Collateral Strategies
What Are Collateral Strategies?
Collateral Strategies let you earn yield on your vault collateral while keeping your borrowed USDK. Instead of having all your collateral sit idle, you can deploy a portion to earn interest on platforms like Hyperlend or HypurrFi.
Key benefit: Your collateral continues to back your borrowed USDK while simultaneously earning yield.
How It Works
Your Collateral is Split Into Two Parts
When you use Collateral Strategies, your collateral is divided:
Direct Collateral - Stays in your vault for security (can't be deployed)
Deployable Collateral - Extra collateral you can send to earn yield
Example:
You have 2 BTC in your vault ($100,000 value)
You've borrowed $50,000 USDK
The protocol requires you keep at least 1.3 BTC directly in the vault for safety
You can deploy up to 0.7 BTC to earn yield while your debt stays the same
Why Keep Direct Collateral?
The protocol enforces a Safety Buffer (default: 20% above the liquidation threshold) to protect your vault:
Prevents liquidation if deployed strategies temporarily can't return funds
Maintains healthy vault even during market volatility
Keeps your borrowing power intact
Yield Sources
You can choose from multiple vetted DeFi protocols:
Hyperlend V3 - Lending protocol
HypurrFi - Lending protocol
More options added over time
Each protocol has different yields and risks. Choose based on your preference.
Safety Features
Automatic Protection
If your vault becomes unsafe due to price movements or other factors, the protocol has built-in protection:
Safety Monitors - Automated bots (keepers) monitor all vaults 24/7. If your direct collateral falls below the safety threshold, keepers can trigger an automatic withdrawal from your yield strategies to protect your vault.
Small Fee - If a keeper needs to rescue your vault, they receive a small fee (0.5% default) from the withdrawn amount. This incentivizes them to keep the protocol safe.
You Stay Safe - Even if you're not actively monitoring, your vault won't get liquidated due to deployed collateral.
What Happens During Emergency Withdrawals
System detects your direct collateral is too low
Keeper triggers withdrawal from your yield strategies
Collateral is returned to your vault
A small fee goes to the keeper
Your vault is safe again
Note: You can always withdraw your collateral yourself before keepers need to intervene.
How to Use Collateral Strategies
Deploying Collateral
Check Available Amount - The interface shows how much you can deploy
Choose a Strategy - Select from available yield sources (Hyperlend, HypurrFi, etc.)
Enter Amount - Deploy up to your available limit
Confirm - Your collateral starts earning yield immediately
Your total collateral value doesn't change - it's just split between direct (in vault) and deployed (earning yield).
Withdrawing Collateral
You can withdraw your deployed collateral anytime:
Click Withdraw - From your vault's strategy section
Confirm - The system retrieves from all strategies automatically
Receive - Collateral plus any earned yield returns to your vault
Note: Withdrawals are usually instant, but may occasionally have small delays depending on the external protocol's liquidity.
Claiming Yield
Instead of withdrawing everything, you can claim just the yield earned:
Check Earned Yield - Displayed in your vault interface
Click Claim Yield - Keeps your principal deployed
Receive - Yield is added to your vault collateral
This increases your collateral without interrupting your yield strategy.
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