FAQs
Last updated
Last updated
USP is a credit-backed synthetic dollar, built on infrastructure tailor-made for financial institutions. USP uses the token standard.
Unlike traditional stablecoins that rely on fiat reserves or crypto collateral, USP is natively tied to real-world credit exposure. It serves as a foundational asset in Pareto’s on-chain credit ecosystem by enabling users to access, trade, and earn yield from private credit markets.
By combining DeFi composability with TradFi-grade credit underwriting, USP offers a decentralized and scalable alternative to the incumbent offering. One that’s programmable, capital-efficient, and aligned with institutional risk models.
sUSP is the staked version of USP, designed to distribute the yield generated by Credit Vaults to stakers. When users stake USP, they receive sUSP, an token that tracks the share of the Credit Vaults exposition.
Staking: USP holders can deposit into the sUSP contract in a permissionless way and receive sUSP in return.
Yield Accrual: As revenue is generated from the underlying credit activity (e.g., interest from institutional loans), it is periodically distributed to sUSP holders. This causes the exchange rate between sUSP and USP to increase, representing the accrued yield.
Unstaking: Users can redeem sUSP back into USP at any time, subject to protocol-defined conditions or cooldowns. The amount of USP received reflects the current exchange rate, including any earned yield.
USP is backed 1:1 by Credit Vaults (and USDS).
These funds are deposited into Credit Vaults and borrowed by vetted institutional borrowers to generate yield for stakers. Pareto’s Credit Vaults offers built-in risk controls such as:
Professional curators overseeing loan terms and counterparty risk
Institutional KYC and legal structuring
Transparent reporting and enforcement mechanisms
Additionally, USP token holders are backed by USP stakers (Junior tranche) and a Stability Fund to absorb any loss.
No, USP is not a stablecoin in the traditional sense. While it is soft-pegged to 1, it is better described as a credit-backed synthetic dollar. Unlike fiat-backed stablecoins (USDC, USDT), USP is backed by real-world credit positions, i.e. loans issued to vetted institutional borrowers through Pareto’s Credit Vaults.
Verified users maintain the peg through arbitrage and a controlled mint/redeem mechanism.
If USP falls below 1, users can buy it on the market and redeem it for 1 worth of stablecoins, driving USP price back up
If USP rises above 1, they can mint new USP by depositing stablecoins, increasing supply, and pushing the price down
Non-verified users can trade USP freely on decentralized exchanges but cannot access mint/redeem functions.
In case of borrower default, a Stability Fund covers losses first. If needed, sUSP holders absorb remaining losses by receiving less USP per staked token. The protocol can also burn excess USP to support peg stability.
Note: While staking offers yield, sUSP holders bear "junior risk", meaning they may absorb losses if borrowers default and the Stability Fund is insufficient. This tradeoff allows the system to prioritize peg stability for USP while rewarding active participants.
The Stability Fund is a reserve held by the protocol to absorb losses in the event of a borrower default. It acts as the first line of defense to protect the USP peg before any losses are passed on to sUSP holders. By covering shortfalls proactively, the fund helps maintain confidence in USP and reduces the likelihood of conversion slashing for stakers.
The Stability Fund will be gradually funded by a 5% fee on generated interest, allowing it to grow over time.
This permissioned model ensures regulatory compliance and controlled issuance tied directly to on-chain credit origination. It also helps maintain the integrity of the 1 peg by limiting mint/redeem access to trusted entities operating within Pareto’s credit infrastructure.
Non-verified users cannot mint or redeem USP but can still access USP through secondary markets.
Redemptions happen instantly via secondary markets or by burning the token on Pareto.
For sUSP, there’s a 7-day cooldown period, then a 1 to 30-day wait depending on CVs maturity since redemptions align with Credit Vault cycle lengths.
Users can earn yield by staking USP into the SUSP vault, Pareto’s yield-bearing layer for credit-backed dollars. Here’s how it works:
Users stake USP into the protocol to receive sUSP
As the protocol earns revenue from institutional lending activity, yield is distributed to sUSP holders.
The value of sUSP increases over time relative to USP, reflecting your accrued earnings.
Users can unstake anytime, converting sUSP back to USP at the prevailing exchange rate (subject to protocol conditions or cooldowns).
Yes. USP is fully transferable and freely tradable by anyone on supported decentralized exchanges. You can buy, sell, and use USP in DeFi protocols just like any other ERC-20 token.
However, USP minting, redeeming, and staking require users' verification.
Yield from trusted, institutional partners
Backed by real-world credit
Built to deliver consistent, market-driven returns
Institutional-grade design, with open market access
High composability, that unlocks seamless DeFi integrations
USP inherits risk from the underlying credit strategies, but the system is designed with institutional risk controls, curated loan origination, and transparent reporting. While not risk-free, it aims to offer a more capital-efficient and transparent alternative to traditional dollar-pegged assets.
The USP system uses a two-tier risk structure:
Senior position -> USP holders These users are protected and can redeem USP at 1 unless extreme losses occur. They are last in line to absorb risk.
Junior position -> sUSP holders Users who stake USP into sUSP earn protocol yield but take on first-loss risk. If a borrower defaults and the Stability Fund is depleted, sUSP value may be reduced to protect USP.
This design mirrors traditional credit tranching by offering a boosted yield to junior participants in exchange for greater risk.
Mint via the : Verified users can mint USP directly by depositing stablecoins into the protocol’s smart contract.
Buy on the open market: Anyone can purchase USP from decentralized exchanges such as or , just like any other token.
Only verified users can mint or redeem USP directly via the . They can either issue new USP (minting) or convert USP back into stablecoins (redeeming), at a 1:1 ratio.