Yuzu Protection PoolPrice

(YZPP)

YZPP aims to enhance underlying DeFi strategies by providing a first-loss tranche. Its core function is to allow depositors to accept the initial risk on these strategies in exchange for a higher target yield. This mechanism serves to absorb early losses, thereby protecting other participants or tranches in the strategy, and making the overall strategy more appealing by offering varied risk/reward profiles. It's inspired by models like Resolv's RLP, designed to optimize capital efficiency and risk management in decentralized finance.

Participants mint YZPP by depositing USDC. The yield is composed of a base yield that tracks syzUSD and an additional yield budget funded by the protocol. Depositors accept the first loss on underlying strategies. YZPP can be redeemed at any time, provided the yzUSD collateralization ratio, calculated as (yzUSD Supply + yzPP TVL) / yzUSD Supply, remains above 110%. This design ensures a clear operational framework for risk acceptance and liquidity.

The primary risk for YZPP participants is accepting the "first-loss" position on underlying strategies. This means their deposited capital is the first to absorb any losses incurred by these strategies. While designed for a higher target yield, this comes with the explicit agreement that their funds will be used to cover initial shortfalls before other tranches or participants are affected. This mechanism places YZPP depositors at the front line of risk exposure.

The higher target yield for YZPP depositors is generated through a dual mechanism. A portion comes from a base yield that tracks syzUSD, which reflects the returns from the underlying strategies. Additionally, a significant part of the target yield is provided by an extra protocol-funded yield budget, often supported by a Reserve Fund. This blend allows YZPP to offer attractive returns in exchange for its first-loss risk acceptance, making it an appealing option for specific investor profiles.

Participation in YZPP is highly restricted. It is exclusively for Accredited, Qualified, Institutional, or Sophisticated Investors. All prospective participants must undergo rigorous compliance checks, including Know Your Customer (KYC), Know Your Business (KYB), sanctions screening, Anti-Money Laundering (AML)/Combating the Financing of Terrorism (CFT) checks, and thorough verification of Source-of-Funds and Source-of-Wealth. Critically, retail users are explicitly not eligible to mint YZPP, emphasizing its regulated and institutional-grade focus.

While specific security measures like audit details aren't fully detailed in the provided text, a project of this nature would typically undergo smart contract audits and robust security protocols. In the event of a loss incurred by the Collateral Pool, the minting and redemption of YZPP would be immediately paused. This initial pause allows for a comprehensive assessment of the situation, and the period may be extended as necessary to determine the impact and next steps, ensuring controlled management during adverse events.