Yield Strategy Risks

USX's yield model deploys capital into onchain strategies to generate sustainable returns. These strategies introduce distinct risk categories, from smart contract vulnerabilities to protocol exposure. This section outlines those risks and the mechanisms USX uses to manage and mitigate them.

DeFi Strategy Risk

The onchain yield component of USX is generated by deploying capital into various strategies through Blend's coordination system.

This introduces risks from 3rd party protocol's smart contract vulnerabilities, risk of impermanent loss, or sudden yield changes. A single point of failure in our partner protocols could lead to significant loss of funds, directly impacting USX peg (or value).

Security & Due Diligence

Blend's infrastructure:

USX protocol deploys capital across curated onchain yield strategies through Blend that include lending markets, tranching systems, and liquidity venues. Each strategy executes through Blend's non-custodial coordination layer which automates allocation, rebalancing, and risk enforcement according to defined policies.

Capital remains signer-bound within individual Gnosis Safes, ensuring isolation and non-custodial control, while Blend manages cross-chain execution and delta-neutral balancing. This structure allows USX to operate as a unified savings protocol on top of Blend's neutral automation network.

Blend has undergone six comprehensive security audits with reports available at https://docs.blend.money/resources/audits.

Mitigation Measures:

• Strategy diversification across multiple uncorrelated DeFi protocols to prevent single points of failure.

• Rigorous protocol due diligence including comprehensive code reviews and audit verification.

• Dynamic rebalancing with continuous monitoring and capital reallocation based on risk/reward profiles.

• Position limits capping allocation to any single strategy to minimize potential losses.

• Transparency dashboard: Provides real-time visibility into onchain capital deployment, including distribution across DeFi protocols and allocation amounts.

On redemptions:

• sUSX → USX (unstaking): instant. No cooldown or waiting period.

• USX → USDC (direct redemption): up to 14 days, available for institutional partners only (via usx_operation [at] scroll [dot] io. Regular users can swap via liquidity pools instantly, but DEX fees apply.

• sUSX → USDC directly: unstake to USX first (instant), then swap via liquidity pools.

Reserve Fund

The reserve fund is a system-wide protection mechanism designed to cover potential losses from onchain strategies. USX.Capital dedicates 50% of collected protocol fees (10%) from all strategies to maintain an onchain insurance fund, which serves as a capital protection buffer.

• The insurance fund targets a minimum coverage of 2% of deployed principal.

• There is currently no upper limit on the fund size.

• The community will be notified before implementing any changes to the fund.

• The contract address for the insurance fund is published in Smart Contract Addresses.

For our full risk disclosure statement, please refer to important legal disclosures and risk disclaimers.