💰Yield Generation & Accrual
Yield Generation
SIERRA generates yield through its portfolio of reserve collateral, which are investments in RWA and DeFi. The net yield for SIERRA is the blended rate across the portfolio of reserve collateral. 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
Corporate Bonds
DeFi:
Undercollatalized Lending - Wildcat
Basis - Ethena
Market-Making - Hyperliquid HLP
Target APY
The Target APY yield 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 Target APY for SIERRA changes daily as well.
The Realized APY of SIERRA is variable and depends on the performance, cash flows, market conditions and prices of the assets backing the reserves.
Here is an illustration of how this will work in practice with a sample reserves portfolio:
U.S. Treasury MMFs
25%
4.5%
Commercial Paper
15%
5.5%
Corporate Bonds
20%
6.5%
DeFi Yield
40%
11.0%
Target APY
100%
7.65%
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) in value, 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.
Fees
There are several forms of fees that may be encountered while using SIERRA, including:
Gas fees that are required to send transactions on the Ethereum and Avalanche blockchains, where Ethereum's gas fees are denominated in ETH and typically higher than fees in AVAX on Avalanche
Swap fees charged by DEXes and paid to solely to liquidity providers (LPs) of SIERRA. We have set up DEX pools on LFJ and Uniswap that charge 1 to 5 basis point (bps) fees, depending on the asset pooled with SIERRA
Swaps executed via the Swap page on SIERRA's website currently do not charge any additional fees beyond fees paid to LPs of DEXes and gas fees. In the future, an additional Swap fee on the SIERRA website may be charged, where all proceeds go to the SIERRA treasury wallet
OpenTrade, as the service provider that manages all of SIERRA's reserves, charges a platform fee of 25 bps per annum. There are no other management, withdrawal or deposit fees charged by OpenTrade for the services provided to the Sierra protocol
Currently, the Sierra protocol does not charge any fees on the total yield generated by the portfolio of reserve collateral. In the future, an additional fee on the yield generated by SIERRA's reserves may be charged, where all proceeds go to the SIERRA treasury wallet
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