cUSD Mechanics

cUSD is a US dollar-backed stablecoin redeemable against reserve assets. Users can interact with cUSD via three operations:

• Mint: Deposit reserve assets to mint cUSD at oracle value • Burn: Redeem cUSD for reserve assets at the asset price of the highest deviation • Redeem: Multi-collateral redemption to ensure peg stability

During the pilot phase, advanced stability mechanisms (e.g., redeem, dynamic fees) are disabled pending collateral onboarding. Mint and burn fees will be a constant fixed fee of 0.25% to prevent oracle risk

If oracle prices are stale, i.e. they are not up-to-date with the current time, the mint/burn function should be disabled until the oracle is back in sync.

Fractional Reserves

When deposited assets are not being actively borrowed, the idle capital can earn rewards via the underlying asset or by being invested into integrated lending markets such as Aave and Morpho via the Fractional Reserve. Each asset in the Fractional Reserve accrues interest in an ERC4626 vault until they are divested when needed for withdrawing, redeeming, or borrowing. The allocation process is automatic, and is a function of whether the reserve asset has revenue sharing agreements with Cap, and the current rates of the underlying.