How is iAUSD yield generated?
As we mentioned in How is iAUSD made?, iAUSD is made when a borrower uses iASOL as collateral for a zero interest loan. A portion of the collateral's (iASOL's) Solana staking yield is portioned off into iAUSD yield.
This section explains the yield distribution process.
In Solana, staking yield is calculated and distributed every epoch— every 432,000 blocks, or ~48 hours. These rewards, denominated in SOL, are collected by the iASOL staking pool. For every iA Borrow position that minted iAUSD, a portion of these rewards is converted to iAUSD at the market rate. The proceeds are then allocated proportionally to iAUSD token holders. As a rebasing token, iAUSD increases in quantity for holders rather than altering its pegged value of $1.
Yield Distribution Mechanism
With a minimum 150% collateralization ratio, each $1 of iAUSD is backed by at least $1.5 of iASOL collateral, creating $2.5 of total economic value (iAUSD + iASOL) per $1 of iAUSD. The yield from the iASOL collateral is distributed across this total value.
The iAUSD holder earns a share of the yield equal to $1/$2.5, reflecting the ratio of their iAUSD to the total economic value
The iASOL collateral still earns a share equal to $1.5/$2.5, reflecting the ratio of the collateral value to the total economic value:
At the maximum LTV allowed by iA Borrow, i.e. 66.67% LTV, iAUSD receive 40% of the SOL staking yield, while the collateral retain 60% of the yield.
The effective yield of iAUSD is the average of all iAUSD yield across all iA Borrow positions.
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