Risks

This section describes the risks associated with USP, and the actions taken to mitigate such risks.

Counterparty risk

USP generates yield from Credit Vaults that lend funds to TradFi institutions. This introduces a counterparty risk for USP holders given there is a chance that a party fails to meet its obligations, potentially leading to financial losses.

To mitigate this risk, USP relies on:

  1. Stability fund: 5% of the fees generated by USP are saved in a fund that should cover potential CVs' losses

  2. Stakers' deposits: sUSP holders should cover additional losses by having their conversion price to USP reduced to keep the peg for USP stable

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