How it works

Introduction

afiUSD is AFI’s flagship ERC-4626 yield-bearing stablecoin, engineered to offer stable, risk-managed returns while preserving exposure to U.S. dollar-pegged assets. It serves as the default settlement and accounting unit across the AFI protocol and is designed for both capital preservation and capital productivity.

Key Design Principles

• Yield-Bearing: The value of afiUSD appreciates over time, reflecting the accrued yield generated by AFI Agents.

• Stablecoin-Pegged: Backed by reserve stablecoins (primarily USDC), afiUSD maintains dollar-denominated value.

• Non-Custodial: Minted and redeemed via user-controlled smart accounts.

• Composable: Usable across DeFi protocols to earn secondary yield.

Token Mechanics -

1. ERC-4626 Vault Compliance

afiUSD is implemented as a fully compliant ERC-4626 vault token, enabling seamless interoperability with DeFi protocols and yield strategies.

2. Yield Vesting Mechanism

To mitigate front-running and opportunistic deposit behavior, afiUSD incorporates a vested yield accrual model:

• Yield is gradually reflected in the exchange rate over a vesting window (e.g., 24 hours)

• Ensures fair value realization across depositors

• Smooths out sharp NAV changes from strategy events

Underlying & Supported Assets -

1. Native Asset: USDC

afiUSD is natively backed by USDC, a fully reserved and regulated stablecoin issued by Circle. Chosen for:

• Strong compliance and regulatory track record

• Deep liquidity across DeFi and CeFi

• Broad integration in base layer infrastructure

2. Supported Deposits

Via the AFI Smart Wallet infrastructure, users can also deposit:

• USDT: The most widely traded stablecoin on centralized exchanges, supported via internal routing and conversion mechanisms.

Yield Generation Strategy -

afiUSD generates yield through an actively managed, diversified strategy set across three primary verticals:

1. Yield Trading Protocols

Agents deploy capital in tokenized yield markets such as:

• Pendle, Spectra etc

• Strategies include long fixed-yield capture, forward rate arbitrage, and maturity-based optimization

2. Lending Markets

Participation in top-tier lending protocols:

• Morpho, Euler, and similar markets

• Dynamic interest rate harvesting and loop strategies

3. Diversified Allocations

All strategy allocations are managed with:

• Predefined exposure caps

• Continuous risk scoring and rebalancing

• Liquidity optimization across maturity curves

Minting & Redeeming afiUSD -

1. Minting

• Users deposit USDC or USDT via ERC-4337 Smart Accounts

• Based on the current vault exchange rate (via oracle), the equivalent afiUSD amount is minted into their smart wallet

• Assets are routed to AFI Agents for yield deployment

2. Redeeming

• Users initiate redemption through the AFI interface

• The vault burns afiUSD and returns the corresponding amount of USDC (or supported stablecoins), adjusted for the latest NAV

• Withdrawals may be subject to cooldowns depending on strategy liquidity

3. Composability in DeFi

Once minted, afiUSD can be deployed into secondary DeFi protocols, unlocking additional yield layers such as:

• LPing in Curve/Uniswap stableswap pools

• Collateral use in lending protocols

• Structured strategies via future AFI Agent deployments

This composability allows users to stack yields while maintaining base-level exposure to a risk-managed, dollar-pegged asset.