How USC works

Two networks, one balance

Your ETH stays on Sepolia, Ethereum's test network, in a contract called the Merchant. USC itself lives on a separate test chain, chain 9000, where the Treasury, the savings pot and the CAPE pool run. The app moves things between the two for you, so in practice you see one balance.

You need a little Sepolia test ETH to start. It is free from public faucets such as the Google Cloud faucet or the pk910 Sepolia faucet. The first time you add money, your address also gets a small amount of CAPE, the gas token on chain 9000, so you can act there.

Adding money

You send ETH on Sepolia. The Merchant holds it and you receive mETH on chain 9000, a one-for-one claim on that ETH. The app then buys the CAPE share a new USC needs and mints your USC. Each USC is created against 80% ETH and 20% CAPE by value, at the prices the protocol's oracle publishes. CAPE is valued at its lowest price of the last 24 hours when USC is minted and at its highest when USC is redeemed, so a short jump in the CAPE price cannot be used to mint USC cheaply or to take out more than a fair share.

You sign each transaction yourself. Before anything is sent, the app shows the plan, every step and the amount you should end up with.

What stands behind a USC

The Treasury keeps the ETH claims and CAPE that every USC was minted against. The backing per USC is what those holdings are worth divided by the USC in circulation. The home page and the app show it live.

Some USC is not counted as circulating, because nobody can spend it:

• USC locked in savings, until its term ends.
• USC the savings pot has matched into a trading pool, until trades actually take it out of the pool.
• USC the savings pot holds for a protocol's crisis line that has not been drawn.

If the backing per USC falls below 1.30, the protocol borrows ETH against its staked ETH and adds it to the Treasury's holdings, which brings the backing back to 1.40. Once the backing is above 1.50, the Treasury hands that ETH back and the loan is repaid. The amount borrowed is not subtracted from the backing; it is shown on its own on the Metrics page. When the savings pot runs short, or occasionally when CAPE trades well, the protocol can also buy pool shares into the Treasury, paying in CAPE that vests over five days.

A USC holds its dollar value while the backing per USC is above 1.00. The risks page explains how that can fail.

Earning a fixed rate

Rate

4% to 7% a year, fixed on the day you deposit

How the rate is set

7% when backing is 1.00 or less, 4% at 1.50 or more, in a straight line between

Term

180 days, no early exit

When you can take it out

From 15 days before maturity to 24 hours after

If you miss that window

It rolls into another 180 days at the rate of that day

Maturities are spread out: a new deposit's first maturity moves later, by 0 to 30 days, only if its natural day already holds more than 15% of all savings. It is never made shorter. Interest is paid from the savings pot's rewards. If they ever cannot cover what is owed, you receive what is there and the shortfall is recorded on chain.

Where the savings go. The savings pot does not sit idle. Part of it is lent to the protocol's business lines: USC matched into trading pools, and crisis lines for exchanges and protocols (below). Each line has a limit that grows with the savings and shrinks when USC is less well backed, and money is never lent for longer than the deposits behind it. Paired pools pay the savings pot 9% a year; crisis lines pay a yearly fee for the promise and interest on what they draw. If a line ever loses money, the loss comes out of the rewards set aside for savers first. Only a loss larger than all of the rewards reaches savers' deposits, and it is recorded on chain.

Pairing with the pool

You put in ETH and the savings pot matches it with the same dollar value of USC in the USC / ETH trading pool on Sepolia, so your position is twice your own money. You keep every trading fee above a fixed 9% a year on the matched USC; that 9% goes to the savings pot whatever the pool earns. You carry all of the price risk.

Your ETH is the first loss. If your stake falls to 40% of what you put in, you get a warning; at 25% the position closes and the savings pot is paid first. On the testnet, positions run from 50 to 1,000 USC per wallet, and the total is limited by what the savings pot has set aside.

Withdrawing

You hand back USC and receive your share of what the Treasury actually holds, in ETH claims and CAPE. The app sells the CAPE part for more ETH and sends it all back to Sepolia, where the Merchant pays you in ETH.

The Merchant pays at once from the ETH it keeps ready. If a withdrawal is larger than that, you receive the ready part immediately and the rest is queued and paid automatically, in the order requests arrived, as the protocol borrows ETH on Compound against its staked ETH or sells staked ETH. A withdrawal is never refused for lack of ready ETH.

Where the ETH is kept

Part of the ETH stays ready for withdrawals. The rest is staked as Lido wstETH and posted to Compound, so that the protocol can borrow ETH against it if withdrawals ever outrun the ready reserve. A small extra cushion covers the difference between how Compound and Lido price wstETH.

Borrowing is also used if USC's backing falls: below 1.30 per USC the protocol borrows ETH and brings the backing back to 1.40, and it repays once the backing is above 1.50. ETH borrowed this way can itself be staked for extra income, within fixed limits: at most 60% is borrowed against staked ETH, new staking stops when staked ETH trades more than 1% below ETH, and the position is unwound at 3%.

Lines for protocols

This is what USC is for beyond holding a dollar: a bank that stands behind exchanges and protocols. A member holds a crisis line, an amount of USC agreed in advance that it can draw when the loss event written into its line happens, such as a hack, a crash or a rush of withdrawals. No collateral is posted and nothing has to be sold in a panic.

Every line is customizable. Its size, its price, the event that lets it draw, how it is repaid and the reserve behind it are agreed with each member. The terms below are only where a line starts.

Line fee

Paid every year on the full line, drawn or not, and set by risk: about 2.25% a year for large, steady businesses, 4.5% for solid but younger or more volatile ones, and 9% for smaller, newer ones or those with past incidents

Draw rate

The saver rate plus 3%, about 7% to 10% a year, only on what is drawn and only while it is out

Repayment

A share of the member's revenue goes to USC automatically until the draw and its interest are repaid. It is the speed of repayment, not an extra charge

Member reserve

$2 million or 5% of the line, whichever is bigger, held with USC and earning the saver rate like any deposit

When it can be drawn

Only on the loss event agreed in the line

Set aside in advance

USC for the line is set aside in the savings pot when the line is written, so it is there when it is called

Term

No fixed due date: a draw is repaid from revenue over time, and every line is reviewed at least every 180 days

Membership is not open yet. The For protocols page explains it in plain words.

Fees

The pool fee applies only to the 20% CAPE part, so adding money costs about 0.24% in total and withdrawing about 0.26%. Network gas is extra: CAPE on chain 9000 and ETH on Sepolia.