USDC Vault

Status: Live (Phase 1)

The USDC Vault is Dawn Vault's flagship product. Deposit USDC and earn optimized yield through Kamino Multiply, lending aggregation, and delta-neutral strategies — all managed automatically.

Overview

Parameter	Value
Deposit Asset	USDC
Target APY	9-16% (up to 20% during high FR periods)
Base Layer	Kamino Multiply (primary) + USDC Lending (overflow)
Alpha Layer	SOL Delta-Neutral (conditional)
Rebalancing	Daily to weekly
Decision Metric	Multiply spread + SOL Funding Rate

How It Works

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Base Layer — Kamino Multiply (Primary)

Leveraged stablecoin loops via Kamino to earn native collateral yield + borrow rewards.

Mechanism

1. Deposit a yield-bearing stablecoin as collateral on Kamino

2. Borrow USDC against the collateral

3. Swap borrowed USDC back to collateral and re-deposit

4. Repeat to reach the target leverage multiple

5. Net yield = (Collateral native yield × leverage) − borrow cost

Active Pools

Pool	Market	Effective APY	Leverage	Notes
ONyc/USDC (Primary)	RWA Market	~16% @ 2.5x	2.5x	ONyc native yield via Onre
USDG/PYUSD (Backup)	Main Market	~9.5% @ 5.75x	5.75x	Fallback when ONyc/USDC degrades

Market Scanner & Pool Switching

The Market Scanner continuously monitors candidate pools and recommends switching only when:

• 24h moving-average APY advantage is large enough to repay estimated switch cost within the configured payback window (7 days)

• The destination candidate clears the live risk gate

• Minimum holding period (3 days) has elapsed

Multiply Risk Scoring

The Multiply Risk Scorer evaluates each pool on 4 dimensions as a separate risk axis. Risk does not reduce displayed APY — it gates allocation, trims oversized positions, and forces exits at explicit score thresholds.

Dimension	Weight	What It Measures
Depeg Risk	30%	Peg deviation + 24h volatility + 7d tail risk
Liquidation Proximity	30%	Distance to liquidation at target leverage + stress scenarios
Exit Liquidity	20%	Swap slippage on emergency exit (via Jupiter)
Reserve Pressure	20%	Reserve utilization + capacity ratios + TVL safety checks

Risk thresholds (live):

Score	Action
< 75	Normal operation
≥ 75	Stop new deposits + trim position to dynamic maxPositionCap
≥ 90	Full exit / emergency deleverage

Candidates with score ≥ 75 are excluded from switch targets.

Deleverage Protection

Multi-stage health rate protection prevents liquidation:

Health Rate	Action
Target: 1.15	Normal operation
< 1.10	Soft deleverage — reduce 20% of position
< 1.05	Emergency full deleverage

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Base Layer — Lending (Supplementary)

USDC lending on Kamino / Jupiter Lend (3-8%) absorbs capital that cannot be added to Multiply, and enforces diversification.

Supported Protocols

Protocol	Rate Range	Notes
Kamino Lend	3-8%	Established protocol with deep liquidity
Jupiter Lend	3-8%	Growing protocol with competitive rates

Lending Risk Scoring

The Lending Risk Scorer evaluates each protocol on 5 dimensions with APY penalty adjustment:

Dimension	Weight	What It Measures
TVL Scale	30%	Protocol total value locked — larger TVL indicates stability
Protocol Maturity	20%	Time since launch and operational track record
Reserve Utilization	25%	Borrow utilization rate — high utilization signals withdrawal risk
Deposit Concentration	15%	Depositor concentration — high concentration increases whale risk
Incident History	10%	History of hacks, exploits, or operational failures

Protocol Circuit Breaker

Autonomous safety mechanism triggering auto-exit:

Trigger	Action
TVL crash (-20% in 1 hour)	Immediate withdrawal
Oracle drift detected	Pause new deposits + alert
Withdrawal failure	Immediate withdrawal attempt + alert

Protocol Diversification

Maximum 60% allocation cap per single protocol.

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Alpha Layer — SOL Delta-Neutral

A market-neutral strategy that captures SOL funding rate payments while maintaining zero directional exposure.

Mechanism

1. Split USDC 50/50: half for spot, half for margin

2. Buy SOL spot → convert to dawnSOL (Dawn Labs' LST, ~7% staking yield)

3. Open equal-sized SOL-PERP short (1x leverage — margin = position size)

4. Net SOL exposure = 0: spot long cancels out perp short

5. Collect funding rate payments (when positive) + staking rewards

No leverage is used. For a $20,000 allocation: $10,000 buys SOL spot → dawnSOL, $10,000 serves as margin for SOL-PERP short. Liquidation risk is effectively zero.

Perp venue: Currently Binance Futures (default). A Bulk Trade connector is implemented and under testnet evaluation — Bulk is a Solana-native on-chain perp DEX that would eliminate CEX counterparty risk. Production migration is planned after Bulk's mainnet launch and security audit.

Entry / Exit Logic (Live Config)

Signal	Condition	Action
Entry	SOL FR > 10% annualized for 3 days	Allocate up to 70% to DN
Exit	SOL FR < 0% annualized for 3 days	Close positions
Emergency Exit	SOL FR < -10% annualized	Immediate full close

A "day" means one complete UTC day with all 3 expected 8-hour funding samples recorded. Partial days are ignored. Emergency exit keys off the latest funding print and does not wait for a full day.

Yield Composition

Source	Estimated APY	Condition
Funding Rate (net)	8-23%	When FR is positive
dawnSOL Staking	~7%	Always-on while position is held
Weighted Average	15-20%	During favorable FR periods (allocation-weighted)

Backtest Reference

See Backtest for full methodology, results, and how to run it yourself.

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Dynamic Allocation

The vault automatically adjusts the split between Base and Alpha layers using a state machine:

BASE_ONLY ←→ BASE_DN

From	To	Condition
BASE_ONLY	BASE_DN	SOL FR > 10% annualized for 3 consecutive days
BASE_DN	BASE_ONLY	SOL FR < 0% annualized for 3 days
BASE_DN	EMERGENCY_EXIT	SOL FR < -10% annualized (no time condition)

Base Layer Internal Allocation

Within the Base Layer, capital flows in a Multiply-first / Lending-second mode:

1. CapitalAllocator sends deployable USDC to Kamino Multiply first

2. BaseAllocator manages lending across Kamino / Jupiter for overflow, diversification, and withdrawal buffer

3. Wallet buffer (5%) is preserved before deployment

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Performance

Metric	Value
Annualized Return	14.04%
Sharpe Ratio	27.01
Max Drawdown	0.23%
Test Period	Jan 2024 — Apr 2026 (821 days)

Multiply generates 79% of total returns. DN contributes a smaller but consistent positive amount during favorable funding rate periods.

For full methodology, scenario analysis, and limitations, see Backtest.

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Risk Management

Layer	Mechanism	Trigger
Circuit Breaker	Auto-exit from Lending layer	TVL crash (-20%/1h), oracle drift, withdrawal failure
Multiply Risk Scorer	Separate risk axis for candidate / position scoring	4 dimensions: depeg risk, liquidation proximity, exit liquidity, reserve pressure
Multiply Risk Policy	Score-based rebalance rules	< 75 → normal, 75-89 → stop adds + trim, ≥ 90 → full exit
Lending Risk Scorer	APY penalty adjustment	5 dimensions: TVL, maturity, utilization, concentration, incidents
Protocol Diversification	Max 60% allocation cap	Single-protocol lending exposure limit
Multiply Deleverage	Staged health rate protection	Target 1.15, < 1.10 → soft deleverage (20%), < 1.05 → emergency full deleverage
DN Risk Manager	FR reversal detection + auto-exit	FR < -10% annualized → immediate close
Guardrails	Kill switch, SOL balance, price freshness	Prevents tx fee exhaustion and stale data decisions

For comprehensive risk information, see Risk & Security.