slvlUSD

slvlUSD is the yield accruing version of lvlUSD

Earning Yield

Level distributes the lending yield earned by the protocol to slvlUSD (staked lvlUSD) so in order to earn yield, users must stake lvlUSD into the staking contract/vault to receive slvlUSD, representing their share of the vault. slvlUSD appreciates in value as it accrues yield.

Since all of the lvlUSD reserves are used to generate lending yield but only slvlUSD receives the yield, slvlUSD yield is higher than the underlying lending yield. slvlUSD yield higher when less lvlUSD is staked and vice-versa.

When unstaking, slvlUSD is burned and the user will receive a proportional share of lvlUSD based on the total lvlUSD held in the contract relative to the outstanding slvlUSD supply. After initiating unstaking, there is a 7-day cooldown period before the lvlUSD can be withdrawn.

The cooldown period ensures that the protocol can withdraw enough collateral from the underlying yield sources, which may require time.

For example, most lending protocols rely on a utilization rate to ensure that there's sufficient liquidity for withdrawals. When liquidity decreases, the borrowing rate increases, which incentivizes borrowers to repay their loans or get liquidated. The slvlUSD cooldown period ensures that the lending protocols have enough time to replenish liquidity, particularly during liquidity crunches.

About ERC-4626

slvlUSD is an ERC-4626, which is an Ethereum token standard designed to optimize and standardize the way yield-bearing vaults interact with ERC-20 tokens. It improves efficiency, security, and composability for protocols that manage deposits, withdrawals, and yield distribution.

1. Standardized Vault Interface

   • ERC-4626 provides a universal structure for tokenized vaults, ensuring interoperability across DeFi protocols.

2. Deposit & Withdrawal Mechanism

   • Users deposit lvlUSD into the vault and receive shares (slvlUSD).

   • Upon withdrawal, users redeem their shares (slvlUSD) for the underlying assets (lvlUSD) plus any accrued yield.

3. Automated Yield Distribution

   • Yield is generated through strategies like lending.

   • The total assets in the vault grow as yield is distributed to the vault, increasing the value of shares over time.

4. Improved Gas Efficiency

   • Standardized functions reduce redundant contract interactions, lowering gas costs.

5. Enhanced Composability

   • Protocols can easily integrate with ERC-4626 vaults, enabling plug-and-play compatibility with lending, staking, and yield-aggregating platforms.