Yield Generation Explained

How USDQ generates sustainable and diversified returns

Overview

Unlike protocols that rely on a single source of income (e.g., funding rate arbitrage), USDQ employs a diversified yield strategy to ensure consistent and sustainable returns across varying market conditions.

Yields distributed to stakers (sUSDQ holders and restakers) come from multiple uncorrelated sources, balancing both on-chain and derivatives-based strategies.

Core Yield Strategies

1. Positive Funding Rate Arbitrage

The protocol maintains spot holdings of assets while opening short perpetual positions, capturing funding rate spreads.

  • Spot assets may also be staked simultaneously for extra yield.

2. Negative Funding Rate Arbitrage

When funding rates are negative, the protocol sells spot and goes long on perpetuals, profiting from the rate differential.

3. Cross-Exchange Price Arbitrage

USDQ's treasury executes price arbitrage across centralized and decentralized markets by buying low on one venue and selling high on another.

4. Native Altcoin Staking

The protocol utilizes native staking yields from supported assets like ETH, SOL, or AVAX to generate additional return on idle capital.

5. Liquidity Pool Strategies

A portion of assets is deployed into tier-1 DeFi liquidity pools, generating yield via trading fees and on-chain arbitrage opportunities.

Strategy Allocation Logic

  • Strategy weights are dynamically adjusted based on:

    • Market volatilityï¼›

    • Funding rate trendsï¼›

    • Liquidity conditionsï¼›

    • Realized vs projected yield efficiency。

  • All deployed capital is managed with strict risk parameters to preserve solvency and redemption ability.

Summary

Strategy Type
Description

Derivatives Arbitrage

Funding rate spreads on perpetuals

Cross-Market Arbitrage

Price gaps between CEXs and DEXs

Native Staking

Yield from supported L1/L2 native staking mechanisms

DeFi LP Yield

Trading fees and farming returns from top-tier pools

USDQ’s multi-strategy yield engine is designed to be market-cycle resilient, generating returns even when one or more strategies are underperforming.

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