the cryptobanking plumbing and market pulse.

EURCV Adoption Across Morpho

• EURCV borrowings on Morpho Mainnet have grown by more than 3x since January 2026, driven largely by cbBTC collateral usage, which expanded from near zero to nearly $9m in borrowings in the last 3 months.

• One reason for this recent growth is the cheap EURCV borrowing available against cbBTC collateral on Morpho, with rates below 1% (same rates for all collaterals). Borrowed EURCV can then be deployed into Steakhouse Prime EURCV, which is currently yielding around 3–4%, creating a potential carry opportunity highlighted in one of our previous Markets Updates.

• EURCV supply has also continued expanding in 2026, increasing from roughly €48m at the start of the year to over €75m in May, displaying the growing demand for euro-denominated stablecoin liquidity and euro borrowing markets onchain.

• Moreover, Morpho V2 adoption has also continued expanding across Steakhouse EURCV vaults, with more than €30m deposited into V2 vaults since the start of March.

USDG Lending Rates and Borrow Activity on Kamino

• Steakhouse USDG vaults on Kamino: Steakhouse USDG and Steakhouse USDG High Yield, are both now earning around 7% APY.

• USDG is a dollar-backed stablecoin issued by Paxos through the Global Dollar Network, which expanded to Solana in 2025.

• A key driver behind these elevated yields has been the launch of Kamino’s Ethena Market in mid-May 2026, built around leveraged USDe/USDG looping strategies.

• The strategy allows users to deposit USDe, borrow USDG at rates around 2.5%, swap back into USDe and repeat the loop with leverage. This has driven strong borrow demand for USDG, pushing utilisation across USDG markets higher and increasing lending yields for USDG suppliers on Kamino.

SOFR as the Base Layer for Stablecoin Yields

• A recent paper, “U.S. Stablecoins and the Global Safe Asset Channel: Private Money Meets Public Debt”, by researchers from the European Central Bank and Politecnico di Milano explains how stablecoins are becoming increasingly connected to U.S. money markets through their reserve structures.

• Stablecoin market capitalization has grown quickly over the last few years, with USDC and USDT now holding around $200bn across short-term U.S. government debt and repo-related assets.

• As stablecoin supply grows, issuers need to hold more reserve assets. Since those reserves are mainly held in Treasury bills and repo, more stablecoin demand means more demand for U.S. safe assets. This creates a direct relationship between stablecoin markets and U.S. money markets. Because stablecoin reserves earn short-term dollar yields, onchain dollar lending should be priced from those same rates, making SOFR and Treasury yields the rate benchmark for onchain dollar liquidity.

• Recently, one of our co-founders at Steakhouse pointed out this dynamic when framing DeFi lending rates through a simple pricing model: yield = risk-free rate + expected loss + risk premium + liquidity premium. In this framework, SOFR acts as the starting point, while the spread above it reflects the additional risks of lending through onchain markets.

• For example, we can see this in Steakhouse Prime USDC. Under the framework, the fair-value rate is around 3.95%: 3.6% SOFR + 0.05% expected loss + 0.25% risk premium + 0.05% liquidity premium (note these are illustrative values).

• To conclude, stablecoin growth continues making onchain USD lending more connected to traditional money markets. Since USDC and USDT reserves sit largely in Treasury bills and repo, SOFR becomes the benchmark for lending rates.

Welcome to another DeFi Markets Update—your no-nonsense briefing on the cryptobanking plumbing and market pulse.

More Products, More Growth for Grove

• Grove, the institutional credit infrastructure protocol within the Sky ecosystem, has grown to more than $2.5bn in TVL and continues expanding across both onchain savings and tokenized real-world asset infrastructure.

• Last week, Grove introduced Basin, a programmable liquidity layer for tokenized real-world assets. It gives eligible holders instant onchain stablecoin liquidity when they redeem, sell, or transfer supported RWAs instead of the traditional redemption wait lockup.

• Tokenized Treasuries and money market funds can move onchain 24/7, but redemption still follows traditional finance settlement timelines of 1-2 days wait. Basin finances the settlement timing gap while the relevant fund, issuer, transfer agent, broker-dealer, or tokenization platform completes its existing workflow.

• Over time, Basin may extend across tokenized credit assets including investment-grade bonds and private credit. Grove is starting with Treasury and MMF products first because they are liquid, operationally mature, and institutionally adopted.

• Furthermore, a new rewards program is launching this week. Users who supply USDS or USDC through Grove Savings on Ethereum to mint sUSDS will begin accruing Grove Points when the program goes live on 21 May at 9am ET.

• Points accrue proportionally to a wallet’s share of total sUSDS minted through Grove Savings and are tracked through Grove’s referral code infrastructure inside the Sky ecosystem.

Diverging Capital Flows Across Lending Markets

• Lending venue preference appears to have shifted after the 18th of April KelpDAO/ LayerZero exploit, with users moving away from pooled lending exposure and into more isolated market structures. For comparison, aggregate USDC market size across Mainnet and Base is now similar between Morpho and Aave.

• Overall, in total size Morpho has continued growing this quarter and over the past 90 days, Morpho TVL is up 29%.

• In contrast, Aave TVL is down by around 45% over the same period, with roughly $18bn leaving since 18th of April.

• Isolated market design allocates capital across separate vaults and markets rather than one shared pool. Each market has its own collateral exposure and risk profile, making risk easier to contain. [read more here]

• Risk on Morpho still depends on the curator. Curators choose collateral, manage allocations, and define each vault’s risk-return profile. Steakhouse, the leading curator, currently curates more than 45% of Morpho stablecoin vault market share, giving users a broad set of vaults across different risk profiles and return targets.

AUSD Opportunities Across Chains

• Agora’s dollar stablecoin vaults curated by Steakhouse have continued earning above 8% APY for several months, supported by sustained borrow demand and ongoing incentive programs across multiple markets.

• On Ethereum, the AUSD High Yield Term Vault on the Steakhouse App combines organic lending strategies earning around 4–5% with an additional ~5% in AUSD incentives, bringing total vault APY close to 10%.

• Term strategies are built using Steakhouse Box adapters and hold direct positions to underlying assets. [read more here]

• On Morpho Monad, the High Yield AUSD vault has averaged roughly 7% organic APY over the past three months. Current MON incentives add another ~2%, pushing net vault yield toward 8-9%.

Welcome to another DeFi Markets Update—your no-nonsense briefing on the cryptobanking plumbing and market pulse.

Steakhouse Continues to Grow After the Spring of Exploits

• We all know Q1 2026 was a rough period for DeFi lending, with multiple collateral and lending incidents across the market. At Steakhouse, we are proud to say our vaults recorded less than $0.1 of bad debt across the period, while total deposits have continued growing.

• We are now the only curator managing more than $1B on Morpho and are steadily approaching $2B in total vault deposits.

• Morpho V2 adoption also continues to scale, with Steakhouse leading V2 vault TVL. Users with V1 positions can migrate into equivalent V2 vaults with similar risk-return profiles through the Steakhouse App, including Box Vaults for Term and Turbo strategies. [read more here]

• Steakhouse now curates around Two-Thirds of total USDC TVL on Morpho on all chains. Our Prime USDC vault on Base is also the largest vault on Morpho and was used as a benchmark in Morpho’s Q1 report.

• The spread between our Base Prime USDC and High Yield USDC vaults is widening again and is now above 2%. Prime continues to offer the more conservative USDC exposure, while High Yield rewards users willing to take on a broader collateral mix.

EtherFi: New Markets coming to Morpho

• Steakhouse vaults are onboarding weETH from EtherFi as eligible collateral across both ETH and USD lending markets. This includes new weETH/USDC, weETH/USDT and weETH/ETH markets deployed using our meta oracle setup.

• The review was benchmarked against both the internal Steakhouse risk framework and Lido’s wstETH architecture, which serves as the engineering baseline for Prime vaults. weETH was previously only eligible in Steakhouse High Yield vaults, but after the hardening process it now meets the threshold for Prime inclusion, positioning it as a more institutionally-grade collateral asset.

• EtherFi strengthened governance by moving key powers behind longer timelocks, expanding multisigs with external signers, and reducing instant internal control over upgrades. Additionally, after the rsETH bridge exploit, EtherFi hardened its LayerZero setup by pinning message libraries and DVNs, requiring 4/4 DVN approval, and adding stricter rate limits to reduce exploit damage.

• Before the new Prime markets went/go live, they entered a 7-day Steakhouse timelock period during which vault users could veto the onboarding through the Aragon DAO mechanism.

Are Stablecoins Actually Stable?

• A new IMF paper, ‘Making Stablecoins Stable’, argues that stablecoin stability depends on the reserve structure behind the peg. Stablecoins have grown from a crypto-native settlement tool into a large dollar-denominated money layer, with most supply concentrated in fiat-backed assets and dominated by USDC and USDT. As stablecoins move further into payment regulation after the GENIUS Act, the key question becomes whether reserve structures can support 1:1 redemption during stress.

  

• Stablecoins promise 1:1 redemption, while issuers back liabilities with assets carrying credit, liquidity or duration risk. The 2023 USDC depeg after Circle’s exposure to SVB showed that high-quality reserve structures can still face confidence shocks when part of the backing sits inside the banking system. The peg therefore depends on solvency, liquidity and market confidence during redemption stress.

• However this raises an obvious question: How relevant is this for today’s market, given that USDC has highly cash-like backing and USDT reports a large share of cash-equivalent reserves?

• The authors use central bank money as the benchmark for stability: instant redemption at par, deep liquidity and no-questions-asked acceptance. In our view, this comparison is too narrow, as almost no one holds central bank money at scale. The more relevant comparison is with commercial banks, which are also regulated private entities issuing money-like instruments used across payments and savings.

• Under that comparison, regulated stablecoins have a stronger structural argument. GENIUS and MiCA-style frameworks push issuers toward cash, short-term government debt and other highly liquid reserve assets. Banks, by contrast, issue money-like deposits against a broader and less liquid asset base. Therefore, regulated stablecoins may already have safer and more liquid reserve backing than traditional bank deposits, which challenges the paper’s framing of stablecoin stability.

• The more interesting policy question is whether stablecoins are being held to a higher standard than the banking system they are compared against. Large issuers already show that highly liquid reserve structures can still be profitable at scale. Like USDT, which has built a significant excess reserve buffer, giving token holders an additional layer of protection before liabilities are impaired. The debate should therefore distinguish fully reserved payment money from fractional-reserve bank money as stablecoins move further into mainstream payments.

Welcome to another DeFi Markets Update—your no-nonsense briefing on the cryptobanking plumbing and market pulse.

EURCV Opportunities on the Steakhouse App

• EURCV, Société Générale’s euro-backed stablecoin, has been consistently earning around 4% APY in the Prime Instant vault, with deposits now above $45m.

• Users with BTC collateral can borrow EURCV at around 1.5–1.9% APY, then deposit it into the Prime Instant vault to earn the higher rate. The spread creates a simple carry trade, with the main risk coming from BTC price moves and liquidation risk.

• EURCV supply has grown by over €30m since the start of 2026, a roughly 75% increase from its relatively flat ~€40m level throughout 2025.

• Transfer counts have also stepped higher since March, signalling rising usage and demand for euro-denominated liquidity and yield opportunities onchain.

How Did Morpho Perform in Q1 2026?

• Morpho’s Q1 2026 report shows strong year-on-year growth, with TVL reaching $9.63B, up 75% YoY. Active loans reached $3.64B, up 75.99% YoY, while monthly active users grew to 229.4k, up 664.67% YoY. On a quarterly basis, Q1 was softer than Q4 2025, with TVL down by 3.32% QoQ.

• Morpho remains primarily a stablecoin lending venue. Stablecoins accounted for over 84% of vault deposits, with USDC making up 64.7% of total vault deposits. Base also continued gaining share, supported by Coinbase lending products.

• Steakhouse Prime USDC, is Morpho’s largest vault by deposits, while cbBTC/USDC is Morpho’s largest individual market, where borrowers deposit cbBTC as collateral to borrow USDC. The report uses both as reference points to show Q1 rate compression across Morpho’s largest USDC lending and borrowing venues. For more context on how Morpho architecture works, read our previous Markets Update.

• Steakhouse is explicitly named as Morpho’s largest curator, managing $1.67B in vault deposits in Q1. This is up 25% from Q4 and 319% YoY, from $398.71M one year ago. The growth is especially notable as our deposits increased from Q4 to Q1, while Morpho’s total TVL declined by aforementioned -3.32% QoQ.

Kamino RWAs Growth and Expansion into Institutional Yield

• Kamino’s RWA deposits have crossed well over $1B in April, led by its three largest markets: Prime, OnRe and Maple, which together account for above $850M.

• It is also expanding borrow markets for tokenised equities. USDC can now be used as collateral to borrow xStocks, giving depositors a simple way to access onchain stock exposure while keeping stablecoins deployed.

• Beyond standard DeFi lending and borrowing, Kamino is expanding into Institutional Yield through stablecoin vaults that deploy capital into regulated, overcollateralised lending operations. These vaults generate yield from institutional borrowers backed by high-quality collateral, bringing real-world lending flows onchain in a structure that DeFi users can access directly

• Steakhouse is an active curator on Kamino, managing stablecoin strategies across vaults. Users can deposit into our Prime or High Yield vaults, with Steakhouse USDC consistently being around 4-5% APY.

Welcome to another DeFi Markets Update—your no-nonsense briefing on the cryptobanking plumbing and market pulse.

Base Opportunities: Borrowing, Yields, and Referrals

• Base is becoming the Morpho hub for USDC lending, as Coinbase Borrow lets users borrow USDC against BTC, ETH or cbETH collateral, with loans executed through Morpho on Base and accessed directly through Coinbase. The supply of Steakhouse USDC on Base has overtaken the one on Mainnet in recent months.

• With deeper borrow demand on Base, Steakhouse Prime Instant sits in a more active USDC lending market, which can support steadier utilisation and more resilient allocation. The Base vault offers a conservative profile, with APY consistently around 4% through 2026, compared to a lower circa 3% APY on Mainnet.

• Beyond our Prime vault, Steakhouse App also gives users access to other vault strategies on Base including, our USDC HY Instant yielding 6%+ APY.

• Lastly, Coinbase is also introducing more user incentives through referral rewards on Base App. Users can earn 25% of net referral swap fees when they refer friends, while referred users receive 10% off swap fees.

Pooled vs Isolated Lending Markets After KelpDAO

• Following the KelpDAO exploit, the DeFi ecosystem coordinated one of its largest recovery efforts to date under DeFi United, with reported contributions now exceeding $300m to help restore rsETH backing and stabilise affected markets. However, one question remains: if even Aave, the blue chip of DeFi lending, can face $200m+ of potential bad debt from a poisoned collateral event, what protocols can actually be considered low risk?

• Aave’s pooled design routes deposits into shared liquidity pools, where lenders are exposed to a common set of assets. In the KelpDAO / LayerZero incident, compromised rsETH entered the system as collateral, meaning the risk was able to sit against the broader pool once the asset was used due to rehypothecation. [read more about the Exploit in our previous Markets Update]

• This is why lending market design matters when thinking about platform-level contagion risk. Some designs prioritise deep shared liquidity, while others prioritise isolating risk so one asset or market has less ability to affect the rest of the system.

• Morpho uses an isolated market design, where capital is allocated across separate vaults and markets instead of one shared pool. This gives each market its own collateral exposure and risk profile. Moreover, collateral can’t be rehypothecated, limiting contagion for borrowers.

  

• In this structure, risk is contained at the market level. For example, if an asset like rsETH is compromised, only the vaults or markets exposed to that asset are affected, while unrelated markets continue to operate independently with no contamination. Borrowers are unaffected.

• It is also important to note that “low risk” on Morpho depends on the curator. Curators define the collateral set, manage allocations, and shape the overall risk profile of each vault, so choosing the curator also matters. Even within a given curator, there can be multiple vaults with different risk profiles and levels of risk appetite.

Is Everyone Inflating Stablecoin Volumes?

• Stablecoin volumes have become one of the easiest numbers to overstate and one of the hardest numbers to interpret properly. A headline can say $35tn in annual volume, like in the another can say that payments are only $390bn, and both can be true depending on whether we are talking about supply, transfer volume, adjusted activity or actual payment usage.

• For example, the headline figure of $35tn annual stablecoin transaction volume, reflects the total value transferred onchain. It includes trading flows, exchange and custodian wallet movements, arbitrage, liquidity management, internal treasury transfers, and automated smart-contract activity, where the same capital can move multiple times. Therefore the figure can be often misleading as most of this activity does not represent true end-user payments

• To understand the problem, we need to distinguish the key vocabulary often used around DeFi.

  • Circulating supply refers to how many stablecoins exist, currently over $320bn.

  • Transfer volume is the total value moved onchain, including trading, internal wallet movements and smart-contract activity.

  • Adjusted activity attempts to remove obvious noise like bots, wash-like activity and internal transfers to get closer to meaningful usage.

  • Payment volume captures stablecoins used to transfer value for an economic purpose, including business payments, remittances, payroll, card spend and settlement.

  • Real payments refers to the portion of payment volume that can be clearly identified and attributed through transaction tagging, address labels, payment infrastructure, or category-level assumptions.

• So the ~$35tn figure is essentially everything combined, and it does not represent real payment usage, which is what we often want to look at. To get a clearer picture of actual usage, we need to strip it down. A recent analysis by McKinsey & Company does exactly this.

• McKinsey starts with raw onchain data and filters out exchange and custody movements, trading, arbitrage, and automated smart-contract activity. For categories like B2B and remittances, they apply tagging and assumptions to estimate likely payment flows. The result is $390bn annualised stablecoin payment volume based on December 2025 activity, representing a conservative estimate of identifiable real-world payments.

• Therefore, the headline volume is reduced by more than 99% to estimate identifiable payment usage. This is an extremely large reduction; so does this mean stablecoins, and hence, DeFi are both underperforming? Not really. Even under McKinsey’s strict definition, identifiable stablecoin payment volume has more than doubled since 2024, per their report. At the same time, stablecoin supply has grown from roughly $130bn in 2024 to over $320bn today, showing continued inflows and adoption across the ecosystem.

• The takeaway is that stablecoins operate across multiple use cases: trading, collateral, liquidity management, settlement, payments and more. A single number rarely captures the full picture, and headlines can be attention-grabbing. Often, the wording blends very different concepts into one number, shaping how the data is interpreted, so don’t get fooled and stay sharp.

Welcome to another DeFi Markets Update—your no-nonsense briefing on the cryptobanking plumbing and market pulse.

KelpDAO Exploit

• On April 18, 2026, attackers drained about 116,500 rsETH (~$292M) from KelpDAO’s LayerZero-powered cross-chain bridge by poisoning the RPC nodes LayerZero’s verifier relied on and DDoS’ing into the backups, tricking the bridge into releasing tokens against a forged cross-chain message.

• The attackers, preliminarily linked to the Lazarus Group, deposited 89,567 rsETH on Aave and borrowed 82,650 WETH and 821 wstETH against it. As this collateral is now impaired, those positions could translated into protocol shortfall, with the final bad-debt outcome depending on how Kelp allocates the bridge loss across rsETH holders.

• In Aave’s incident report, the protocol models two bounding cases: one where the 112,204 unbacked rsETH is socialised across the full supply, implying $123.7M of bad debt, and another where the impairment is isolated to bridged rsETH only, which produces materially larger losses on L2 markets. Under the first case, Aave also notes that Ethereum Core’s Umbrella WETH module could absorb part of the hit.

  

• Aave’s exposure stemmed from its pooled architecture as lenders supply into a single shared liquidity pool, against which any whitelisted collateral, ETH, wstETH, cbBTC, or in this case rsETH, can borrow against that same pool under one blended rate and shared risk parameters.

• Moreover, the contagion spread because Kelp’s inflated supply left rsETH partially unbacked across more than 20 supported chains, including Base, Arbitrum, Linea, Blast, and Mantle. Around 18% of the circulating supply became effectively unbacked, which triggered depositor withdrawals as users rushed to avoid being affected. That wave of exits pushed DeFi TVL down by $13bn in 48 hours, making it the largest DeFi exploit of 2026. As one of the leading money markets, Aave sits at the centre of that exposure, leaving many protocols affected even as Aave itself remains largely illiquid for now.

• On Morpho, the isolated-market design meant the damage was capped; only $1M of ETH was borrowed against rsETH as collateral across two isolated markets, and just 2 of ~500 Morpho Vaults (with >$10k in deposits) had any exposure to those markets.

• At Steakhouse, we had less than $0.01 of exposure to KelpDAO, which we exited. We communicated all changes made to our vaults via our socials and remained unaffected by the hack. This marks the second major DeFi incident in a row this year in which our curation has shielded users from losses, following the Resolv USR incident. To this day, we still have zero non-dust bad debt since we started curation.

Steakhouse Prime vaults Grow after a month of Exploits

• DeFi has gone through a rough month, with multiple exploits and hacks pushing markets to price risk higher. As allocators became more cautious and moved into safer positions, the spread between Prime Instant and High Yield Instant USDC vaults widened over the past month on Mainnet.

• Based on daily averages, the spread is now around 7% APY. For users still in V1, this is a strong reason to migrate into our V2 vaults and access that spread through the updated architecture.

  

• Reallocation out of riskier strategies and into Prime vaults increased supply by $60M in a single week at the end of March on Mainnet.

• On Base, the pattern is similar. Prime continued to absorb new inflows as depositors repositioned, while Coinbase Borrow and broader Morpho activity on Base added further USDC demand. Together, those flows almost doubled the supply of our Steakhouse Prime Instant (link to V2 version) as it grew from $300M to $570M in just two months.

  

Stablecoin Spillovers to FX Markets

• We examine the March 2026 BIS/IMF paper, Stablecoin Flows and Spillovers to FX Markets, which studies whether stablecoin activity leaks into spot FX and dollar funding markets. Stablecoins are overwhelmingly dollar-denominated, but the bulk of cumulative fiat inflows into them come from non-USD currencies, which means most stablecoin purchases embed an FX conversion and makes stablecoin venues a parallel FX market.

• Someone holding local currency like the Argentinean peso (ARS) can acquire a stablecoin directly on a centralised exchange, or indirectly by first converting to USD in the spot market and then buying the stablecoin. In a frictionless market these two routes should cost the same, and any gap between them is what the authors call a parity deviation. Parity deviations are near zero for liquid developed-market currencies, like USD, but widen substantially in economies with macro instability or capital controls.

• The model centres on an intermediary that facilitates dollar swaps in both the stablecoin market and the FX swap market, can be thought of as a market maker or dealer active across both markets. For example, when local demand for USDT rises, that intermediary sells the token, takes on the local-currency exposure, and uses up some of its capacity to absorb risk. As that capacity tightens, supplying dollars through swaps becomes more expensive too.

• This is the paper’s main mechanism: stablecoin demand does not stay contained within crypto; it passes through the intermediaries that also help clear dollar demand elsewhere. That means pressure originating in stablecoin markets can feed into broader FX pricing, raising dollar premia and affecting exchange rates. The size of that spillover depends less on the token itself and more on the strength of the intermediary sitting between the two markets.

• This market cost problem could potentially be solved once the GENIUS Act comes into effect, as bank subsidiaries and OCC-qualified nonbanks enter the stablecoin space and bring their FX desks with them, which means the intermediary slot the paper describes could increasingly be filled by entities like a JPMorgan subsidiary running matched stablecoin and swap books with more capital behind them.

• Alongside bank subsidiaries, the December 2025 OCC conditional approvals of Circle, Ripple, Paxos, BitGo, and Fidelity Digital Assets for national trust charters point to a growing pool of regulated issuers. Whether the spillovers the paper measures remain meaningfully measurable in a post-GENIUS world is ultimately an empirical question for the next iteration of this research.

• Furthermore, in February 2026, SEC staff added Q5 to its crypto-asset FAQ. Q5 lets broker-dealers treat qualifying payment stablecoins as liquid assets and apply only a 2% haircut when calculating net capital. That means a broker-dealer can hold qualifying payment stablecoins with only a small capital penalty. Hence, if regulated firms can hold stablecoins more efficiently, they can put more capital behind the intermediary role the paper describes, which could help the market absorb larger flows with less friction over time.

• The paper shows that stablecoin flows affect FX through intermediary capacity, and the new SEC capital treatment, together with the GENIUS Act, could push forward a clearer federal framework for payment stablecoins. This suggests that stablecoin intermediation could become more institutional and easier to scale. The next phase of the market may therefore look less like a niche crypto venue and more like mainstream dollar plumbing built around stablecoins.

Welcome to another DeFi Markets Update—your no-nonsense briefing on the cryptobanking plumbing and market pulse.

Prime USDC Spread Between Base and Ethereum

• After the drop in mid January, the APY spread between Prime USDC on Base and Ethereum Mainnet has widened to its highest level this year of 1.8% APY.

• Lenders have rotated towards Base to capture the higher yield, but the spread has still persisted. That suggests fresh supply is still being absorbed efficiently instead of fully arbitraging the gap away.

• That divergence lines up with the underlying market activity. USDC borrowing demand is stronger on Base, especially in the large BTC-backed markets (Coinbase Borrow product). The cbBTC/USDC market on Base stands at $1.18B and grows, versus $310M on Ethereum which is shrinking with BTC price.

Kamino Introduces Whitelisted Reserves for Lending Vaults

• Kamino introduced ‘Whitelisted Reserves’ for Lending Vaults, an irreversible smart contract setting for the curator that limits vault allocations and investments to reserves verified by the platform, and it is now enabled on all vaults shown on Kamino’s UI.

• In practice, being whitelisted means vault capital is restricted to a protocol-level list of approved reserves maintained by Kamino, while curators can still manage allocations across those approved reserves. This gives depositors an extra protocol-level security layer around where vault capital can be deployed.

• The change adds two onchain controls: one blocks new allocations to non-whitelisted reserves, and the other blocks depositor funds from flowing into non-whitelisted reserves; both should be enabled together for full coverage.

• The main benefit is that a compromised vault admin key cannot redirect funds into a fake or unvetted reserve, which reduces the chance of depositor capital being drained through that attack path and strengthens the security of the vault structure.

• Withdrawals remain available regardless of whitelist status, curators can still de-allocate from reserves, and depositors can still enter or exit subject to available liquidity, so the change improves deployment controls without disrupting the withdrawal path.

Evaluating Stablecoins and Bank Deposits as Substitutes

• Stablecoin and bank deposit demand may overlap, especially when users are deciding where to park dollar balances. To evaluate that idea, we can look at the March 2026 paper by Rashad Ahmed and Inaki Aldasoro, Are Stablecoins and Bank Deposits Substitutes?, which studies whether these money-like dollar instruments compete for the same pool of cash, using weekly U.S. data from January 2019 to June 2025.

• The authors’ mechanism is that deposits and stablecoins both serve money-like functions, so users can shift between them when relative attractiveness changes. Once Fed rates move above circa 3.125%, banks start passing more of those increases through to depositors, which is the key pattern they use to isolate deposit repricing shocks that are associated with slower stablecoin market cap growth.

• They test this in two steps. First, they run an Ordinary Least Squares (OLS) regression, which uses the raw observed relationship between weekly deposit-rate changes and stablecoin growth. They then add an Instrumental Variables (IV) approach, which uses the deposit-rate kink in Figure 2 to isolate the part of deposit-rate moves that comes from banks passing through more of Fed tightening once rates are above about 3.125%. Both estimates are negative, implying weaker growth in reserve-backed stablecoin market capitalisation after deposit rate increases, not necessarily an outright decline in supply.

• On the right of Figure 3, the authors run a bitcoin placebo within the IV framework to test whether the result is specific to stablecoins instead of reflecting a broader crypto or macro cycle. Because BTC does not serve the same money-like role as reserve-backed stablecoins, a significant BTC response would weaken the substitution interpretation. The paper finds no statistically significant BTC response, which the authors treat as supportive of a stablecoin-specific effect.

• The BTC placebo result should be read carefully. Zero stays within the 95% confidence band throughout the horizon, which means the BTC estimate is not statistically distinguishable from zero at that level. It does not mean the BTC effect is precisely estimated at zero, since the confidence bands remain wide across the horizon.

• Moreover, the paper also finds a stronger effect for USDC than for USDT, which the authors interpret as consistent with USDC’s closer links to U.S. institutional and DeFi users, while USDT demand is more associated with offshore and emerging-market usage.

• Overall, the paper supports a plausible substitution narrative between bank deposits and stablecoins, but the evidence is concentrated in a specific U.S. high-rate setting and is stronger for some parts of the market, especially USDC, than for the stablecoin sector as a whole.

Welcome to another DeFi Markets Update—your no-nonsense briefing on the cryptobanking plumbing and market pulse.

Steakhouse take on EthCC Cannes 2026

• EthCC[9] took place in Cannes from March 30 to April 2, bringing together the Ethereum ecosystem for four days of conferences, workshops, and side events across the city. Our team was on the ground throughout the week, and we are grateful to everyone who spent time with us in Cannes. For those who were not there, this update gives a snapshot of the ideas, discussions, and market structure themes we brought to the Riviera.

• Steakhouse chefs were active on stage during Cannes’ DeFi and stablecoin events. Alexis Bourdillat, our Head of DeFi Risk, joined the Vault Summit panel “Managing Vault Risk Through Market Stress”, which covered the biggest risks facing vaults today, how the industry can prevent failures and exploits, whether tokenised assets and RWAs introduce new risk layers into vaults, and much more. [to watch full discussion click here]

• Our founder Sébastien Derivaux also spoke at Stable Summit Cannes in his presentation, “DeFi Architecture in 2026: Stablecoin, Vaults and RWA.” Stable Summit ran in Cannes as a dedicated forum for stablecoin infrastructure, liquidity, regulation, and market structure during EthCC week.

• Sébastien framed DeFi in 2026 around three distinct building blocks: stablecoins as liabilities, vaults as the asset orchestration layer of DeFi, and RWAs as an onchain representation of offchain financial instruments. In his view, stablecoins are a bridge between the user world and DeFi, vaults sit inside DeFi as the asset side, and RWAs are a bridge between DeFi and TradFi.

• We can then apply that framework further. The example Sébastien used was Sky, where the stablecoin layer is focused on growing adoption of USDS while separate allocators such as Spark, Grove, and others handle the asset side. He also said vaults are still a bit too simplistic and can be used to grease the wheels of DeFi more effectively. The market has already tokenized the simplest assets, like money market funds or T-bills, and the most complex assets, like private credit, and the next area to build is the space in between. [watch full presentation here]

• As DeFi moves toward this more modular structure, Steakhouse is already operating in that curator layer today as the largest curator on Morpho, managing 60% of Stablecoin Markets (excluding stablecoin farms).

Drift Exploit Recap

• DeFi recorded its largest exploit of 2026 on 1 April, when Drift lost about $285m of user assets in a governance compromise that executed in minutes after months of prior social engineering. Drift’s own investigation says the attackers spent roughly six months building relationships with contributors, posed as a quantitative trading firm, onboarded an Ecosystem Vault, deposited over $1m, and used that access to stage the exploit.

• The exploit path combined compromised signer workflows, durable nonce transactions, fake collateral and oracle control. The attacker used pre signed approvals to seize admin control of Drift’s zero timelock 2 of 5 Squads governance, listed a fake token market, set an attacker controlled oracle, lowered withdrawal protections and completed 31 withdrawals in about 12 minutes.

• The stolen funds remain visible onchain. Arkham’s Drift Protocol Exploiter page tracks the labelled exploiter entity and lets users follow linked wallets, holdings, inflows, outflows and counterparties across chains as the funds move.

• The impact was immediate as Solana TVL fell by $1bn over the following day, Drift’s TVL alone dropped from roughly $550m to under $250m, and SOL traded down by circa 10%. Hence, this being the largest DeFi hack of 2026 so far and the second largest security incident in the Solana ecosystem after the $326m Wormhole exploit in 2022.

• When one large venue breaks, the shock is able to travels through vaults, structured products and credit pools that source yield from the same underlying markets, so users can feel losses one or two layers away from the original exploit, and unfortunately Drift’s 28k token holders on Solscan show how widely that risk can sit.

• Steakhouse had zero exposure to Drift. To safeguard against liquidity drawdowns, we temporarily reduced exposure to the JLP Market on Kamino and SOL positions on Base and Monad, and communicated those position changes to our users through updates on X.

• Solana is a space we entered to build non custodial, transparent internet capital markets beyond EVM, and we are committed to keep building there. No matter the setback, DeFi always comes swinging back, and Steakhouse is here for it.

How and Why to Migrate to Morpho V2

• Morpho Vaults V2 launched in late 2025 as a full vault architecture upgrade, bringing stronger governance, clearer role separation, immutable contracts, and a flexible adapter system that supports strategies V1 could not support.

• Steakhouse users with V1 positions can migrate into equivalent V2 vaults with similar risk-return profiles, including Steakhouse Box Vaults for Term and Turbo on the Steakhouse App.

• For Steakhouse users, the key V2 improvements are broader strategy support through adapters, timelocked governance that gives depositors visibility before risk-increasing changes execute, and abdication features that let curators lock in permissionless access and fixed strategy scope at the contract level.

• In December 2025, Morpho DAO approved MIP 124, which increased the MORPHO rewards budget by 14% for a V2-specific incentive campaign, with rewards distributed through Merkl and updating every eight hours, which gives V2 depositors an APY uplift on top of base lending yields, while V1 positions are outside that programme.

• The migration path is available through the Steakhouse App in one transaction: connect your wallet, go to the Earn page, find vaults marked with an Upgrade indicator, review the side by side comparison between your V1 position and the V2 equivalent, and confirm the upgrade while keeping funds under your control throughout the process.

• V1 vaults remain functional and withdrawals remain available, but new deposits will close on V1 vaults that have a V2 equivalent, so liquidity can consolidate where governance, infrastructure, and incentive rewards are strongest; we have published the full detailed V2 Migration post on Substack for anyone who wants the complete breakdown.

Check which of your V1 positions can be upgraded at app.steakhouse.financial/earn?protocol=morpho_v1

Morpho launched Vaults V2 in late 2025, rebuilding the vault architecture from the previous version: new role separation, timelocked governance, immutable contracts, and a flexible adapter system that opens the door to strategies V1 could never support. Since then, Steakhouse has been adopting this infrastructure, deploying equivalent vaults, and building new products on the upgraded architecture, including Box Vaults for Term and Turbo strategies.

That migration is now reaching the point where staying on V1 means missing out. Morpho’s frontend defaults to V2, and V1 vaults are no longer visible in the standard directory. If you still hold V1 positions, they remain accessible from your wallet dashboard, but you are missing the MORPHO incentive rewards directed exclusively at V2 depositors.

We advise all users with Steakhouse V1 positions to upgrade through the Steakhouse App. The migration tool handles it simply, directly from your V1 position management dashboard.

What Changed with V2

Morpho Vault V2 is a structural upgrade to the vault architecture. The table below summarises what V2 introduces and what it replaces.

For Steakhouse users, three of these deserve particular attention.

The adapter architecture is what powers Term and Turbo strategies. V1 could only route capital to Morpho Blue lending markets. V2’s adapter system allowed Steakhouse to build the Box Vaults with whitelisted actions and slippage constraints at the contract level.

Timelocked governance means the vault cannot silently change its risk profile. Any risk-increasing change (adding a new adapter, raising a cap, modifying fee parameters) must be submitted and wait through a defined delay before it executes. During that window, every depositor can inspect the pending change and withdraw if they disagree. The Sentinel role adds a second layer: an independent actor that can veto pending changes and force-deallocate positions in an emergency, but can only take risk-reducing actions.

Abdication lets curators harden trust assumptions permanently. A vault that abdicates the ability to set access gates guarantees permissionless deposits and withdrawals forever. A vault that abdicates adapter addition guarantees its strategy scope will never expand beyond what is currently enabled. These are commitments enforced by code, verifiable onchain by any observer.

MORPHO Incentive Rewards

In December 2025, Morpho DAO approved MIP 124, a V2-specific incentive campaign that increased the MORPHO rewards budget by 14% to accelerate migration. V1 vaults do not receive these additional rewards.

MORPHO token rewards are distributed through Merkl to V2 depositors and contribute to overall APY alongside base lending yields. Rewards update every eight hours, and V2 vaults that allocate into underlying Morpho Blue markets automatically detect and forward market-level rewards to depositors.

The practical effect is visible in the migration tool. As an example from a recent snapshot: a V1 position in USDC Prime Instant showing 2.14% APY maps to a V2 equivalent at 2.4% APY once incentive rewards are included. The spread varies with market conditions, but V2 eligibility for MORPHO rewards is a structural advantage that persists across vaults and chains.

How to Migrate

The Steakhouse App provides a one-step conversion path. The process takes a single transaction.

1. Open the Steakhouse App and connect your wallet.

2. On the Earn page, vaults where you hold a V1 position will appear with an “Upgrade” indicator.

3. Select the vault and click “Upgrade” to review the migration: a side-by-side comparison of your current V1 position and the V2 equivalent, including updated APY with incentive rewards.

4. Confirm and sign. Your position migrates to the V2 vault in the same asset. Your funds remain under your control throughout. The interface confirms: “Non-custodial upgrade: Your funds remain under your control.”

The app supports migration on Ethereum, Base, and Arbitrum. For V1 positions on other chains, use the Morpho App directly. Some V1 vaults do not have a V2 equivalent and will continue operating as V1; these will not display an upgrade indicator.

What Happens to V1

V1 vaults are not deprecated. The smart contracts remain functional and withdrawals will always be available under Morpho’s noncustodial rules, regardless of any frontend or curator decisions.

We will close new deposits on V1 vaults that have a V2 equivalent. Fragmented liquidity across two versions of the same strategy reduces capital efficiency for all depositors. Consolidating on V2 concentrates liquidity where the infrastructure, governance, and incentive rewards are strongest.

Users who choose to remain in V1 retain full withdrawal access. They will, however, miss V2-specific MORPHO rewards and will be in vaults no longer receiving new deposits, which may affect utilisation rates and lending yields over time.

Before You Migrate

V2 vaults carry the same underlying strategy risks as their V1 equivalents: collateral risk, liquidation risk, interest rate volatility, and protocol-level risk. V2’s governance infrastructure (timelocks, role separation, abdication) mitigates operational risk but does not eliminate market risk. Review each vault’s allocation, risk rating, and parameters in the app before confirming.

Explore the Steakhouse App at app.steakhouse.financial.

Disclaimer: Stablecoin and crypto lending strategies involve smart contract risk, liquidation risk, collateral risk, and market risk. Past performance and current APY do not guarantee future results. MORPHO incentive rewards are subject to Morpho DAO governance and may be modified. Review vault parameters and risk documentation before deploying capital.

Welcome to another DeFi Markets Update—your no-nonsense briefing on the cryptobanking plumbing and market pulse.

Steakhouse Domain Incident

• On March 30, a presumed phone call-based social engineering attack on our DNS provider, briefly allowed an attacker to execute sensitive actions in the management of the steakhouse dot financial domain. This was an attack through the domain-control layer, not through Steakhouse vault infrastructure or internal contract systems. The attacker was able to ask customer support to change the primary email and remove 2FA, allowing the attacker to take control of the account.

• No vaults, contracts, or depositor funds were affected. Steakhouse vaults remained fully operational throughout the period, with all actions available through third-party frontends such as Morpho or Makina. Existing user funds were never at risk.

• The attacker changed the DNS A records for the main page and app subdomain to a malicious IP, which allowed a phishing frontend to be served under our domain. During a short window before the domain was taken offline, users visiting the site would have seen a fraudulent interface designed to trick them into signing a malicious transaction.

• In response, Steakhouse reverted the malicious DNS changes and intentionally pointed the affected records to blank values while the account and domain setup were being fully secured. The domains have now been fully restored and are safe to use.

• Steakhouse has migrated away from the affected domain-management to remove this dependency going forward.

• This was a domain-management incident, not a failure of Steakhouse vault design, or smart contracts. No other service accounts appear to be compromised, and Steakhouse stores no user data, so no user data was compromised.

OnRe Hits $100M on Kamino

• OnRe’s market on Kamino has now crossed $100m in market size, marking another milestone for RWAs on Solana.

• OnRe is a Bermuda-licensed reinsurance platform, and its ONyc asset brings reinsurance premium income and collateral yield onchain as a dollar-denominated yield-bearing asset. In practice, that gives Kamino users exposure to a return stream that comes from underwriting performance and collateral income, giving DeFi access to a source of yield that is less tied to the usual crypto cycle.

• ONyc went live on Kamino in August 2025, when Kamino added it as collateral for borrowing, lending, and looping strategies. It brought reinsurance-backed yield into active use across Solana DeFi, with live incentives and real-time NAV infrastructure helping it scale from launch into one of Kamino’s larger RWA markets.

• Steakhouse USDC High Yield vault on Kamino has been allocating to OnRe for several weeks, as we noted in one of our Markets Update. That allocation has now been increased further and the USDC High Yield vault is earning above 5% APY.

Katana Perps Go Live

• Katana launched Katana Perps as its native perpetuals DEX, positioning it as a core part of the chain’s economic design. The launch followed Katana’s acquisition of IDEX and brought an orderbook-based venue with low-latency execution, advanced order controls, and API support.

• Users can trade perpetual futures with leverage on Katana Perps, with vbUSDC as the primary margin asset. vbUSDC enters Katana through vaultbridge, which routes select deposited assets into yield-generating strategies on Ethereum and issues vbTokens back onto Katana for use across the chain.

• vaultbridge is part of how Katana turns bridged capital into productive liquidity. Katana routes those deposits into Morpho vaults on Ethereum, where they are allocated into yield-generating strategies curated by Steakhouse. The yield generated there is then streamed back to Katana and routed into core DeFi apps such as Morpho and Sushi.

• For more leveraged strategies, users can borrow on Morpho against core collateral at very low cost. For example, vbUSDC can currently be borrowed against vbETH for as little as -0.07%. The vbWBTC / vbUSDC market is at 0.01%, while borrowing against wsrUSD is at 1.33%, showing a wide range of funding conditions across the supported collateral set.

Dune dashboard

Linea’s Native Yield program transforms the bridge from a simple pass-through mechanism into an active balance sheet. When users deposit ETH on Ethereum, the bridge records an ETH asset on the origin chain and simultaneously issues a corresponding liability on Linea. Users treat this liability as immediately redeemable at par, regardless of how the underlying ETH is managed.

This balance sheet becomes more complex once a portion of the ETH asset base is staked. Staked ETH generates yield, but no longer converts back to liquidity on demand. It can be encumbered by exit queues, validator delays, and the operational dynamics of Ethereum’s consensus layer. What results is classic asset–liability management (ALM), where assets now pay back slowly and liabilities can be called instantly.

While the bridge’s balance sheet appears simple, its behavior is dynamic. What matters for solvency is not the total amount of ETH held but the timing and accessibility of that ETH when redemptions arrive. Staked ETH introduces duration into what was previously a fully liquid position, and the bridge must therefore manage liquidity buffers, staking allocations, and slashing reserves to ensure it can always meet withdrawals at par.

We therefore evaluate the balance sheet through three interconnected dimensions:

1. Liability behavior, captured by the timing and clustering of bridge outflows;

2. Asset behavior, including the liquidity profile of staked ETH and its exposure to validator slashing; and

3. Economic and market dynamics, which influence flows, yield differentials, and redemption pressure.

What follows is a set of quantitative observations and practical recommendations for Linea to safely pursue staking yield without compromising instant redemption guarantees.

Liabilities: Bridge Flows & Duration

The liability side of the Linea bridge is shaped entirely by user withdrawals: every bridge token represents an instantly redeemable claim on ETH, and users exercise that right in predictable but highly uneven patterns. The bridge’s solvency is determined not just by how much ETH it holds, but by when that ETH must be delivered relative to withdrawal timing. Understanding the flow dynamics is thus the first essential step in sizing liquidity buffers, determining how much ETH can be safely staked, and defining the operational posture required for Native Yield.

Historical flow data from 2024–2025 exhibits a consistent pattern. Most days show negligible net movement with deposits and withdrawals roughly in equilibrium. But this stability is punctuated by short, intense bursts of redemptions, periods where users withdraw rapidly for a few days and then flows stabilize again. These bursts are not theoretical edge cases; they appear repeatedly across history and occur in response to market volatility, yield differentials, incentive programs ending, or broad shifts in ecosystem sentiment.

The magnitude of these burst events is best seen in the statistical distribution of outflows. The table below depicts the 1-day, 7-day, and 14-day outflow percentiles as a share of bridge TVL, illustrating how sharply user flows can cluster in short windows.

A graphical representation of these flows shows the same phenomenon more intuitively, where redemptions surge suddenly, peak quickly, and then dissipate. The system rarely experiences a sustained 30-day bleed; instead, stress compresses into the first 7–14 days. The implication for Linea is straightforward.

To remain liquid, Linea must be able to satisfy the largest 7-14 day outflows without relying on fast staked ETH withdrawals

Ethereum’s exit process does not operate on short timeframes. Even in benign conditions, unstaking tens or hundreds of thousands of ETH takes several days. In stressed conditions, it takes significantly longer. This timing mismatch defines the ALM boundary.

This matters because a bridge with perfect asset quality but insufficient short-term liquidity can still fail to meet user expectations. Linea’s liabilities are near-instantaneous, therefore, the first week of redemptions is decisive. If the liquidity buffer cannot cover this window, Linea would be forced into less attractive alternatives: selling staked ETH or more likely delivering liquid staked ETH which could ultimately create user delays or discounts, all of which could ultimately erode trust in the bridge’s par guarantee.

The historical 99th percentile 14-day event of ~30–35% of TVL therefore becomes a practical design anchor. The goal is not to maintain a buffer equal to that size at all times, but rather to ensure that liquid ETH, accessible secondary liquidity and governance levers together exceed this demand shock.

These flow patterns also interact with market structure. Our analysis shows that weeks with the largest outflows often coincide with:

• yield compression relative to mainnet staking,

• reductions in incentives,

• elevated volatility, and

• deleveraging in LRT and staking markets.

This establishes a relationship between DeFi conditions and liability-side stress, which we return to later in the economic risks section. For now, the key point is that user flows can and will cluster sharply, and these clusters are the events Linea must design for.

Liability-side behavior tells us the demand for liquidity, large, sudden, short-duration outflows, is roughly bounded by historical 7–14 day extremes. The asset side, which we analyze next, tells us the supply of liquidity, or how quickly ETH can be unstaked, sold, or synthesized into liquid value.

The distance between these two curves is the ALM gap Linea must bridge.

Assets: Staked ETH Liquidity, Duration and Impairment

Ethereum’s withdrawal mechanics define the liquidity profile of Linea’s staked ETH assets. Once ETH is staked, the timing of when it becomes usable again is no longer under Linea’s control; it is dictated entirely by exit queue conditions and network validator activity.

Over the past year, Ethereum’s exit queue has swung from effectively zero days during quiet periods to nearly 50 days during periods of elevated exits. Even today, the network sits in a materially delayed regime with exit queue of roughly 1.15M ETH, a wait time of ~20 days, and a sweep delay of ~8–9 days, implying ~30 days from exit initiation to final liquidity.

The current environment illustrates how quickly conditions can shift. The timing of liquidity from staking is therefore state-dependent and external, driven entirely by global validator behavior rather than anything Linea can influence.

The solvency implication is relevant during the 7–14 day windows in which Linea has historically experienced its largest outflows. These assets cannot be realized within the time horizon that matters most for redemption pressure.

To quantify how much ETH Linea can safely stake, we model solvency using two standard ALM metrics:

• A 14-day Liquidity Coverage Ratio (LCR), comparing available liquidity to the stressed outflow distribution;

• A Net Stable Funding Ratio (NSFR) analogue, assessing multi-week solvency after immediate liquidity stress passes.

We vary liquidity buffers from 20% to 60% of TVL and evaluate each configuration’s solvency under the 98th, 99th, and 100th percentile outflow scenarios.

The results show a clear threshold.

Buffers below ~25–30% fail to maintain LCR > 1 under multiple plausible stress cases, meaning short-term solvency depends on distressed stETH sales or discretionary gating. Buffers between 35–45%, however, consistently maintain LCR > 1 even under the worst 14-day events in the dataset, indicating resilience without relying on unstaking or emergency mechanisms.

To complement this, we evaluate long-horizon funding stability through an NSFR-like metric. This measures the relationship between Linea’s long-term illiquid assets (staked ETH) and its stable funding (deposits that remain after initial outflows).

The NSFR analysis reinforces the same conclusion:

Buffers ≥40–45% keep funding stable across 30–90 days, while buffers ≤30% introduce meaningful long-term instability if exit conditions worsen or stress persists.

Short and long horizon solvency can also be viewed through the liquidity gap, the portion of outflows not covered by the buffer and which therefore must be financed through stETH sales or intervention.

This quantifies the magnitude of stETH distributions required under different configurations. At today’s TVL, a ~5–10% distribution requirement (35–40% buffer scenario) is entirely absorbable by secondary markets without meaningful discounts. A 10–15% liquidation requirement (30% buffer) is still feasible, but introduces more execution risk to users and dependence on clean governance coordination. As TVL scales, the feasibility of similar liquidation volumes diminishes proportionally.

Together, these solvency metrics outline a clear operating band. Liquidity buffers in the 35–45% range maintain solvency under all observed short-term outflow scenarios, preserve funding stability into the 30–90 day horizon, and minimize reliance on secondary market sales. Buffers below this range remain viable but require more active governance oversight; buffers above it deliver diminishing marginal solvency benefit at the expense of yield.

All of these solvency metrics evaluate Linea’s ability to withstand liquidity stress assuming the value of its staked ETH remains intact. In practice, the asset side can also experience principal impairment. The most relevant source of asset impairment for a staking bridge is validator slashing, and its effects can be incorporated alongside liquidity stress.

Slashing Risk and Asset Impairment

Slashing occurs when a validator violates consensus rules designed to preserve network security and liveness. While the precise mechanics sit outside the scope of this report, the main categories of misbehavior are well-understood and can be summarized as follows:

• Double-signing arises when a validator signs two conflicting blocks or attestations for the same slot, typically due to misconfigured redundancy or replayed signing keys.

• Surround voting occurs when attestations overlap improperly with prior ones, often linked to key reuse or client inconsistency.

• Proposer equivocation involves proposing two blocks in the same slot, usually stemming from automation or relay-level failure.

• Correlated downtime or client-wide bugs are the most economically meaningful cases, where multiple validators misbehave simultaneously due to a shared dependency — a client bug, relay outage, cloud zone failure, or slashing-protection corruption.

• Malicious coordination, while theoretically part of the protocol’s threat model, lies outside realistic operational risk for a permissioned staking operator set such as Linea’s.

These categories matter because Ethereum’s penalty function is correlation-sensitive. The more validators misbehave in the same window, the higher the penalties each validator suffers, which can amplify losses beyond what any isolated validator would experience individually.

The dominant determinant of slashing severity is not validator “skill,” but operational correlation across a validator set. When many validators share the same client, infrastructure, key domains, relays, or runtime environment, a single software or system failure can cause a cluster of validators to misbehave simultaneously. This is the essence of slashing tail risk, the correlated operational domains.

From a bridge or vault perspective, this is best understood as a form of counterparty concentration risk. Conversely, the simplest and most powerful mitigation is diversification across operational domains, which decomposes a large correlated failure mode into several much smaller ones.

The forms of diversification that matter most are:

• Consensus clients: Lighthouse, Prysm, Teku, Nimbus, Lodestar

• Execution clients: Geth, Nethermind, Besu

• Slashing-protection domains: entirely independent slashing-protection DBs and signer daemons

• Infrastructure environments: cloud vs. bare metal, distinct cloud providers, geographic separation, and energy/bandwidth diversity

• Relay and MEV stack diversity: reducing dependence on any one builder/relay path

Each dimension reduces the cross-correlation of misbehavior. Each reduction constrains the size of any credible slashing cluster.

In practice, across five years and a validator set that has grown by orders of magnitude, Ethereum has recorded only 536 slashed validators across 138 unique slashing events, a cumulative incidence of roughly 0.001% of all staked ETH. Normalized into an annualized rate, this corresponds to 0.0002%–0.0013% of stake per year, depending on whether median or mean penalty severity is used.

This chart makes two things immediately clear:

1. Slashing frequency is extraordinarily low.

2. Relative incidence decreases as validator count grows, reflecting an increasingly diverse and mature operator ecosystem.

Under the current consensus rules, slashing severity is determined almost entirely by protocol mechanics rather than historical averages. Each slashing event consists of two components. First, an immediate penalty equal to the validator’s effective balance divided by 4096. Second, a correlated penalty that scales with the share of total network stake slashed within a short correlation window, equal to the validator’s effective balance multiplied by three times the fraction of network stake slashed, capped at the validator’s full balance. Once effective balance is specified, per-validator loss is therefore mechanically determined. However, the remaining uncertainty is how many validators are affected before detection halts propagation.

This structure makes probability-based modeling difficult. The historical data is too sparse to infer a meaningful distribution of correlated events, and attempting to do so would introduce false precision. Instead, slashing is best treated as an operational stress scenario, while the likelihood of a given event is unknown, the loss conditional on a plausible event can be bounded directly from protocol rules.

The formula is effectively the sum of:

• Immediate penalty = EB / 4096

• Correlated penalty = EB * min(1, 3*Percent of Total Network Slashed)

A simple visualization makes this clear. Holding effective balance fixed (e.g. ~1,000 ETH), total per-validator loss rises linearly with the fraction of network stake slashed, with the immediate penalty acting as a small fixed floor and the correlated component dominating once correlation increases. Conversely, holding correlation fixed, loss scales linearly with effective balance. These two curves, loss vs. EB and loss vs. correlation, fully characterize slashing severity under the protocol.

The critical structural insight is that severity scales with effective balance, but correlation does not. Correlated slashing propagates only within an operator’s failure domain, validators sharing clients, signing infrastructure, slashing-protection databases, or deployment environments. These domains are bounded in practice because validator duties are time-distributed and misbehavior is detected quickly, allowing operators to halt affected clusters after the first few slashings. As a result, even though per-validator loss grows under MaxEB, the number of validators plausibly affected in a single event remains limited.

This boundedness simplifies reserve setting, but does not eliminate uncertainty. While the immediate slashing penalty is mechanically small, correlated penalties can materially increase losses if multiple validators are affected within the same operational domain. What cannot be known ex ante is how far such a correlated event propagates before detection halts it. As a result, reserve sizing cannot be justified through probability-weighted loss estimates. Instead, the reserve is set to absorb a credible, bounded local event in which correlation is limited by diversification across clients, infrastructure, and signing domains, and where losses are dominated by the immediate penalty plus a modest correlated component rather than by system-wide bug.

Within the solvency framework established earlier, this leads to a practical, stress-based recommendation rather than a probabilistic one. A slashing reserve in the range of 0.25–0.50% of total staked ETH is sufficient to absorb a realistic operator-local slashing event without pushing liquidity coverage ratios below threshold during a stressed outflow window. This range is intentionally conservative relative to the immediate penalty alone, but materially smaller than what would be required to insure against unbounded correlation. The appropriate position within the range should be guided by observed effective balances and demonstrated operator segregation; absent strong empirical evidence of diversification, governance should assume the upper end. Crucially, this recommendation reflects what can be reasonably insured, not an assertion that larger correlated events are impossible.

DeFi & Economic Dynamics

While validator failures and withdrawal constraints define the lower bound of solvency, the upper bound is determined by DeFi market behavior. The Linea bridge sits inside an ecosystem where capital is constantly reallocated across staking, restaking, leverage, incentives, and secondary liquidity venues. These external dynamics shape redemption behavior directly through yield, funding spreads, and risk-adjusted opportunity cost.

One of the clearest empirical relationships in the dataset is the connection between levered staking spreads on Linea and user flows. The spread vs flow analysis shows a robust threshold pattern. When the spread between staking yield and funding cost is positive, flows tend to be neutral or mildly positive. As the spread compresses into a neutral band of roughly ±0.3%, flows become unpredictable and volatile. Naturally once the spread declines beyond –0.6%, outflows accelerate in severity, averaging more than 7,000 ETH in weekly redemptions, aligning with the extreme 98th–100th percentile redemption windows observed earlier.

These economic incentives offer a clear path to account for most of the short-horizon redemption spikes in Linea’s historical record.

This reflexivity is amplified by leverage. Recursive staking, LRT-collateralized borrowing, and LSD-backed credit all magnify capital’s sensitivity to yield. When funding costs increase or staking yields decline, levered positions unwind rapidly. These unwinds typically occur over the same 7–14 day horizons that bound the solvency model, meaning pressure can materialize faster than unstaking can replenish liquidity.

Market depth interacts with these dynamics in a second-order way. In benign conditions, stETH secondary markets can absorb 5–10% of TVL with modest slippage. But when spreads are negative and deleveraging occurs system-wide, depth things, discounts widen, and it becomes more costly to rely on secondary liquidity. This amplifies the bridge’s dependence on its internal liquidity buffer. The worst flow events recorded in the dataset occurred precisely when spreads were negative and liquidity was fragile, underscoring that DeFi-driven exits can tighten concurrently on both the liability and asset sides.

Finally, these dynamics often coincide with or reinforce broader conditions, such as reductions in incentives, increased staking competition, episodes of market volatility, and LRT deleveraging cycles. The combined effect can cause concentrated bursts of exits during specific windows, which drives the liquidity buffer model above.

Summary & Recommendations

This report evaluates Linea’s native yield design as a balance sheet problem. The bridge transforms instantly redeemable liabilities on Linea into staked ETH assets on Ethereum, introducing duration and external constraints that must be actively managed to preserve solvency. The analysis throughout has focused on characterizing that asset–liability mismatch, identifying the conditions under which it becomes binding, and defining a disciplined way to manage it over time.

A central empirical result is that bridge outflows are not evenly distributed. Redemptions cluster into short, intense windows, most commonly over 7–14 day horizons, while remaining relatively muted outside of stress. These clusters coincide with deteriorating economic incentives, captured most clearly by compression in the levered staking spread and are exacerbated when Ethereum exit queues lengthen, extending the period during which staked assets remain illiquid.

To ground this behavior, we refer back to the historical bridge outflows across rolling horizons. This table defines the empirical envelope of liquidity stress and is used as a reference against which liquidity buffers are sized. This table can be updated in real time and can help define how large outflows have been conditional on a given time horizon once stress has begun. The liquidity buffer policy implicitly chooses which portion of this distribution it is designed to withstand.

While a single static buffer set to guard against the most extreme stress could ensure solvency it is not efficient. Thus we recommend that when economic incentives are favorable and exit queues are short, protecting against the extreme tail imposes a large opportunity cost with limited solvency benefit. Conversely when incentives deteriorate or asset duration lengthened, operating against the median or upper middle of the distribution becomes insufficient.

To make this tradeoff operational, we implement a simple model that links observable market conditions to balance sheet posture. Ethereum exit queue data (beaconcha.in) is used to estimate the effective duration of staked assets, augmented by conservation governance reaction window. In parallel, a trailing 7-day moving average of the levered staking spread is used as a proxy for economic conditions which informs redemption pressure. Together, these inputs determine both the relevant horizon and appropriate percentile from the distribution above to guard against.

The output is a recommended liquidity buffer expressed as a percentage of current bridge TVL. This recommendation is recalculated daily as conditions change and is intended to guide governance decisions on this Linea Dune Dashboard.

• Asset Duration (days): 11d

• Levered Staking Spread (7d MA, bps): -40bps

• Target Liquidity Threshold: P99

• Recommended Liquidity Buffer (%): 36%

• Recommended Liquidity Buffer (ETH): 21,667 ETH

As of April 6th, 2026

The snapshot above illustrates how the analytical framework translates into an operational balance sheet posture under current conditions. Exit queue congestion implies that staked ETH remains illiquid for several weeks, while the prevailing levered staking spread places the system in a higher-stress incentive regime. Taken together, these signals justify operating against the upper tail of the historical outflow distribution and maintaining a materially higher share of bridge TVL in liquid ETH. The recommendation is effectively a conditional posture derived from observable conditions. If conditions improve, the same methodology supports a gradual reduction in the liquidity buffer, allowing the bridge to operate closer to the efficient frontier.

Slashing differs fundamentally from redemption pressure above. It does not create an immediate demand for liquidity, but permanently reduces the value of staked ETH. For this reason, it must be addressed explicitly, but separately, within the same balance sheet framework Slashing is treated here as an operational stress scenario. Correlated slashing events are bounded in practice by operational realities of shared clients, signing infrastructure, etc which limit the failure domains, while duty rotation and monitoring constrain how far an incident can propagate. Within those bounds, a modest, dedicated reserve is sufficient to absorb a credible operator-local event without interacting meaningfully with liquidity management.

This reserve serves as structural capital intended to absorb asset impairment. It should be reviewed as validator configurations, effective balances, or operator concentration change, but it does not need to respond to short-term fluctuations in incentives or flows. Keeping the two concepts distinct avoids conflating temporary funding needs with permanent balance sheet losses.

The broader implication of this work is that Linea’s solvency is best preserved through explicit asset–liability management rather than fixed parameterization. Liquidity buffers, staking allocation, and redemption modalities are control variables that should move in response to observable signals, while reserves are held to absorb bounded, non-liquidity risks. Governance is therefore not an emergency backstop, but the control layer through which the bridge transitions between operating regimes.

In conclusion, Linea does not need to choose between yield and safety. By treating the bridge as a balance sheet, grounding decisions in historical stress behavior, and responding to clear market and network signals, native yield can be pursued without compromising solvency. Ultimately, this framework hopes to provide an understandable structure for managing liquidity and asset risk over time, with governance firmly responsible for how and when the system adapts.

Welcome to another DeFi Markets Update—your no-nonsense briefing on the cryptobanking plumbing and market pulse.

Resolv: RLP & USR DeFi Markets Exploited

• On March 22, USR, a DeFi product designed to hold a $1.00 peg, was unfortunately exploited, creating $23.6m in losses. A compromised private key controlling a privileged signing account allowed the attacker to deposit about $200K into Resolv’s minting contract and receive around $80m of unbacked USR in return. The attacker then swapped the unbacked USR into ETH across DEXs, temporarily bringing the pool price down to $0.05 per USR and extracting the assets before Resolv paused protocol functions.

• Contagion spread to lending markets on Morpho as they kept valuing wstUSR collateral at a hardcoded $1.13, assuming full peg, while the market price was well below this point. This created an arbitrage as people bought wstUSR at distressed prices and borrowed healthy USDC against it at full face value, which drained the vault’s liquidity.

• According to Morpho, “there are ~15 vaults with non-negligible exposure (>$10k)” to Resolv that were impacted. None of which were Steakhouse vaults.

• In Resolv’s dual-tranche architecture, wstUSR and USR are the more conservative (senior) tranche, while RLP serves as the riskier (junior) tranche. Steakhouse never accepted RLP as collateral; its concentrated junior tranche risk fell outside our framework for depositors.

• Our systems flagged a 1.61% USR deviation at 02:21 UTC and were fully exited across all vaults by 03:02 UTC. With zero exposure, there were zero potential losses to depositors. Our published assessment identified the failure modes that materialised and the underlying collateral was not compromised, consistent with that view. Our full treasury is in our own products and our commitment to withdraw last predates this incident.

Spread Between Prime and High Yield USDC

• Following the recent Resolv exploit, depositors have been more cautious around positions in riskier strategies, which reduced supply and mechanically increased yields. Throughout the situation, Steakhouse High Yield USDC Instant remained liquid for withdrawals.

• Steakhouse High Yield USDC (and its v2 feeder vault) saw volatile TVL during the events, going from $61m to $37m. After derisking, deposits flowed back into our HY fund.

• The overall TVL of this market is currently 64m, higher than pre-incident TVL, and the vaults are earning above 7% APY.

  

• Currently, there’s a 3%+ spread between our High Yield and Prime USDC vaults on Ethereum Mainnet. USDC Prime Instant on Ethereum is tracking in the 3-4% range. This is suggestive of a persistent tick-up in cost of capital for onchain repo opportunities.

• Steakhouse continues to hold the largest share of stablecoin deposits on Morpho.

Cork’s Time-to-Cash Framework

• In ‘Assessing Liquidity Risk in DeFi’, Cork’s team focused on a question that matters more and more as DeFi matures: How quickly does capital convert back into cash? Early DeFi was built on highly liquid collateral and near-instant settlement, so liquidity remained a background concern for most product design. That changed as the market expanded into RWAs, fixed-rate lending, cross-chain settlement, and structured vaults, where the path from redemption request to final cash can take a lot longer.

• The main concept is the time-to-cash, which gives a practical way to think about liquidity risk onchain. The article defines time-to-cash as the period between asking for liquidity and actually receiving funds, and that period can include notice windows, settlement processes, withdrawal queues, and other operational delays. Once you look at an asset through this lens, the risk becomes more concrete because the question moves from “is this asset liquid” to “how long does exit actually take, and under what conditions”, including whether cash is received immediately at NAV or only after a settlement period.

• Longer time-to-cash usually comes with a higher required yield, which is the illiquidity premium. Stablecoin positions with immediate redemption, a monthly-window fund, or a quarterly-redemption private credit product can all look income-generating, but the exit profile behind each one is very different. That makes liquidity part of the return stack, alongside credit risk and market risk, and it gives a clearer basis for comparing headline yields across asset types.

• For example, an RWA may only let investors redeem monthly or quarterly, while a staking-linked asset may require time for validators to exit. A vault may need time to unwind positions before cash is available, and a cross-chain asset may depend on bridge and settlement timing. These are different sources of friction, but they all affect how long it takes to get your money out.

• In products like CRDIX, a smooth reported NAV can still sit alongside a longer path from redemption request to cash. Once time-to-cash becomes longer or less predictable, it starts to shape which assets fit inside a product, how liabilities should be structured, and where extra yield is coming from.

• The article notes that liabilities in DeFi often behave like instant deposits or on-demand redemptions, which creates a need for assets with matching liquidity. When the portfolio holds assets that settle more slowly, the system relies on liquidity sleeves, secondary markets, or staggered exits to keep withdrawals smooth. During heavier redemption periods, those mechanics become visible through capped exits, secondary discounts, slower settlements, and higher sensitivity to market depth.

• As DeFi moves further into assets with slower settlement, liquidity deserves its own pricing framework alongside credit and market risk. The article goes deeper on the mechanics, examples, and implications across asset types, and is worth reading in full.

Euro stablecoins are growing rapidly under MiCA, but still only account for a fraction of the global stablecoin market. EURCV, a regulated euro stablecoin issued by SG-FORGE, is one of the first to anchor serious lending infrastructure onchain.

The Steakhouse EURCV vault on Morpho deploys euro liquidity across five lending markets, spanning ETH and BTCs collaterals, USD stablecoins, and tokenised euro money market fund shares. While deposits have grown as borrowing demand continues to build, and early borrowers face favorable rates.

This piece covers the fundamentals behind EURCV, the state of the euro stablecoin market, what the Steakhouse EURCV vault looks like from the inside, and what the emerging yield spreads in euro markets tell us.

EURCV: A Fully Regulated Onchain Euro

Today’s stablecoin economy runs almost entirely on dollars. For euro-based users and institutions, every deposit into a USD-denominated vault carries implicit foreign exchange risk. Until recently, the euro stablecoin market lacked a credibly regulated, institutionally-backed option that could anchor serious lending infrastructure.

Societe Generale’s digital assets subsidiary, SG-FORGE, issued EURCV in 2023 as a euro-denominated stablecoin. SG-FORGE was the first entity to receive a digital asset service provider license from France’s financial markets authority (the AMF) in July 2023, and it operates as a licensed electronic money institution under supervision of the French banking regulator (the ACPR). Those two licenses place EURCV under the same dual regulatory framework that governs traditional banking and financial services in France.

On 1 July 2024, EURCV transitioned to a Markets in Crypto-Assets Regulation (MiCA) Electronic Money Token. MiCA requires full reserve backing in euros, transparent reserve reporting, a 1:1 redemption mechanism, and, critically, free transferability without whitelisting. As a result, with this transition, EURCV removed whitelisting requirements instead of requiring gateway approvals to move between addresses. After it, making the token fully composable across DeFi.

The reserves backing EURCV are held in euro-denominated bank deposits and high-quality securities administered by Societe Generale, which has operated continuously since 1864. For users evaluating counterparty risk, this is a meaningfully different proposition from stablecoins issued by entities outside the European regulatory perimeter. That institutional backing does not eliminate risk, but it does change the nature of it.

The Euro Gap

In traditional foreign exchange markets, the euro accounts for approximately 28.9% of daily trading volume, second only to the dollar. Onchain, the picture looks nothing like that. Dollar stablecoins command over $315 billion in circulating supply, while Euro stablecoins, collectively, sit at approximately €710 million. The second largest currency in the world holds less than 0.3% of the stablecoin market.

The gap reflects several structural factors. The US dollar is the world’s reserve currency. Global trade, commodities, and capital markets are predominantly dollar-denominated. When the first stablecoins launched, they followed that gravity: US venture capital funded them, US exchanges listed them, and dollar liquidity drew borrowers and lenders into a self-reinforcing cycle. Even European users defaulted to USDC and USDT because that was where the depth sat.

Regulatory uncertainty affected stablecoins across the board, including dollar-denominated ones. The difference is that dollar stablecoins grew despite regulatory ambiguity, carried by the sheer gravitational pull of USD liquidity and global demand for dollar-denominated settlement. Euro stablecoins had no equivalent tailwind. Without clear rules, European institutions and users saw little reason to issue or hold euro tokens when dollar alternatives already existed and worked. MiCA, years in the making, only took effect in mid-2024. Before it, the regulatory case for euro stablecoins simply was not there.

Within the euro stablecoin market, concentration is high. EURC (Circle) is the largest euro stablecoin by supply. EURCV follows at approximately €74 million, with adoption accelerating in recent months. The remaining tracked stablecoins collectively hold a small share of the total.

The effect of MiCA has been measurable. Since enforcement began in mid-2024, the euro stablecoin market has roughly tripled in size. Over 50 crypto-asset licenses have been issued across the EU. Issuers are launching, institutions are evaluating, and the first lending markets built around euro stablecoins are beginning to take shape.

The Steakhouse EURCV Vault

A stablecoin without lending markets is just a token sitting in a wallet. Lending is what turns a stablecoin into productive capital, creating borrowing demand, generating yield for depositors, and giving users a reason to circulate the token.

More fundamentally, lending markets establish a base yield for the currency onchain. USDC lending rates on venues like Aave and Morpho have become the de facto reference rate for dollar-denominated DeFi, the equivalent of a risk-free benchmark. For euro stablecoins, no such benchmark exists yet because there is not enough liquidity depth to establish one, and these are the markets where that begins to change.

The Steakhouse EURCV vault, deployed on Morpho in January 2025, is one of the first dedicated euro lending venues onchain. It pools EURCV liquidity from depositors and allocates it across five isolated lending markets, each with its own collateral type, Liquidation Loan-to-Value ratio (LLTV), and risk profile.

Vault parameters:

• Governance: Safe multisig (5/8 signers), Aragon DAO guardian, 7-day timelock

• Performance fee: 0%

• Net APY: 0.25% (0.19% base + 0.06% MORPHO incentives)

• Total deposits: 20.36 million EURCV (~$23.57M)

• Idle liquidity: 16.17 million EURCV

The vault serves five markets:

Three markets accept Bitcoin and Ethereum collateral at 86% LLTV, meaning borrowers must maintain collateral worth at least 116% of their loan. The steakUSDC market pairs a dollar-denominated yield-bearing position against euro borrowing at 91.5% LLTV. The EUTBL market accepts tokenised shares of Spiko’s Euro Money Market Fund at 96.5% LLTV, the highest capital efficiency in the vault, reflecting the tight correlation between a euro money market instrument and a euro stablecoin.

The EUTBL market is worth noting separately. EUTBL represents tokenised shares of Spiko’s Euro Money Market Fund, backed by short-term European government debt. Borrowing EURCV against a euro-denominated money market instrument is a practical example of how yield spreads form onchain: the difference between the fund’s return and the borrowing cost reflects the market’s pricing of liquidity and collateral quality between two closely correlated euro assets.

Deposits in the Steakhouse EURCV vault grew following the native integration with Safe wallet, which simplified the deposit flow for users ranging from individual holders to multisig treasuries. However, while supply has increased substantially, borrowing demand is still building its way across the markets. The capital allocated to active markets shows healthy utilisation (73-90%), but the majority of vault deposits remain idle. This is typical of early lending markets where supply arrives first and borrowing demand follows as the ecosystem matures and use cases solidify.

The Opportunity

For European users and institutions who want their onchain balances denominated in euros rather than dollars, these markets offer a direct path. A user can deposit BTC or ETH as collateral and borrow EURCV, maintaining crypto exposure while holding euro-denominated liquidity. This avoids the implicit forex risk of sitting in USD stablecoins, since if the dollar weakens against the euro, a euro-based user holding USDC loses purchasing power in their home currency. Borrowing EURCV eliminates that exposure, with current borrowing rates across the vault ranging between 1.06-1.12% depending on the market.

The natural question is why borrow EURCV instead of borrowing USDC and swapping to euros. There are two main reasons. First, the swap incurs a spread and a gas cost that often exceeds the rate differential. Second, and more importantly, borrowing EURCV means the debt is euro-denominated. A European business paying salaries, vendors, or taxes in euros avoids carrying an implicit EUR/USD position. The simplicity has real value for anyone whose liabilities are in euros.

The steakUSDC market serves a different purpose. Here, the collateral is a dollar-denominated yield-bearing position. Borrowing EURCV against it creates a direct EUR/USD exposure onchain. As a result, if the dollar strengthens, the collateral appreciates relative to the debt. This market begins to bring foreign exchange dynamics into composable lending, accessible to any user rather than restricted to institutional FX desks.

Current utilisation is high on allocated capital, but the overall vault has significant idle liquidity. For borrowers, this translates to favourable rates. As demand scales and idle capital gets deployed, rates will adjust upward. Early borrowers capture the benefit of an emerging market where supply has outpaced demand.

Risks

The most immediate risk for borrowers is similar to what users face on USD markets: collateral volatility. BTC and ETH fluctuate daily against the euro, and a sharp drawdown can trigger automatic liquidation if a position breaches its LLTV threshold. The isolated market structure means each pair has its own liquidation conditions, so risk is compartmentalised but still present. All positions also carry smart contract risk inherent to the Morpho protocol and the underlying collateral tokens, and while audits reduce, it does not eliminate this exposure. EURCV itself, while regulated, introduces counterparty risk on reserves held by Societe Generale. The bank is systemically important and has operated for over 160 years, but no institution is risk-free.

At the market level, the vault’s pools are still small relative to traditional lending. A large position entering or exiting rapidly could face slippage, and the euro stablecoin market as a whole is nascent enough that liquidity may not always be available at expected rates. MiCA is new legislation; amendments to licensing, reserve standards, or permissible use cases could affect EURCV’s operational status and, by extension, vault users. Current lending rates across the vault sit below 1.1%, and as more euro liquidity comes onchain, rates may compress further.

Euro Stablecoin Adoption is On the Rise

Yield spreads are beginning to form in onchain euro markets. The gap between EURCV lending rates and USDC lending rates reflects currency preference, liquidity depth, and the relative maturity of each market. As euro-denominated lending deepens, these spreads will tighten and begin to price the same factors that drive spreads in dollar markets: credit quality, platform architecture, and capital mobility.

The euro stablecoin market does not need to match the dollar market to be useful. It needs enough depth for borrowers and lenders to transact in their native currency without defaulting to dollar exposure as the only option. MiCA created the regulatory foundation. Institutional issuers like SG-FORGE provided the assets. Now, lending infrastructure like the Steakhouse EURCV vault on Morpho are providing the markets where those assets become productive. The rest is a matter of adoption, and adoption follows utility.

Follow Steakhouse Financial for more European poasting.

Disclaimer: This content is for informational purposes only and does not constitute financial advice. DeFi lending involves risks including smart contract risk, liquidation risk, and market risk. Past yields are not indicative of future performance. Users should conduct their own research and assessment before interacting with any protocol or vault.

Steakhouse is launching the Steakhouse USD Machine on Makina, a DeFi execution engine for onchain strategies. Makina’s infrastructure allows Machines to allocate across protocols, chains and asset types with strong cryptographic guarantees. We value the product on the back of it offering trustless NAV accounting, atomic execution and strong guardrails around operator permissions.

Steakhouse USD Machine is our first deployment on Makina, designed to offer automated yield aggregation across chains through a single deposit. In the below post we cover what Makina unlocks as infrastructure, how the USD Machine will work at launch and how to get started.

What Makina brings

At the core of Makina is MakinaVM, a flexible execution environment that replaces traditional smart contract adapters with lightweight Instruction sets, reducing the integration overhead for each new protocol. This is what makes Makina a DeFi execution engine rather than a single-purpose vault wrapper, like our Box vaults.

Each Machine operates through Calibers, which are chain-local execution engines deployed on any supported chain. A Caliber holds funds, accounts for local positions, and interacts with protocols on that chain. All position values are relayed back to the Machine, which computes an aggregated NAV onchain. The Machine Token price reflects actual NAV, in a verified and transparent way. Crucially, Steakhouse as an operator has no influence on how the NAV is struck.

Merkle tree permissions. Each Machine’s approved actions are encoded in a Merkle tree structure. A Merkle tree is a cryptographic data structure that lets anyone verify whether a specific action is approved without needing to read the entire configuration. For allocators, the practical implication is legibility: you can audit exactly what the Operator is permitted to do, and that permission set is enforced onchain. The blueprints are furthermore readable in Makina’s GitHub repo in a human and agent-readable YAML format.

Governance: Security Council, Risk Manager, and Root Guardians. Three governance roles sit above the Operator. The Risk Manager can adjust risk limits and propose configuration changes, which go through a timelock and can be vetoed by the Security Council. The Security Council can veto timelocked changes and trigger Recovery Mode, which pauses normal Machine operations. Root Guardians hold veto power over Merkle Root updates, which define the full scope of what the Operator is permitted to do. Together, these roles create layered oversight where no single party has unchecked authority.

Oracle Registry. All asset pricing runs through Chainlink oracles registered in Makina’s Oracle Registry. This provides standardised, externally sourced pricing across every asset the Machine interacts with.

Cross-chain capability. Makina’s architecture supports operations across multiple chains from a single Machine through its Caliber system. For strategies that benefit from accessing liquidity or yield opportunities on different networks, this removes the need for separate vaults per chain or manual bridging.

How the USD Machine works

Target: Aim to offer noncustodial stablecoins yields equal to or greater than Mainnet High Yield repo by

• Allocating to dislocated repo opportunities across chains

• Allocating within constraints to less liquid opportunities in Term and Turbo

• Allocating opportunistically to individual situations (point farms, PT tokens, etc)

Steakhouse operates the Machine through Makina’s Operator model, executing yield strategies within a permission set we define and publish onchain. Every action available to the Operator is explicitly encoded in the Merkle tree configuration. If an action is not in the tree, it cannot be executed.

The Machine aims for a high degree of automation, nondiscretion and noncustodiality, leveraging our curator tooling and experience.

Considerations

Steakhouse Financial is a vault-agnostic curator. Every vault infrastructure involves tradeoffs. Naming them is part of how we operate.

Withdrawal mechanics. Makina uses an asynchronous withdrawal queue. When you request a withdrawal, it enters a first-in, first-out (FIFO) queue that the Operator settles. Unlike lending protocols where depositors can trigger instant redemption, on Makina you cannot bypass the queue. The queue adds a time dependency that depositors should factor into their liquidity planning. The redemption queue is settled through an automated mechanism that pulls out of a designated liquidity adapter to minimize the queue time.

Broader action set, scoped by design. Makina’s modular architecture allows a wider range of operations than lending-only protocols. Every action available to the Operator is constrained through Makina’s Merkle tree permissioning system, where the full set of approved instructions is publicly available in an open repository and verifiable against the root stored onchain. Steakhouse operates within this framework under layered governance oversight, including the Risk Manager, Security Council, and Root Guardians, and maintains transparent reporting on all Machine activity. We treat transparency as a baseline requirement. Depositors should understand that a broader operating environment is inherently different from a narrow one.

Oracle dependency. The Machine relies on oracle infrastructure for asset pricing. Oracle downtime, delayed price updates, or feed inaccuracies may affect Machine operations. Any external dependency introduces risk that depositors should account for.

Operational track record. Steakhouse has curated vaults across DeFi since January 2024. Our operational history on Makina is shorter. We apply the same curation standards and risk frameworks, but the track record on this specific infrastructure is new. That context matters for allocators sizing their positions.

Prior security incident. Makina depositors experienced an exploit in January 2026 involving a secondary market liquidity pool. The exploit did not occur on Makina’s core execution infrastructure, but in its secondary liquidity markets. The robustness of the protocol to this situation - namely, the protocol itself was not exploited - as well as the team’s subsequent response and contract-level security hardening, was a factor in our diligence and met the standard we would expect from a professional team managing critical infrastructure. The protocol upgrades implemented after the incident have strengthened the safeguards around the vectors that were exploited, which narrowly required specific conditions to be true (exposure within the Machine to liquidity pools, secondary trading of the Machine tokens and atomic NAV updates at the same time).

Steakhouse’s use of Makina is scoped to cross-chain yield aggregation across our vault portfolio, and does not involve using Machine Tokens as collateral or relying on secondary market liquidity pools, which were the vectors involved in the incident - even if a similar situation has been rendered impossible in the future following the protocol hardening.

How to deposit

Depositing into the USD Machine is straightforward:

1. Navigate to the Makina app

2. Locate the Steakhouse USD Machine

3. Connect your wallet

4. Select your deposit amount and confirm the transaction (Ethereum)

5. Receive your Machine Tokens (MTs) representing your aggregated position

For full documentation on Machine mechanics, withdrawal processes, and fee structures, see Makina docs and Steakhouse docs.

Rewards

The USD Machine offers multiple layers of return for depositors.

Native yield. The Machine generates yield through Steakhouse-curated USD strategies aggregated on Makina. This is the baseline return from the underlying strategy.

Makina Season 2. The USD Machine is part of Makina’s Season 2 rewards campaign. Holders of the Steakhouse USD Machine token will get a 1.0x point multiplier.

Points accumulated during Season 2 convert to MAK tokens at the Token Generation Event (TGE). For the latest on multiplier rates and Season 2 mechanics, check Makina Season 2 page.

Steakhouse Financial curates onchain yield strategies across multiple vault infrastructures. For more on how we evaluate infrastructure and manage risk, visit steakhouse.financial.

This content is for informational purposes only and does not constitute financial advice. DeFi protocols carry inherent risks including smart contract risk, oracle risk, and liquidity risk. Always conduct your own research before depositing.

Disclaimers → steakhouse.financial/disclaimers

Welcome to another DeFi Markets Update—your no-nonsense briefing on the cryptobanking plumbing and market pulse.

Capital Allocation in an Increasingly Curated DeFi Credit Market

• In the paper ‘Institutionalizing Risk Curation in Decentralized Credit’, posted on arXiv, the authors argue that underwriting in DeFi has moved from the protocol governance layer to the curator layer. Their point is that protocols such as Morpho and Aave are better understood as infrastructure, while curators are increasingly the ones deciding asset selection, leverage bounds, and portfolio construction. However, note that the dataset used in the paper ends in early November 2025.

• The paper also argues that major lending protocols are converging. By mid-2025, the authors find that large lending systems were increasingly moving in sync across collateral mix, chain expansion, and liquidity conditions, which weakens the case that simply spreading capital across protocols is still meaningful diversification.

• In November 2025, the top four curators(Steakhouse, Gauntlet, MEV Capital, and K3 Capital) controlled around 65% of curated TVL. But curators do not take the same kind of risk, and today only Steakhouse and Gauntlet remain at the top. The authors shows differences in volatile exposure and portfolio concentration across curators, which suggests users are no longer just choosing a venue, but also choosing a risk profile.

• The article focuses on the share of stable versus volatile assets used in vaults. Steakhouse’s focus and expertise have always been in stablecoins, which keeps it relatively small in the volatile bucket. The authors note that Steakhouse’s positioning is “akin to a large money-market or government-bill fund,” which is indeed our objective.

• Moreover, curators also differ in how much of the yield they retain. The paper shows that “Re7 and MEV Capital explicitly run more active, higher-beta strategies, so higher fee shares can be justified by higher gross yields” (both have since been hit by Stream Finance), while Steakhouse keeps less than 3%, pointing to two distinct models: one that charges more in exchange for more active risk-taking, and one that relies on scale, lower fees, and depositor confidence.

• Overall, the paper shows some interesting data points, and the next step is to dig deeper into the actual risk profile of the underlying collateral. The important question going forward is which exposures sit inside each vault and how they behave under stress, which is the direction we are taking with our own Vault Ratings in the new Steakhouse App.

USDC Yield is Becoming Easier to Access

• USDC has crossed the $80bn mark in circulating supply, including unreleased supply. The total stablecoin sector is around $315bn, therefore, USDC now makes up roughly 25% of the whole stablecoin market.

• Crypto markets have felt increasingly unsettled since the start of 2026, and in this kind of environment, one of the simplest positions can still be one of the best: holding stablecoins that stay liquid while earning yield on them.

• Ramp users can now do this directly in-app. Steakhouse curates the strategy and risk parameters behind Ramp Earn, Ramp’s new in-app USDC yield feature. Users can deposit USDC directly in the wallet and earn variable yield through Morpho, with no fees and no lock-up.

• Another example is QiDao’s Goldbot Sachs product, which applies the same idea to AI-agent wallets. Users can deposit USDC into clawUSDC, a Base ERC-4626 vault designed for idle balances sitting inside agent-controlled wallets. The current setup routes funds through a Beefy strategy connected to Morpho, with Steakhouse curating the underlying USDC strategy.

• Across Ramp and QiDao, users can now access roughly 3–7% variable yield on USDC strategies curated by Steakhouse, without needing to interact with the underlying lending stack directly.

Elevated Yields Across Steakhouse Vaults

• On Ethereum, Steakhouse High Yield USDC currently offers the highest APY among the selected competing USDC vaults shown below.

• The High Yield vault allocates across a broader collateral mix, led by siUSD and mF-ONE. siUSD adds liquid, yield-bearing stablecoin exposure, while mF-ONE provides tokenised exposure to Fasanara’s multi-strategy private credit platform. With mF-ONE yielding around 10% APY in recent weeks, this mix has helped the High Yield USDC vault sustain higher yields than our competitors.

• Steakhouse continues to offer solid USDC rates across multiple chains, with HY USDC on Katana at 9.12% APY, HY Instant on Mainnet at 5.29%, and HY USDC on Monad at 4.89%.

• Furthermore, yields on Monad remain elevated across several Steakhouse vaults. For example, Grove x Steakhouse HY AUSD is now earning an organic 8.6% APY as Grove reduces its AUSD exposure on Monad and shifts more allocation toward Ethereum.

• Incentivised vaults like Prime ETH, HY USDT0, and HY AUSD are all above 7.5% APY.

• We also launched a new cbBTC vault on Monad, which is currently earning 3.6% APY.

Update 2026-03-22: Unfortunately, one of the risks we highlighted in the below report materialized, leading to an exploit that allowed an attacker to mint new USR tokens. The collateral backing, thankfully, was not compromised and remains whole. Please refer to communications from Resolv Labs for more updates.

Steakhouse Financial has been engaged, on a fixed-fee basis, as a risk manager by Resolv. The mandate focuses on formalizing a unified risk framework (liquidity, market, concentration, duration risk), providing a governance review of collateral onboarding, venue exposure and building structured transparency and attestation dashboards. The below report provides our overview of the first few weeks examining Resolv in-depth.

Published in March 2026. Download the Full PDF

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Resolv Protocol is a DeFi platform issuing USR, a stablecoin backed by a diversified basket of crypto money markets, and RLP, a risk‐bearing yield token. Together these form a dual-tranche structure: USR provides stable USD exposure with no directional crypto risk, while RLP acts as an insurance/equity layer that absorbs volatility and counterparty risks in exchange for higher returns.

Unlike other similar protocols, Resolv bifurcates its collateral pool into senior (USR) and junior (RLP) claims, delivering stable yield to conservative holders and leveraged returns to risk-tolerant liquidity providers. The following report presents a comprehensive economic and operational analysis of Resolv’s unique mechanics. We examine how collateral flows through the system, how delta-neutral exposure and payoffs are managed, the liquidity and correlation dynamics of its integrated venues, and the operational processes and failure modes that underpin Resolv’s stability.

1. Economic Analysis

The information herein is sourced primarily from the Resolv public docs and supplementary materials. For a complete description of the structure, including its risks, please refer to the governing documents directly.

1.1. Structure

Resolv is a stablecoin protocol with a two-token structure consisting of USR (a $1-pegged stablecoin) and RLP (the risk-bearing “insurance” token). This design separates conservative vs. risk-tolerant capital into different tokens. USR serves as a senior stable tranche (targeting 1 USD value), while RLP is a junior tranche that absorbs risk and earns higher yields. Economically, this structure lets USR holders enjoy stability and modest yield, whereas RLP holders take on extra risk (like market and counterparty risk) in exchange for a greater share of the profits.

• USR (Resolv USD): A fully collateralized stablecoin pegged to $1. Its primary backing are on-chain assets grouped into a few distinct clusters, such as delta-neutral positions in ETH and BTC, DeFi lending, and RWAs. USR itself does not accrue yield unless staked (as stUSR), designed to make it a low-risk, stable asset. USR can be minted and redeemed 1:1 for USD value of collateral (e.g. $1 of collateral ↦ 1 USR).

• wstUSR (Wrapped Staked USR): USR is a stablecoin that by itself does not accrue yield. However, holders can stake USR to earn native yield. When USR is staked, it is converted into a yield-bearing token. Staking USR first issues stUSR (staked USR), which is a rebasable token whose balance grows as rewards accrue. For ease of use in DeFi, stUSR is typically wrapped into wstUSR which represents staked USR in a non-rebasing format. Each wstUSR grows in value relative to USR over time as it accumulates staking rewards

• RLP (Resolv Liquidity Pool token): A risk-sharing token that represents the excess collateral beyond the $1-per-USR backing. RLP acts as an insurance layer for USR – it covers any losses or shortfalls to protect USR’s peg. RLP’s price is not fixed but floats based on the net asset value of its backing (denominated in USD). Holders of RLP earn higher yield rewards (including a dedicated risk premium) for shouldering this risk. If losses occur, RLP’s value is written down first, preserving USR’s full collateralization

1.2. Delta Exposure for Minting and Redeeming

Resolv’s collateral pool is sourced from user deposits and allocated across multiple instruments and custody locations to implement its delta-neutral strategy. The key steps of the minting process are:

• Stablecoin Deposit: A user deposits $x of liquid collateral (currently USDC or USDT) to mint either $x of USR or an equivalent value of RLP. Minting is done at a 1:1 USD value basis.

• Swap to Allocation: The protocol uses the deposited funds to deploy into multiple USD-Neutral clusters including Delta-neutral ETH & BTC, Delta-neutral Altcoins, USD DeFi assets, RWA
  On a cluster level, funds are deployed into a relevant money market strategy, for which the cluster is mandated. For example, in the delta-neutral cluster, the assets are exchanged into ETH. In parallel, Resolv opens a short using perpetual futures, sized to fully offset the assets acquired. For every 1 ETH added to the collateral pool, the protocol shorts approximately 1 ETH worth on a partner exchange or DeFi perps venue (e.g. Hyperliquid, Bybit, etc.). This hedge neutralizes price movements – if ETH’s market price rises or falls, the gain/loss on the long ETH is offset by an opposite loss/gain on the short contract. The net effect is that the portfolio value stays pegged to USD, enabling 1 USR to remain redeemable for ~$1 of collateral at all times without needing large collateral buffers for volatility.

• Minting Tokens: In conjunction to the above allocations, the user receives their tokens as either USR equal to the deposit amount (if they chose to mint USR), or RLP tokens equal in value to their deposit (if minting RLP). RLP minting mirrors USR minting operationally, but with a different economic outcome. The RLP collateral becomes “excess” collateral in the system (above what’s needed for USR backing). This increases the buffer protecting USR. Initially, 1 RLP token typically represents $1 of assets; over time its price will fluctuate as profits or losses accrue to the RLP tranche.

The redemption process follows closely but in the opposite direction:

• Redeeming USR/RLP burns the tokens in exchange for a proportional share of the underlying collateral. For USR, this creates an unwind request that is submitted and fulfilled by the team. For RLP, the amount of stablecoins you get back equals # of RLP redeemed) * (current RLP price), minus any fees. For example, redeeming 10,000 RLP when price is $1.10 would return about $11,000 worth of assets. The protocol adjusts collateral requirements dynamically based on RLP’s price, so that redemptions and minting are always fair relative to the pool’s latest valuation.

• Critically, RLP redemptions may be subject to certain guardrails to maintain the system’s capital adequacy. Because RLP acts as the buffer protecting USR, the protocol monitors the ratio of RLP pool value to USR outstanding, akin to a capital adequacy ratio. Withdrawal limits or delays can kick in if too much RLP tries to exit at once, ensuring that after RLP redemptions, the remaining collateral still fully backs all USR in circulation. This design prevents a scenario where RLP holders could withdraw and leave USR under-collateralized.

1.3. Yield Generation

Once users have minted USR or RLP and the protocol has allocated the collateral, Resolv’s system enters a steady-state of delta-neutral yield generation. The economics hinge on the fact that the collateral assets (e.g. ETH) produce yield, and the short hedge can also produce or cost funding, all while the net value remains stable in USD.

Key components of Resolv’s collateral yield strategy include:

• Staking Yield: The majority of ETH collateral is held as yielding ETH (e.g. in liquid staking derivatives like Lido or in native staking or direct lending on Aave). This earns regular staking rewards (currently on the order of ~2-3% APY for ETH). Those rewards increase the total ETH in the collateral pool over time, effectively boosting the backing for both USR and RLP. Since USR is fixed to $1, these extra earnings are split to accrue to staked USR and RLP holders as “excess” collateral once credited (hence raising wstUSR and RLP’s price). Staking yields provide a base level of profit to the system, derived from securing the Ethereum network.

• Funding Fees from Shorts: By holding a short perpetual position against the long spot, the protocol may earn or pay funding rate payments. Historically, typically longs pay shorts, resulting in the short side (where Resolv is) receiving periodic funding fees. Historically, funding on ETH/BTC perps ranges around ~10% of annual yield when positive. However, if market sentiment flips, shorts might pay funding to longs (a cost to Resolv). The protocol’s design aims to manage this by possibly adjusting hedge venues or relying more on staking yields during such times.

• Other Yield Streams: Resolv also deploys portions of the collateral in DeFi money markets or RWAs to enhance returns, as long as they remain USD-neutral. For example, a portion of assets could be lent on Aave/Morpho or put into tokenized real-world assets (like treasury bill tokens) to earn interest. Allocations are made while making sure to preserve high liquidity and safety. In essence, Resolv’s treasury management seeks diversified yield (staking, lending, funding fees) to maximize return without jeopardizing the peg or taking directional bets.

1.4. Yield Payoff

Resolv splits the earnings (or losses) of the collateral pool between USR, and RLP holders and the treasury in a structured way to align incentives:

USR Stakers (Conservative Tier)

USR itself is a stable utility token and does not automatically accrue yield. However, users can opt to convert into stUSR and wstUSR to receive yield distributions. Staked USR and RLP together are entitled to a portion of the protocol’s profits (the “Base Reward”) each epoch (24 hours). After a 10% protocol fee is deducted, 76.5% of each epoch’s profit is shared pro-rata between stUSR and RLP holders as the Base Reward. This parameter was updated in early 2026 from the original 70% base / 30% risk premium split (with no protocol fee) via a phased six-week transition. USR holders must stake to get this reward; if they don’t, they simply hold a stable token with no interest.

In times of loss, USR holders are protected – no losses are taken from USR, and unstaked USR never dips below $1 in value because redemptions are always honored at $1 so long as RLP capital is available. This makes USR a low-risk asset suitable for those who prioritize stability but with the option of moderate yield (by staking).

RLP Holders (Risk Tier)

RLP holders receive the lion’s share of rewards due to the higher risk they bear. In addition to their pro-rata portion of the 76.5% Base Reward, RLP exclusively earns 13.5% of profits as the Risk Premium each epoch (with the remaining 10% going to the protocol treasury as a fee). This boosts RLP’s effective APY significantly.

For example, if RLP comprises 30% of total staked assets and USR 70%, RLP would receive 30% of the 76.5% Base Reward (i.e. 22.95% of profits) plus 100% of the 13.5% Risk Premium – totaling ~36.5% of all profits in that scenario (while only representing 30% of capital). USR stakers would receive the remaining ~53.6%, with 10% going to the protocol treasury.

Note that RLP also fully absorbs any losses: if an epoch ends with a negative return (e.g. due to adverse funding rates or other costs), 100% of that loss is deducted from the RLP pool’s value (reducing RLP price) and USR holders receive nothing negative. RLP is essentially the first-loss capital that insures USR such that USR remains fully backed. In return, RLP is rewarded with outsized profit share during good times. This risk-reward profile attracts users who are comfortable with volatility and seeking high yield.

Economic Example

Suppose the system has $200M USR (staked) and $100M RLP. In a day, the collateral pool could earn $82.2k from staking and funding (~10% net interest). From this $82.2k yield, $8.2k (10%) goes to the protocol treasury as a fee. Of the remaining $74.0k, $62.9k (76.5% of total) is the Base Reward split pro-rata between staked USR and RLP, and $11.1k (13.5% of total) goes entirely to RLP as the Risk Premium.

From the above table, you can see how on this example epoch day, the net $300m of TVL earning 10% collectively ended up split into staked USR yielding 7.7% and RLP holders earning 11.7%.

1.5. Points Incentives and Airdrop Rewards

Resolv historically employed a seasonal Points Program to reward user participation, effectively converting user activity into future token yield. Each season allocates a portion of the total $RESOLV token supply as an airdrop, distributed in proportion to points earned by users.

Season 1 rewarded early adopters with 10% of the total token supply (100 million tokens) distributed via airdrop. Season 2 followed with an allocation of 5% of the supply (50 million tokens) for its airdrop pool. Subsequent seasons have continued this trend on a diminishing scale; for example, Season 3 distributed 3% of supply – reinforcing long-term engagement while avoiding excessive immediate dilution.

These token rewards acted as a powerful incentive tool as users earned not only interest from USR/RLP positions but also “bonus” yield in the form of points that convert to governance tokens. In essence, the prospect of sizable airdrop rewards boosts the effective APY for participants and has been a key driver of user involvement.

Points are earned by performing various actions that support USR and RLP’s ecosystem – such as holding or staking USR, providing USR liquidity, or holding RLP in the protection pool. Different actions earn different amounts of points, and the Resolv team can choose to adjust these point distributions as they like to reward ecosystem favorable behaviors. For example, if they want there to be deeper secondhand USR liquidity, they can choose to allocate more points to USR/USDC liquidity pools to encourage more LPs.

To maximize points (and thus their share of airdropped tokens), many users employ leverage and looping strategies. For example, a user can deposit USR as collateral on a lending platform (e.g. Morpho or Euler) and borrow USDC against it, then swap the borrowed USDC for more USR to deposit again. By repeating this loop, the user dramatically increases their USR position (while staying largely delta-neutral since both assets are USD-pegged), which in turn multiplies the points they earn.

Some top point-maximizing strategies involved leveraged USR/RLP positions on protocols like Fluid, Morpho, and Euler, achieving up to a ~10× points multiplier through aggressive looping. Users also pursued yields on Pendle by acquiring wstUSR/RLP YT (yield tokens), which simultaneously generated base yield and points rewards. These tactics became common as participants sought to “farm” as many points as possible before each season’s snapshot. While such leverage amplifies rewards, it does introduce risks (liquidation or interest costs), so only savvy users with higher risk management engage at higher multiples.

The impact of these point incentives on protocol growth and user behavior has been substantial. By offering significant token rewards, Resolv rapidly attracted liquidity and users – effectively jumpstarting network effects.

The chart above illustrates the direct causal link between points incentive seasons and TVL growth. Season 1 (10% of RESOLV supply) catalyzed explosive growth from under $50M to over $650M in under three months, driven primarily by the enabling of USR as collateral on Morpho and Euler which unlocked leverage looping strategies. Following the TGE and Season 1 airdrop distribution, TVL contracted by approximately 40–45% as yield farmers exited positions. Season 2 (5% supply) and Season 3 (3% supply) incentives helped plateau TVL. This pattern is consistent with incentive-driven growth curves seen in other basis trading protocols like Ethena, and represents a key risk factor: a significant share of TVL may not be “sticky” capital and may exit upon incentive exhaustion. With the points program now concluded, this thesis is actively being tested as the protocol transitions to liquid incentives.

1.6. Liquidity Pathways

A critical aspect of any protocol is how liquidity flows in and out – both under normal conditions and stress. Resolv’s liquidity pathways can be summarized as follows:

Primary Market (Mint/Redeem):

Users can always interact with the protocol contracts to mint new USR/RLP (by depositing collateral) or redeem USR/RLP (withdrawing collateral). This provides base layer liquidity. USR is soft-pegged by this mechanism: if market price deviates, arbitrageurs can create or destroy USR via the 1:1 collateral window to profit, thus pushing the price back to $1. USR redemptions are typically honored within 24 hours via the standard process. Additionally, Resolv offers instant USR redemptions subject to a daily cap and a small fee, funded by idle USDC in the Treasury or temporary Aave borrowing.

The delay in some cases usually relates to converting staked assets or unwinding futures if needed. The on-chain liquidity buffer is intended to fulfill most redemptions quickly without having to wait, for example, for a Lido unstaking period.

Additionally, Resolv can maintain liquidity by borrowing against staked assets – e.g. using stETH as collateral to borrow ETH from DeFi lending markets – ensuring that even if a large portion of assets are staked (with days-long withdrawal times), the protocol can access immediate liquidity to redeem users if needed. This is an important operational pathway: essentially transforming illiquid yield assets into liquid funds when needed via DeFi money markets.

Secondary Market Liquidity

USR, as an ERC-20 token, trades on secondary markets (DEX pools, CEX listings) for convenience. The presence of the primary arbitrage mechanism (mint/redeem) typically keeps secondary market spreads tight around the peg – any drift invites arbitrage. RLP also trades on secondary markets, allowing investors to enter/exit without directly calling the slow redemption function.

However, secondary liquidity for RLP will depend on demand; since RLP’s price can fluctuate and has fewer holders (risk seekers), its market might be less liquid than USR’s. Resolv’s approach to fostering RLP liquidity has included incentivizing liquidity pools in the past and additional points incentives for such.

Liquidity for Hedging Operations

Another facet is internal liquidity for rebalancing. When the protocol needs to adjust futures positions or margin, it requires available capital. Resolv’s design ensures a portion of assets is always liquid (unstaked or in stable form) as a buffer. If crypto prices spike and more margin is needed on exchanges, Resolv can pull from this buffer or quickly swap some assets to stablecoin to post margin.

Conversely, if prices crash and positions are in profit, Resolv will withdraw excess margin back to the buffer. This flow of liquidity between on-chain reserves and exchange collateral is managed via the custodial accounts (Fireblocks/Ceffu) which allow near-instant transfers to/from exchanges. Essentially, Fireblocks and Ceffu act as bridges that can swiftly move collateral in response to exchange margin needs, avoiding the delays of traditional banking. This operational liquidity pathway is critical in volatile conditions to prevent forced liquidations.

Below is an analysis of USR and RLP Inflow/Outflow across 2025 using the TVL chart from above. This highlights explosive USR & RLP growth to start the year as leverage was introduced before plateauing off as 2025 continued.

1.7. Correlation and Co-Movement Across Integrated Venues

Resolv sources its delta-neutral yields from multiple venues (staking and several futures exchanges). Understanding the correlation and co-movement of yields and risks across these venues is key to evaluating Resolv’s stability.

Funding Rate Co-Movement

Funding rates for BTC and ETH perpetuals are broadly driven by market sentiment. Thus, there is a high correlation in the direction of funding moves across venues as in a market-wide downturn, most exchanges’ funding will compress or turn negative together. While exchanges follow the same broad trends, there are material differences in average funding and volatility by venue.

By allocating futures across various exchanges like Binance, Bybit, Deribit, and Hyperliquid, Resolv can achieve a blend close to actual efficient operations. This diversification means Resolv is not overly exposed to an idiosyncratic funding event on any single exchange. If one venue’s rates go negative due to a localized issue, the others might still be positive, smoothing the overall yield. Correlation of funding income is high but not perfect, so diversification reduces variance of the composite yield.

Exchange Credit Event Correlation

The risk of exchange failure is another area of possible co-movement as a broad market crash could stress multiple exchanges simultaneously (as seen in events during the Bybit hack during February 2025). Resolv mitigates by using independent custodians and aiming for low exposure, explained more in the operational analysis.

Staking Yield vs Funding Correlation

Two of Resolv’s main yield sources – ETH staking rewards and perp funding fees – are uncorrelated to a large extent. Staking yield is relatively stable (set by network parameters and overall ETH economics) and tends to slowly vary (recent range ~3–3.5% APY). Funding fees, conversely, are highly sensitive to market conditions and can swing from strongly positive to zero or negative.

The above analysis confirms statistically insignificant correlation (ρ ≈ -0.049) between ETH staking yield and perpetual funding rates, validating the diversification thesis underlying Resolv’s dual yield strategy. This lack of correlation is beneficial: during some periods when trading yields are low (bear markets with flat or backwardated futures), staking yields continue to accrue, providing a baseline return. In bull markets with rich futures premiums, funding yields spike, adding to staking returns. In stress scenarios, funding could be slightly negative, but staking would likely still produce positive yield, offsetting some losses.

Price Correlation of Collateral Assets

The collateral includes ETH, BTC, and other stable assets. BTC and ETH prices are closely correlated, often moving in tandem. It’s important to note that with respect to stETH vs ETH liquidity, in extreme conditions, stETH (Lido Staked Ether) can trade at a slight discount to ETH. If Resolv needed to quickly liquidate stETH for ETH, a large depeg could impair liquidity or value. This is a risk if, say, many are exiting stETH at once, Resolv’s mitigation is to keep some portion of ETH not staked and to allow time for redemptions (24h window) which could include swapping stETH gradually.

1.8. Worst-Case and wind-down Scenarios

Under normal conditions, both USR and RLP can be redeemed freely. In a severe stress scenario, additional measures kick in. As already noted, if the collateralization drops too low, RLP redemption halts. USR redemption would presumably remain open unless the situation is so dire that even USR might be impaired (which the protocol is architected to avoid – it would require both RLP to be fully wiped out and further losses beyond that, an unlikely scenario given the conservative hedging and downside risk management).

More likely, in a situation like an exchange default or a sudden large loss, USR redemptions might temporarily queue so that the team can assess and reallocate remaining collateral to honor $1 redemptions fairly. The primary withdrawal “surface” to monitor is RLP run risk as a large exodus of RLP could reduce the cushion. Resolv handles this by dynamically adjusting yields (to entice RLP to stay or join) and by outright blocking redemption if it would compromise USR backing. This is analogous to gating redemptions for a fund’s junior shares during crisis to protect senior claims.

The most common risks include counterparty risk where the assets Resolv holds (Defi lending, RWAs, stablescons, exchanges, etc.) encounter a hack or insolvency, as well as interest rate risks (funding rates, defi lending, RWAs). Below are some scenarios and their projected responses to the most common risks.

Exchange Insolvency (Counterparty Failure)

Perhaps the most drastic scenario for Resolv is a major exchange (or multiple) becoming insolvent or inaccessible (e.g. sudden shutdown or hack like FTX). In this event, any margin collateral and unrealized P/L on that venue could be lost. Resolv mitigates this risk by safekeeping trading margin for centralized exchanges with third-party custody solutions, such as Fireblocks and Ceffu. However, there is a remaining risk for funds held directly with exchange infrastructure (e.g. margin deposited to smart contracts of Hyperliquid, or unrealized PnL owed by the exchanges to Resolv).

Similarly, a meaningful share of Resolv’s collateral pool is deployed into decentralized lending markets (currently, Aave, Fluid, and Morpho are allowlisted). While these protocols are among the most battle-tested in DeFi, they carry distinct counterparty risks: smart contract exploits, oracle manipulation, or governance attacks on the lending protocol itself could result in partial or total loss of deposited assets.

RLP Absorbs Loss

The immediate economic loss – say exchange X held 5% of total collateral as margin and unrealized profit – would be deducted from the collateral pool’s value. This hits RLP exclusively: RLP price would drop to reflect the missing assets, potentially by a significant percentage if losses are large. USR remains fully redeemable from remaining on-chain assets; the system essentially “eats” into RLP’s insurance layer.

Maintaining Peg

USR redemption might be temporarily paused or limited if multiple exchanges failed at once and there’s concern about asset recovery, but assuming enough on-chain collateral remains to cover USR (which is the intent – Resolv keeps on-chain backing ≥ 100% of USR), USR should hold at $1.

If RLP is mostly or completely wiped out by the loss, the system enters a state of zero protection layer. The FAQ notes that even if the protection layer goes to 0, “no loss of value of the stablecoin” occurs – USR is still redeemable for $1 equivalent. However, going forward, USR would temporarily become an un-overcollateralized stablecoin until more RLP liquidity comes in. In that state, any further losses (e.g. another exchange failure) would directly threaten USR, so likely the protocol would freeze new USR minting and aggressively incentivize RLP recapitalization.

Operational Response

Resolv would attempt to close any remaining positions on that exchange via emergency (if possible) or recreate hedges on other venues to maintain delta neutrality. Fireblocks/Ceffu might help in claiming any recoverable funds from the failed exchange’s estate. This scenario effectively tests the soundness of the design: as long as total exchange exposure was limited and RLP had at least that much value, USR holders should come out whole.

Prolonged Negative Funding / Yield Drought

In a scenario where crypto markets enter a long stagnation or backwardation, futures will trade below spot (negative funding), and staking yields drop (perhaps due to protocol changes or slashing events). In such a case, Resolv’s strategy could turn net negative-yielding – paying funding while earning minimal staking return. If this persisted, the collateral pool would slowly bleed value. For other yield-generating assets of Resolv, such as positions in DeFi lending venues and fixed income RWAs, the situation can be similar in a low rate environment.

RLP is designed to cover any yield shortfall. Each epoch that realizes a loss would reduce RLP’s price. USR stakers would get zero yield in those epochs (but their principal remains $1). Over a long period, RLP could lose value – effectively subsidizing the stablecoin’s rate. The question is whether RLP could deplete entirely if the negative carry persists.

Above, a hypothetical Monte Carlo simulation was conducted using data extrapolated from the 2025 funding and staking data previously presented, with each of the 500 paths (standard n simulation) being a hypothetical yield scenario after one year. Overall, in a situation where a majority of the net yields were positive, even if there are days of negative yield, the chances of the entire pool of RLP being wiped are virtually 0.

Additionally, note that if RLP approaches depletion, new investors might actually step in because a thinner protection layer means the next uptick in yields will disproportionately reward them. The protocol’s self-correcting incentive is that the thinner the RLP layer gets, the higher its prospective yield, which should attract replenishment capital.

Due to diversification of possible allocations enabled for the collateral pool, in such scenarios Resolv would also aim to reposition its assets into a combination of other money market instruments in DeFi and real-world assets.

Governance might also respond by adjusting fees or allocations to support RLP. This lever has already been exercised, with the yield distribution parameters updated in early 2026. In the absolute worst case where RLP goes to zero and funding is still negative, USR could become undercollateralized. That is essentially a failure of the stablecoin (it would no longer be fully backed). However, long before reaching that, Resolv would likely halt USR minting and potentially wind down operations (allowing USR holders to redeem what remains, and effectively dissolving the project).

Mass Redemption or Bank Run

Consider a scenario where, due to external fear or market panic, a large portion of USR holders and RLP holders all rush to exit (maybe triggered by rumors or a black swan event). This is a liquidity stress test. For USR, because it’s fully backed, in theory everyone could redeem $1 for $1 of collateral until all collateral is gone. The only issue would be if some collateral is not instantly liquid (e.g. staked ETH needing days to withdraw).

Resolv’s mitigations include a 24-hour redemption window allowing staggering and using liquidity buffers to meet most requests. If needed, Resolv’s operators can tap DeFi loans (as mentioned, borrowing ETH against stETH) to meet redemptions quickly. In an extreme, they might even perform an emergency partial unbond of stETH (taking the withdrawal delay but communicating to users the timeline).

Because USR is over-collateralized, even a full redemption of all USR should be possible: users would end up withdrawing essentially the entire pool of assets, leaving only RLP. The design forbids RLP from redeeming in such a situation – RLP can’t be redeemed until USR is above 110% collateralized. RLP holders in a bank run scenario are effectively last in line and could remain stuck.

They might trade RLP on secondary markets at fire-sale prices, but the contract won’t let them redeem at primary if it would negatively impact USR holders. This is by design, as RLP is the safety buffer for USR holders. A mass redemption would play out with USR holders getting priority claims on all liquid assets and RLP being left with whatever remains.

If USR holders fully clean out the pool (less likely, because presumably some RLP value was present), RLP holders end up with nothing. This is the intended outcome: the stablecoin holders are protected even in a run, at the expense of RLP capital. The rules are clear: RLP’s gate closes at CR <110%, so RLP withdrawals freeze and only USR can continue to redeem. This ensures no “race” between tranches.

Smart Contract Exploit or Oracle Failure

Although not an “economic” scenario per-se, it’s a worst-case scenario to consider nonetheless. If Resolv’s smart contracts were exploited (e.g. a bug allowing an attacker to withdraw funds) or if the price oracle’s feeding values were manipulated (causing misvaluation of USR or collateral), the protocol could suffer a sudden loss of assets or erroneous redemptions.

To mitigate these risks, Resolv relies on reputable oracles and employs safeguards through sanity checks and multi-source pricing. As with all protocols, an exploit could still circumvent the economic design entirely. These mitigations are primarily preventative, utilizing multiple security audits and using time-tested components for token minting and redemption logic.

Resolv is designed to handle a range of crises via automated mechanisms (pausing certain redemptions, rebalancing collateral, using RLP as a buffer, etc.) and via a diversified approach (multiple exchanges, sources of yield). However, these scenarios also stress that the ultimate backstop is RLP capital – if losses exceed RLP, the stablecoin could impair USR holders. The protocol’s parameters (like maintaining low exchange exposure and >110% collateral ratio) are designed to make that outcome unlikely, though it is not impossible.

2. Operational Analysis

The information herein is sourced primarily from internal due diligence with the team, official documentation, and supplementary public materials. For a complete description of the operational structure, including its risks, please refer to the governing documents directly.

2.1. Contractual Structures

Resolv’s operational structure spans on-chain smart contracts and off-chain agreements with custodians and exchanges. Unlike traditional fund structures that rely on legal frameworks and appointed service providers, Resolv is implemented as a protocol with contractual logic embedded in code and other elements managed via governance and partnerships.

Smart Contract System

At the core, Resolv has smart contracts for minting and redemption of USR and RLP, maintaining the collateral pools, and distributing yield. These contracts enforce rules like the 1:1 collateralization on mint, the 110% collateral ratio requirement for RLP withdrawals, and the daily profit distribution mechanism. The mint/redeem contract will only allow RLP redemption if post-redemption collateralization stays at or above 110%. Additionally, the contracts restrict withdrawals of collateral by anyone except via the designated user redemption functions, ensuring that even administrators cannot arbitrarily pull funds aside from programmed margin transfers to custodians which are rule-based.

The protocol enforces that withdrawals from on-chain treasury are limited to amounts necessary to meet margin requirements, preventing misuse of funds. These rule-based safeguards are essentially programmatic contracts taking the role of what in a traditional fund might be legal covenants or oversight by a trustee. They hard-code certain risk limits such as no unlimited draining of assets to exchanges, no redemption that breaks collateralization, contributing to Resolv’s trust-minimized design philosophy.

Multi-Chain Deployment

Resolv has deployed across nine blockchain networks including Ethereum (primary), Base, BNB Chain, Berachain, HyperEVM, Soneium, TAC, Arbitrum, and Plasma. The core Ethereum contract addresses are publicly verifiable:

Contract

Ethereum Address

USR Token: 0x66a1e37c9b0eaddca17d3662d6c05f4decf3e110

RLP Token: 0x4956b52aE2fF65D74CA2d61207523288e4528f96

stUSR Token: 0x6c8984bc7DBBeDAf4F6b2FD766f16eBB7d10AAb4

wstUSR Token: 0x1202F5C7b4B9E47a1A484E8B270be34dbbC75055

RESOLV Token: 0x259338656198eC7A76c729514D3CB45Dfbf768A1

USR Requests Manager: 0xAC85eF29192487E0a109b7f9E40C267a9ea95f2e

Custodial and Off-Chain Agreements

Despite being DeFi-native, Resolv interfaces with CeFi via custodians (Fireblocks, Ceffu) that hold and manage exchange accounts. There are contractual arrangements between Resolv Digital Assets Ltd. and these custodians. Fireblocks allows Resolv to delegate collateral to Deribit and Bybit without the collateral sitting directly at the exchange. Ceffu holds an omnibus account that interfaces with Binance futures. These relationships are operationally critical and involve legal agreements ensuring the assets in custody are not commingled with direct deposits to exchanges’ (and thus, not forming exchanges’ liability base in case of their insolvency).

The custodial structure means that if something goes awry (exchange default), Resolv has a legal claim via the custodian for those assets, potentially providing better recovery odds than direct exchange custody. In essence, Resolv’s off-chain contractual structure mirrors that of an institutional trading operation using third-party custodians to manage exchange positions under specific custody terms.

2.2. Custodial Assumptions and Asset Security

Custody of assets in Resolv is bifurcated between on-chain custody (smart contracts on Ethereum) and institutional off-chain custody for exchange collateral. Each comes with distinct assumptions and risk considerations.

On-Chain Custody (Smart Contracts)

A portion of the assets (ETH, stETH, BTC as wrapped assets, stablecoins) are held in Resolv’s smart contract wallets on Ethereum. The assumptions here are that the smart contract is secure (no one can withdraw assets except via legitimate mint/redeem processes) and that the keys controlling upgrades or emergency functions are well-managed. A multisig controls certain administrative privileges. The security audits and focus on 100% on-chain collateralization indicate a priority on making this component trustless.

Users must trust the code as they would a vault. If the code has no flaws and no backdoors, their on-chain collateral is safe from misappropriation. However, one assumption is that the price oracles feeding the contract are reliable, since they determine redemption rates and when to halt RLP redemptions. If an oracle reported collateral as more valuable than reality, it could allow excess USR to be redeemed. Resolv uses robust oracles and likely conservative pricing approaches.

Off-Chain Custody

via Fireblocks: Fireblocks Off Exchange uses Multi-Party Computation (MPC) wallets where assets are held in single-purpose blockchain wallets dedicated to Resolv. These wallets enable traders to allocate and mirror assets directly to exchanges without actual transfer, meaning assets can be audited in real-time while protecting principal from hacks, bankruptcy, and fraud. Fireblocks primarily services Deribit connectivity for Resolv.

via Ceffu: Ceffu MirrorX operates through Binance partnership, providing real-time collateral pool mirroring between Ceffu custody and Binance. The system features multi-signature approval processes, HSM integration, automatic T+1 settlements, and API-driven execution. Ceffu also enables WBETH liquid staking with slashing protection coverage. Ceffu’s legal separation means that if Binance had trouble, clients using Ceffu could potentially reclaim assets outside the exchange’s bankruptcy estate.

Off-Exchange Settlement (OES) Architecture

The technical OES architecture uses a 2-out-of-3 signer model (Custodian, Client, Trusted Third Party) for multi-party wallets. When Resolv deposits assets, the custodian locks funds while the exchange mirrors those funds as tradeable margin. Assets never actually leave custody during trading. PnL settles periodically through a separate settlement wallet. This fundamentally changes how counterparty risk is managed compared to direct exchange deposit.

Custodial Risk Management Summary: Resolv’s strategy to mitigate custodial risk is segregation and limitation: keep most value on-chain (no custody risk besides Ethereum itself and chosen DeFi protocols); for off-chain needs, use reputable custody solutions to avoid direct exchange custody; diversify across venues to avoid concentration; and programmatically prevent misuse of funds via contract rules. These measures align with best practices and show a thoughtful approach, assuming trust in some intermediaries but reducing the need to trust any single one excessively.

Specific custody wallet addresses are not publicly disclosed, though the protocol has real-time auditability with third-party verification available through Apostro’s proof-of-reserves dashboard. The absence of published custody addresses presents a transparency limitation for independent verification.

2.3. Rebalancing Mechanisms

Resolv must continuously rebalance its portfolio to maintain the peg, manage leverage, and optimize yield. The collateral pool is dynamically managed between its sub-components (ETH, BTC, stable assets) to meet protocol needs.

Margin Management Parameters

The protocol maintains a target margin ratio of 30% with a minimum threshold of 20%. This buffer absorbs potential losses from slippage, market swings, or rebalancing delays. Position adjustment triggers include: every user mint or burn triggers futures position adjustment to maintain delta neutrality; price movements require margin top-ups (when price rises) or gain realization (when price falls); and margin ratio breaching minimum threshold triggers automatic rebalancing.

Inventory Allocation on Deposits

When new collateral comes in (mint), the protocol allocates a target fraction to staking versus margin. This split is not fixed; it depends on factors like current funding rates, collateral composition, and the target exposure metric (~8%) for exchanges. If significant USR is minted via ETH deposit, Resolv increases the short futures accordingly and stakes the rest. If USR is minted via USDC deposit, Resolv may convert some to ETH/BTC to maintain the desired inventory or deploy stablecoin into lending markets.

Price Movement Response

When collateral value shifts due to price moves, delta-neutral positioning means net USD value stays constant, but the margin dynamics change. If ETH price doubles, the short futures will have unrealized loss equal to the spot gain, requiring margin top-up. Resolv rebalances by withdrawing margin and possibly converting some ETH to stablecoins or vice versa to keep ratios consistent. This ensures the exposure metric (assets at risk on exchanges) stays at target, effectively capping how much can accumulate on exchanges through partial closes of futures when needed.

Periodic Position Rollover

Although perpetuals don’t expire, Resolv periodically rolls or rotates positions to avoid excessive unrealized PnL buildup. The protocol reopens futures at new market levels to realize gains. This suggests an operational cadence (perhaps daily or weekly) where they close winning positions and open new ones, representing a form of rebalancing the hedge to keep it efficient and to withdraw profits to on-chain custody.

Automated vs Professional Management

The system operates with a mix of automated and professionally managed components:

Table: Breakdown of automated versus professionally managed operational components.

2.4. Oracle and Accounting Dependencies

Resolv’s functioning depends on accurate data feeds and accounting of assets, both on-chain and off-chain. The protocol employs four oracle providers for collateral valuation, creating defensive redundancy with Chronicle, Pyth, Chainlink, and Redstone.

Market vs Fundamental Oracles

The protocol distinguishes between market oracles (tracking real-time secondary market prices) and fundamental oracles (tracking intrinsic NAV based on actual reserves).

• Fundamental values update every 24 hours based on: on-chain assets including ETH, staked ETH, BTC, and stablecoins; and off-chain positions including margin held at custodians plus unrealized P&L from futures.

Native Resolv Oracles

Native Resolv oracles (0x7f45180d6fFd0435D8dD695fd01320E6999c261c and AggregatorV3 interface at 0xf9C7c25FE58AAA494EE7ff1f6Cf0b70d7C7ce88c) provide Chainlink-compatible interfaces for integration reliability.

Price Oracle Functions

The protocol uses price oracles for valuing collateral and USR to maintain the $1 peg and determine how much collateral to give on redemption. For collateralization checks, the 110% RLP redemption rule and general monitoring of USR backing require knowing the current collateral ratio. This means summing the on-chain assets’ USD value and comparing to USR supply, using oracle prices. Extreme oracle delays could theoretically allow an RLP redemption that shouldn’t be allowed, though Chainlink updates frequently for large moves.

Funding Rate Data and PnL Accounting

A unique dependency is obtaining PnL from exchanges. The smart contract itself does not know how much funding was earned on Binance in the last epoch since that data is off-chain. An off-chain agent (like a script run by Resolv Labs or an oracle service) calculates the total change in collateral value (including realized funding, staking rewards, etc.) over the epoch and then calls the contract’s distribution function with that number. The contract may require a signed report of profit/loss, which triggers the minting of stUSR rewards and updates RLP price.

2.5. Withdrawal Surfaces

Withdrawal surfaces encompass how users withdraw or exit their positions and what risks or frictions accompany those methods. For Resolv, the primary withdrawal surfaces are the redemption process for USR and RLP, and secondarily any secondary markets or third-party integrations providing liquidity or exit.

USR Redemption Process: Users withdraw USR by redeeming it 1:1 for underlying collateral. The timeline is within 24 hours, with independent analysis by Chaos Labs in 2025 confirming the operational efficiency of USR redemptions showing a weighted average execution time of 1.8 hours, with 50% completed within 1 hour and 75% within 2 hours. Notably, redemption size shows no correlation with execution delay, where large redemptions ($1M+) process at comparable speeds to small ones. Redemption assets are in USDC or USDT only. The rate is 1:1 equivalent to the market price of USDT or USDC based on the composite oracle at that time. For example, when USDT = 0.999 USD, 1 USR is redeemable for 1 USD = 1/ 0.999 = 1.001 USDT. USR redemption is unrestricted at any time. The 24-hour window allows position unwinding, liquidity buffer management, and exchange margin settlement.

RLP Redemption Process: RLP is withdrawn by burning RLP for underlying excess collateral. The timeline is within 24 hours, with the rate being 1:1 based on current RLP price (which fluctuates). The critical restriction is that RLP redemption can only execute when USR collateralization ratio exceeds 110%. If CR drops below 110%, RLP redemptions suspend entirely. During suspension, secondary market trading (Curve, Aerodrome, Uniswap) remains available but potentially at a discount to NAV.

• The 110% Circuit Breaker: This circuit breaker proved functional in late 2024 when the Collateral Asset Ratio dropped from 170% to approximately 120% during market stress. The system self-balanced: RLP yields spiked, attracting new capital without impacting USR peg stability. This demonstrates the intended functioning of the tranche structure under stress.

Secondary Market Exits: Users don’t have to go through official redemption. They could swap USR for USDC on a DEX or sell it on an exchange, and similarly sell RLP if a buyer exists. For USR, the presence of the primary arbitrage mechanism (mint/redeem at $1) typically keeps secondary market spreads tight around the peg. For RLP, if redemptions are locked (CR <110%), the only exit is secondary selling, potentially at a discount. This is reminiscent of closed-end funds trading at discount if direct redemption is unavailable.

Withdrawal via Vaults or Integrations: Resolv’s architecture includes Vaults (professionally managed strategies built on top of USR/RLP). If users enter via a Vault, their exit might be through that vault’s interface rather than directly redeeming USR. These layered integrations mean some users might not even know they indirectly hold USR. It’s important operationally because those integrators need confidence in Resolv’s liquidity. If Resolv halted redemptions, those vaults would in turn halt.

Instant Protocol Redemption: Resolv also offers instant USR redemptions with a 24-hour cap and a small fee. Both the redemption cap and fee are adjustable based on current TVL and market conditions. At the time of writing, the daily cap is $1M with a 1 bps fee. These instant redemptions are supported either by idle USDC held in the Treasury or by temporarily borrowing funds via Aave, subject to a predefined health factor (HF) parameter within the Treasury smart contract.

2.6. Governance Rights and Protocol Controls

Governance in Resolv is primarily exercised through the RESOLV governance token and the protocol’s smart contract parameters. Understanding the scope of these rights and controls is important, as it influences how the system can evolve or respond to situations.

RESOLV Token Utility: The governance token ($RESOLV) has a fixed supply of 1 billion tokens and serves as the voice of the community in protocol decisions. Holders can vote on proposals that alter key aspects of Resolv including:

• Adjusting yield allocation percentages (Base vs Risk vs Fee)

• Changing the collateral whitelist (adding support for new collateral types, exchanges, or yield strategies)

• Setting risk parameters like the minimum collateralization (110% rule)

• Fee levels (currently 10% protocol fee)

• Use of the protocol treasury

• Launching new products or incentivizing integrations.

The token distribution is:

• 40.9%: Ecosystem & Community (24-month vesting)

• 26.7%: Team & Contributors (1-year cliff + 30-month vesting)

• 22.4%: Investors (1-year cliff + 24-month vesting)

• 10.0%: Season 1 Airdrop

Staked RESOLV (stRESOLV): Only stRESOLV holders vote through Snapshot (resolvgovernance.eth), with a two-layer process, a Discord forum discussion followed by gasless off-chain voting. Staking features a 14-day unstake cooldown and time-weighted multiplier reaching 2x for 1-year average holding periods. Staking RESOLV grants a share of protocol fees plus voting weight, incentivizing long-term holding.

Current Governance Model: The current model is hybrid, team-led with transition roadmap toward full DAO control. Governance launched November 2025 with limited decentralization. RGP-01, the first governance proposal, approved distribution of 120,000 ETHFI earned from weETH exposure over 3 months to stRESOLV holders.

After consulting with the Resolv team on some points and raising some concerns with centralization and operational concerns, they have set forth some expectations.

Legal Structure

From a legal perspective, Resolv Digital Assets Ltd. is the main entity and structured in BVI. Resolv Foundation (Cayman) is the parent and UBO. Resolv Labs Ltd (BVI) is a key vendor of Resolv Digital Assets Ltd., carrying out software development assignments and marketing/business development services. To work with protocol directly, users should undergo AML process (KYC/KYB + wallet screening) Resolv Digital Assets Ltd. (BVI) is the sole protocol entity

2.7. Identified Failure Modes and Risk Mitigants

This section enumerates the major failure modes that have been identified in Resolv’s design, along with how the protocol mitigates them. This serves as a summary risk checklist for operational due diligence.

Counterparty Exchange Failure

An exchange used for hedging (e.g. Binance, Deribit) defaults or locks up funds.

• Consequence: Loss of margin and unrealized gains on that venue; potential under-collateralization.

• Mitigants: Use of off-exchange custody (assets held via Fireblocks/Ceffu, not commingled); diversification across multiple venues to limit exposure; and RLP capital to absorb losses. RLP effectively serves as an insurance pool covering the credit risk of exchanges. Additionally, active management withdraws profits frequently to minimize what’s left on exchange at any time. If a failure occurs, RLP redemption halts if needed, and USR remains redeemable from on-chain assets.

Market Risk (Hedge Imperfection)

This includes scenarios like sustained negative funding rates or extreme volatility leading to liquidation.

• Consequence: Strategy could incur losses, possibly significant if positions liquidate.

• Mitigants: Highly liquid venues and conservative leverage are used to reduce chances of liquidation. Because Resolv is delta-neutral and not outright leveraged (except the inherent leverage in RLP acting as equity), the only way it gets liquidated is if the team fails to post margin. They mitigate this by maintaining buffer collateral and dynamic margin management. Negative funding is explicitly addressed: RLP covers any funding losses. Historical extreme 8-hour funding rates (-0.35% Binance, -0.6% Deribit) would require 60-90 days of extreme negative rates to drain the protection layer.

Liquidity Risk (Runs and Large Withdrawals)

A flood of withdrawals, especially from RLP, could destabilize the system.

• Consequence: If RLP could all exit at once during stress, USR might become undercollateralized.

• Mitigants: Withdrawal gating for RLP at 110% CR ensures RLP can’t fully drain if it’s protecting USR. The system is designed to be overcollateralized normally, so moderate withdrawals are fine. For USR, a run is mitigated by having largely liquid on-chain assets and the ability to borrow against staked assets to meet redemptions promptly. Open-market arbitrage helps by other parties stepping in to buy cheap USR if any panic-sell occurs, then redeeming it.

Smart Contract Exploit

A bug in contracts could allow theft or unintended behavior.

• Consequence: Loss of funds, loss of confidence, possibly collapse of the stablecoin if severe.

• Mitigants: Audits (14+ engagements from five firms), bug bounty programs ($500,000 maximum on Immunefi), time-locked governance for upgrades to allow scrutiny, and circuit-breakers (pausing contracts) if something odd is detected. Many DeFi protocols have an emergency pause function controlled by a multisig; Resolv has this for the initial phase. That’s a mitigant: if an exploit starts, they can pause minting/redemptions to stop the bleeding and then patch.

Oracle Failure/Manipulation

If price feeds or other oracle inputs are wrong, it could enable bad redemptions or mispricing.

• Consequence: Could drain collateral if price feed says ETH is significantly different from market reality.

• Mitigants: Use of established oracles (Chainlink, Chronicle, Pyth, Redstone) which have decentralization and anti-manipulation measures. The system might also verify multiple sources. Resolv might set limits, such as not honoring redemptions beyond certain daily size or price slippage without manual intervention. RLP indirectly protects USR; if an oracle glitch caused slight loss, RLP would eat it.

Governance Attack or Failure

A malicious proposal could alter the protocol in harmful ways.

• Consequence: Loss of funds or collapse of trust.

• Mitigants: Time-locks and multi-stage governance, with proposals on-chain for days giving users time to exit if concerning. Admin multisig could potentially veto clearly malicious proposals. Distribution of tokens matters; if team and core supporters hold a majority, hostile takeover is unlikely. Quorum thresholds and security councils provide additional protection.

Operational Mismanagement

Non-technical issues such as team failing to respond to margin call due to human error or system downtime.

• Consequence: Avoidable losses or panic.

• Mitigants: Professional operations with presumably 24/7 monitoring, multiple team members on call, automated alerts. Multiple exchanges are used, so even if one margin got low, others might cover net exposure. This is more an internal risk mitigated by having a solid team and gradually handing off simple tasks to trustless agents.

Conclusion

Resolv Protocol presents a thoughtfully designed delta-neutral stablecoin with a clear economic structure. The separation of USR and RLP tranches ensures conservative holders receive stability while risk-tolerant participants earn enhanced returns in exchange for absorbing losses. The protocol benefits from diversified yield sources, and the tranche structure has already proven functional under real market stress. Operationally, Resolv demonstrates institutional rigor through third-party custody, multi-oracle redundancy, and programmatic safeguards. Resolv has operated without incident to date and has demonstrated self-correcting behavior under adverse conditions.

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Welcome to another DeFi Markets Update—your no-nonsense briefing on the cryptobanking plumbing and market pulse.

EURCV Adoption Accelerates with Deblock and Safe Integrations

• The tokenised euro ecosystem recently crossed $1B in circulating supply, according to Token Terminal data tracking EUR-denominated stablecoins, marking a notable step for euro-based stablecoins and suggesting that regulated EUR liquidity is beginning to gain traction on-chain.

• Recent integrations by Deblock and Safe are expanding EURCV distribution across both fintech and wallet interfaces. Deblock lets users hold EURCV in-app and deploy it into yield strategies without using DeFi protocols directly, while Safe gives users access to a Steakhouse curated EURCV vault from the wallet interface.

• Since the Safe and Deblock integrations launched on 25 and 26 February, the number of EURCV holders has roughly doubled within two weeks, suggesting that new distribution channels are beginning to bring regulated euro stablecoins to a broader user base.

• Steakhouse curates the majority of EURCV vaults on Morpho, with the EURCV Prime Instant vault that you can explore on the Steakhouse App, currently offering 4.1% APY in an A-rated strategy.

Do stablecoin inflows create measurable demand pressure in the Treasury Market?

• In the Bank for International Settlements (BIS) Working Paper No. 1270, “Stablecoins and safe asset prices”, the authors analyse the relationship between dollar-backed stablecoin flows and short-term US Treasury yields using daily data from January 2021 to March 2025, defining flows as the 5-day change in the aggregate market capitalisation of the six largest USD stablecoins.

• As previously discussed in a Markets Update, stablecoin reserves are largely invested in short-term government securities and repo markets, meaning new stablecoin issuance creates direct demand for US Treasury bills as issuers invest incoming dollars into safe reserve assets.

• By March 2025, stablecoin issuers collectively managed over $200 billion in assets, exceeding the short-term Treasury holdings of many foreign investors. Between January 2024 and September 2025 alone purchased roughly $64 billion of Treasury bills, placing them alongside major foreign holders of short-term US government debt.

• The paper finds that stablecoin inflows have a measurable effect on short-term Treasury yields: a two-standard-deviation inflow shock (roughly equivalent to several billion dollars of new stablecoin issuance) lowers the 3-month Treasury bill yield by about 2.5–3.5 basis points, with the effect appearing within around 10 days.

• They used a statistical model to estimate how sudden increases in stablecoin supply affect the 3-month Treasury bill yield. The results suggest that large inflows of new stablecoin issuance are associated with small declines in short-term Treasury yields. However, it’s important to note that stablecoin supply often expands during crypto bull markets, which themselves tend to coincide with periods of stronger global liquidity. In that case, stablecoin growth may partly reflect broader liquidity cycles rather than being the main driver of additional Treasury demand.

• The price impact is state-dependent: when Treasury bill supply is abundant, the effect becomes statistically insignificant, but during periods of bill scarcity (measured using increases in the Federal Reserve’s Overnight Reverse Repo Facility (ON RRP) or debt-ceiling episodes) the estimated yield impact rises to roughly 5–8 basis points, indicating stronger sensitivity when safe assets are scarce.

• Some scepticism remains around the magnitude of the effect as the US Treasury bill market is roughly $6–7 trillion, compared with stablecoin reserves of about $200 billion, meaning stablecoin inflows represent only a small share of the overall market. As a result, we can argue the estimated few-basis-point yield impact may reflect model sensitivity rather than measurable price pressure.

• To conclude, the evidence provided by BIS suggests stablecoin inflows exert some demand pressure on short-term Treasury markets, particularly during periods of safe-asset scarcity, although we have to note that part of the relationship may also reflect reverse causality, where higher Treasury yields incentivise further stablecoin issuance.

AUSD Farming on the Steakhouse App

• The Steakhouse app has now been live for about a week, and it’s already bringing many great opportunities with it.

• As highlighted in the last Markets Update, AUSD vaults continue to keep rewards high, with yields currently reaching up to 25% APY on the High Yield Term vault.

• On the borrow side, AUSD rates remain near 0%, with particularly cheap borrowing currently available on Monad and Katana.

• For example, on Monad, the WBTC/ AUSD market currently offers negative borrow rate, effectively paying users to borrow AUSD.

Welcome to another DeFi Markets Update—your no-nonsense briefing on the cryptobanking plumbing and market pulse.

The Steakhouse App Is Live

• We launched our new App, bringing all Steakhouse curated vaults into a single interface where users can allocate capital across Morpho strategies with full visibility into collateral composition, LLTV thresholds, liquidity, and historical APY before deploying capital.

• Alongside existing Prime and High Yield vaults, we introduce two new strategy types built using Steakhouse Box adapters: Term strategies, which hold direct positions to the underlying (e.g. Pendle PT), and Turbo strategies, which apply leverage or carry structures to increase exposure. More on Vault Infrastructure coming soon.

• Strategies are separated into Prime, High Yield, Term, and Turbo so conservative and higher-risk collateral are not mixed in the same pools, allowing users to choose exposure based on their risk tolerance.

• Meaty opportunities are currently available on the app like 13.5% APY on AUSD Turbo vault, or 9% APY on the AUSD High Yield Term vault (both CC ratings) on Mainnet.

Stablecoins: the plumbing of the crypto financial cycle

• We examine a recent report from the Andersen Institute for Finance & Economics on stablecoin behaviour during the latest crypto winter. After the 10/10 mass market liquidation event and the Stream Finance blow-up, we entered a so-called cold crypto winter with heavy liquidations and declining activity. DeFi lending contracted, with total value locked falling from $90B in October to $52B.

• Stablecoins were expected to act as a safe haven during the crash, with users moving out of risky assets into stable dollars. Instead, supply mostly plateaued and slightly declined in recent months, suggesting demand is still closely tied to crypto activity rather than acting as a refuge from it.

• The growth of stablecoins outstanding stalled after October, breaking the strong expansion seen through 2024 and early 2025. Authors of the article note that stablecoin supply “contracted” by $125M with two consecutive monthly declines in December and January, something not seen since 2023.

• At Steakhouse we would frame this dynamic as plateauing rather than contraction, as the reported decline represents only about 0.05%, alongside a reallocation of some USDC supply into PYUSD and RLUSD driven by incentives. We already discussed this phenomenon in one of our Markets Update.

• Steakhouse stablecoin vaults on Morpho continued to grow during this period. Capital staying on chain kept flowing into more conservative lending strategies as users sought stable yield and trusted risk management during market stress.

• Moreover, transaction activity increased in tandemn with on-chain stablecoin volumes surged in October, reaching around $1.46T according to Visa analytics. The increase was driven mainly by USDC transfers, as traders moved collateral, closed positions, and settled trades during the market stress.

• The “crypto winter” confirmed that stablecoins are the plumbing of the crypto financial system, with their product-market fit reflected through transaction activity and volumes growing regardless of market regime.

Katana Liquidity Surge Drives Negative Borrow Rates

• Katana saw a major inflow of stablecoins into Morpho, with roughly $120M+ in TVL added in a single day, much of it flowing into Steakhouse vaults.

• As liquidity increased, borrow capacity expanded and rates turned deeply negative across several markets. Borrowing vbUSDC against vbETH or vbWBTC collateral is currently around -13%, effectively paying users to borrow due to excess stablecoin liquidity. There are many more marekts with such incentivized negative rates.

Welcome to another DeFi Markets Update—your no-nonsense briefing on the cryptobanking plumbing and market pulse.

DeFi rates converging with SOFR despite different risk profiles

• While historically uncorrelated, DeFi lending rates and SOFR have been converging since early 2025. The spread between the two was all over the place through 2021–23 but now tracks near zero, despite USDC supply fluctuating and SOFR moving from 4.3% to 3.6% in the past year.

• Rate convergence with a risk-free benchmark (SOFR) is typically what you see as a market develops deeper liquidity, more sophisticated participants, and better pricing infrastructure.

• DeFi lending TVL has grown to $50B+, with institutional allocators now active across Aave, Morpho, and Compound, making it a structurally different market from 2021.

• Tokenized money markets are driving convergence from the TradFi side. For example in 2025, Sky’s Spark allocated $1B to tokenized Treasuries, including $500M to BlackRock’s BUIDL, which is now around $2.6B AUM across eight chains. As T-bills become DeFi collateral, the gap between the “risk-free rate” and the “DeFi rate” keeps narrowing.

• However, risk profiles haven’t converged. SOFR is overnight, Treasury-collateralised, and centrally cleared via FICC (near-zero credit risk), while DeFi lending is crypto-collateralised, smart-contract-intermediated, and exposed to oracle, liquidation, and depeg risks. So why is the spread converging if the risks still differ?

• The compression likely reflects frictions (gas, bridging, off-ramp delays) that make on-chain capital sticky, plus persistent stablecoin demand in regions with limited dollar banking (e.g. stablecoin holdings relative to bank deposits increased from near 0 to 2.5–3% within 4 years in Latin America as mentioned in our last update), which isn’t directly arbitrageable against TradFi.

• In equilibrium, DeFi rates should sit above SOFR to compensate for its specific risk stack. A near-zero spread suggests either the market is underpricing DeFi risk or structural demand frictions are compressing it artificially. More on the spread yield decomposition soon!

wstETH/ETH Looping: Flat Carry with Fat Tails

• wstETH/ETH looping on Aave v3 Mainnet has been barely profitable over the past 6 months, with the strategy running at roughly breakeven as ETH borrow rates hover around 2–3% against wstETH yield of 2.5–3%.

• The WETH borrow rate spiked twice in February. The first spike (utilisation to 95.4%) was driven by Trend Research’s ~$2B leveraged ETH long on Aave, as ETH/USDT positions were unwound and 332k ETH were sold to repay their stablecoin debt. This deleveraging drained Aave’s ETH pool, spiking WETH borrow costs and reducing liquidity for the wstETH/ETH loop.

• The second spike (utilisation to 99.85%) came when a $144M whale withdrawal hit an already thin pool. At both peaks, the wstETH/ETH carry spiked deeply negative.

• Deposits dropped from 3.45M to 2.9M ETH in the first week of February as Trend unwound, compressing liquidity and pushing borrow rates up. The first spike resolved as borrows subsided and repayments outpaced withdrawals, gradually stabilising the pool’s liquidity. The second spike resolved through a combination of fresh deposits entering the pool and further borrow reductions.

Yields on Kamino

• Steakhouse USDC High Yield on Kamino is currently earning circa 5% APY.

• Utilisation sits at 89%, meaning most supplied USDC is actively deployed. Around 60% of the vault is allocated to the OnRe Market, the primary driver of the current yield.

• OnRe is a Bermuda-licensed reinsurance platform bringing the $750B global reinsurance market on Kamino. ONyc generates yield from diversified underwriting performance and collateral income which is a return source that is structurally uncorrelated to crypto markets. NAV is priced in real time via Chainlink Data Streams, and independently attested by Apex.