💰Yield Generation & Accrual
Yield Sources
SIERRA generates yield through its diversified portfolio of reserve assets deployed into RWA and DeFi yield sources. The yield earned by SIERRA holders is the blended rate across the portfolio of reserve assets. The current set of yield sources eligible for allocation of SIERRA's portfolio include:
RWAs:
U.S. Treasury Money Market Funds (MMFs)
Investment-grade Commercial Paper
DeFi:
Undercollatalized Lending - Wildcat & directly with institutional borrowers
Basis - Ethena
Market-Making - Hyperliquid HLP
More yield sources will be gradually added and each yield source is subjected to an assessment via Sierra's Risk Framework.
Current APY
The Current APY is an annualised interest rate that is a weighted average of the expected returns on the underlying portfolio of reserve assets. The underlying reserves of SIERRA are dynamically-managed and reallocated daily, so the Current APY for SIERRA changes daily as well.
The Realized APY of SIERRA is variable and depends on the performance of the assets backing the reserves, which fluctuate with changing market conditions. For example, the lending rate earned on deposits in AAVE or basis yield on Ethena's sUSDe may change day to day, which will cause the Realized APY to differ slightly from the Current APY.
Here is an illustration of how this will work in practice with a sample reserves portfolio:
U.S. Treasury MMFs
30%
4.5%
Commercial Paper
15%
5.5%
DeFi Yield
55%
10.0%
Current APY
100%
7.68%
Learn more about allocation of SIERRA's reserves using the Transparency Dashboard.
Yield Accrual
SIERRA uses an exchange rate that increases (or decreases) as the value of the reserve assets increase (or decrease), as opposed to a rebasing method. As a result, a user's balances of SIERRA always remains fixed unless they buy, sell, mint, redeem or transfer SIERRA tokens. This means that yield accrual is reflected as the difference between the current value of SIERRA relative to the acquisition price a user paid.
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