Mechanism & Technology

Solidus’s synthetic dollar protocol relies on a powerful mix of financial methods and advanced technology. This lets $SUSD deliver stability, scalability, and yield within the Solana ecosystem. By bringing together delta-neutral hedging, institutional-grade custody, and Solana’s high-performance blockchain, Solidus has created a stablecoin that’s both efficient and robust. Here’s a closer look at the core mechanisms and technologies powering the protocol.

Delta-Neutral Hedging Mechanism

$SUSD’s stability relies completely on delta-neutral hedging. This system cancels out price swings in backing assets (like SOL, BTC, ETH) by matching them with equal short perpetual futures positions. For example, if you deposit 1 SOL when it’s worth $100, the system triggers a $100 SOL short. This makes your net delta zero. If SOL jumps to $200, your $100 spot gain is erased by a $100 loss on your short. If it drops to $10, your $90 spot loss is offset by a $90 gain from the short. In both cases, your portfolio's USD value remains $100.

This hedging is automated by Solana smart contracts, coded in Rust. These contracts use real-time price feeds (like Pyth oracles) and APIs from centralized exchanges (like Binance). We use no leverage, which significantly lowers liquidation risks. Plus, hedging across several exchanges cuts down on exposure to any single counterparty.

Off-Exchange Settlement (OES) Custody

We store backing assets in Off-Exchange Settlement (OES) solutions, not directly in exchange wallets. We only delegate them when needed for funding payments or profit/loss settlement. This means your assets stay on-chain and are protected even if a provider faces bankruptcy, thanks to established trust frameworks.

OES providers, such as Copper, integrate with Solana's blockchain. They use multi-signature wallets and secure APIs for asset delegation. Solana’s lightning-fast finality (under a second) ensures quick asset movement during settlement. On-chain transparency lets users verify holdings anytime, fully supporting DeFi's trustless principles.

Smart Contract Infrastructure

Solidus’s core operations—minting, hedging, staking, and reward distribution—are all controlled by smart contracts. These contracts automate the protocol’s entire workflow. For example, when you mint $SUSD, the contract instantly hedges your deposit and issues tokens. When you stake $SUSD for $sSUSD, it sets up daily revenue distribution through a Token Vault model.

These contracts are written in Rust, Solana’s native programming language. This allows them to take full advantage of Solana’s high throughput (over 65,000 TPS) and ultra-low gas fees (fractions of a cent). Our modular architecture means upgrades can be done smoothly via $SOLID governance, and all contracts are audited for security to prevent risks.

Revenue Generation Model

$sSUSD generates yields from three primary sources:

• Funding Rates: From short perpetuals, typically yielding 7-13% annually.

• Liquid Stablecoin Rewards: Like 2-5% from USDC holdings (e.g., Coinbase).

• SOL Staking Returns: Consensus rewards, generally 3-6% annually.

A dedicated 5% $SOLID reserve fund protects against periods of negative funding rates, ensuring stakers receive consistent payouts. Funding rates are collected through exchange APIs and settled on-chain. Stablecoin rewards integrate securely with platforms like Coinbase. SOL staking uses Solana’s native protocols, and rewards are automatically sent to the $sSUSD pool. All these processes are managed by smart contracts, ensuring efficiency and full transparency.

Cross-Chain Interoperability

$SUSD is designed to extend beyond Solana through cross-chain bridges. This allows it to be used on Ethereum and other blockchain ecosystems, making it highly composable across various DeFi applications, such as lending and trading.

Integration with LayerZero and Wormhole protocols ensures secure and trustless asset transfers. Solana’s low transaction fees make bridging highly economical. Smart contracts manage the wrapping and unwrapping of tokens, ensuring $SUSD maintains its peg and utility seamlessly across different chains.

Risk Mitigation Framework

Solidus uses a robust framework to minimize risks like exchange outages, negative funding rates, or custody failures. This includes diversifying across multiple hedging venues, maintaining a reserve fund, and utilizing OES custody. We never use leverage, which ensures stability without magnifying any potential losses.

Our monitoring systems keep an eye on exchange uptime and funding rate trends. If needed, they can automatically trigger a failover to alternative hedging venues. The reserve fund is managed by a multi-signature wallet controlled by $SOLID governance, and on-chain analytics provide real-time risk assessments.

Solidus’s technology and mechanisms brilliantly combine financial innovation with Solana’s outstanding performance: over 65,000 TPS, sub-second finality, and a $65 billion+ perpetual futures market. This allows us to create a stablecoin that scales effortlessly and consistently delivers value. By integrating delta-neutral hedging into Rust-based smart contracts, securing assets with OES, and diversifying income streams, Solidus ensures $SUSD is a truly stable, yield-generating asset, ready to lead the next era of DeFi adoption.