kfUSD and kafUSD

Two tokens, and the difference between them is the whole design. kfUSD is a dollar backed by the stablecoins that minted it. kafUSD is kfUSD you have locked, and it is the thing the protocol's fees are paid to. Holding the first earns nothing; holding the second earns.

Minting kfUSD#

Collateral is USDC, USDT or USDe. It goes in, kfUSD comes out, and the fee is 0.05% — five basis points, charged in kfUSD, deducted from what is minted rather than added on top.

Collateral is valued at its price, not at par. Each collateral has a USD price feed (a Chainlink-style aggregator) named by the admin. A mint credits kfUSD worth what the collateral is worth: 100 USDe at $0.90 mints about $90 of kfUSD, not $100. This is what stops a depegged collateral from buying a good one at par — mint with the weak asset, redeem the strong one — which the earlier par-only design allowed.

The pricing fails closed. A collateral with no feed cannot be minted or redeemed; a feed that is older than the age bound (27 hours by default, which fits a stablecoin feed that updates daily), non-positive, or outside $0.50–$2.00 is refused rather than trusted.

Anyone can mint by naming the collateral and the amount; the contract works out the kfUSD. There is also a minter-only entry point that names its own kfUSD amount, and it is capped at what the collateral is actually worth, so a minter's mistake cannot create unbacked kfUSD either.

Where your collateral sits#

Minting splits the collateral in half:

That ratio is a parameter, not a constant, and 50/50 is what it is set to. The idle half is the honest part of the design: a stablecoin that deploys everything is one that cannot pay a redemption without a queue.

Redeeming#

Name an amount and name the collateral you want back. kfUSD is worth $1 and the collateral is valued at its price, so what comes out is worth what went in, less the same 0.05%: redeeming into a collateral trading at $0.80 pays about a quarter more of it, worth the same dollars. This only works while the contract holds enough of that particular token — the idle balance is per asset, so redeeming into a collateral nobody minted with will tell you so rather than silently substituting another.

Two floors apply. The smallest redemption is 0.001 kfUSD, which exists because kfUSD carries eighteen decimals and USDC and USDT carry six: below that the conversion would round to nothing. And the conversion rounds down, in the protocol's favour, never up.

A full round trip therefore costs 0.1%. Both legs are capped at 3% by the contract, so the ceiling is known even though the setting is not fixed.

Locking for kafUSD#

Lock kfUSD and you get kafUSD one for one. kafUSD is an 18-decimal dollar receipt — one kafUSD per dollar locked, whatever the asset's own decimals, so a dollar of 6-decimal USDC and a dollar of 18-decimal kfUSD earn the same. From that moment your share of every fee the treasury receives accrues to you, in proportion to your kafUSD balance against everyone else's.

kafUSD can be transferred, and the claim goes with it: send a quarter of your kafUSD and a quarter of each asset you locked moves to the receiver, who can withdraw it. The kafUSD behind a pending withdrawal cannot be moved until that request completes or is cancelled.

Coming back out takes three moves, and it is not the same shape as the going-in:

• Request the amount. Unlike the staking vault, this one names a figure up front, and it is that figure the cooldown applies to. It must come to a whole number of the asset's smallest units (for a 6-decimal asset, a multiple of 0.000001), or the request is refused rather than burning the remainder.
• Wait seven days. Enforced on chain.
• Complete it, naming an asset. The kafUSD is burned then, not at the request, and you are handed back the same asset you locked — normally kfUSD.

That last point is the one people trip on. Unlocking does not return collateral. Leaving the system entirely is unlocking and then redeeming, two decisions rather than one, and each has its own step.

How the yield actually reaches you#

The treasury keeps a running accumulator per asset instead of a per-holder balance. When fees arrive, a 10% performance fee is taken off the top and sent to the protocol's fee vault — the same vault the lending fees go to, deliberately, so there is one place to account for revenue rather than two. The remaining 90% moves the accumulator, and your claim is the difference between the accumulator now and where it stood when your balance last changed.

The practical consequences:

• Yield is claimed, not rebased. Your kafUSD balance does not grow; a claimable amount does. Claim one asset, claim all of them at once, or compound a claim straight back into more kafUSD.
• The performance fee applies only to fees arriving after it was set. Past distributions have already moved the accumulator and are not retroactively re-cut. The ceiling on it is 20%.
• An unset fee recipient means the fee is waived and depositors take everything, which is the safe default rather than the intended state.

What feeds the treasury#

kfUSD's mint and redeem fees are pushed to the treasury as they are charged. The lending protocol's cut of interest goes to the same fee vault. And the staking vault harvests from the treasury, which is how protocol revenue ends up moving an stKLD balance — see holding KLD as stKLD.

Every charge in the system, with its rate and its ceiling, is on the fee page. The contracts are kfUSD.sol, kafUSD.sol and YieldTreasury.sol, and the pages are at /stable.