Why Cap?

Verifiable Money, Credible Financial Guarantees

In the ever-evolving landscape of crypto, Cap functions as the credibly neutral and open aggregate layer atop the currently fragmented landscape of stablecoins and yield opportunities. At any given time, cUSD represents a composite of the most stable and accessible dollar-denominated stablecoins, while stcUSD dynamically allocates to the most effective yield strategies available.

Cap is designed by two guiding principles:

• Open protocols: Open-source, autonomous systems foster innovation, transparency, and resilience. Financial guarantees must be credible, based on verifiable code.

• Market driven: Well-designed rewards and penalties minimize reliance on human judgement.

By combining the verifiability of smart contracts and the economic strength of markets, Cap aims to serve as the financial backbone of the digital economy.

Let us break down the thesis for each of the products.

Why cUSD?

There is no question that stablecoins are a better payment system compared to legacy financial systems. They are faster, safer, more transparent and more accessible, removing inefficiencies plaguing the traditional payment networks (read settlement latency, opaque intermediaries, costly conversions). This technological leap, alongside regulatory receptiveness, has spurred governments and financial institutions to issue their own stablecoins. However, the rapid adoption of institution-led stablecoins leads to a fragmentation problem. As more stablecoins are introduced, the ecosystem fractures into incompatible siloes, negating the whole value proposition of stablecoins: frictionless global value transfer.

Money derives its value from network effects: the more users accept it, the more useful it becomes. The dollar is a strong form of money, since dollars held at Bank A are functionally equivalent to those at Bank B thanks to centralized clearinghouses and regulatory harmonization. Stablecoins today lack such unifying infrastructure. For stablecoins to truly have “moneyness”, the lack of interoperability is a problem that must be addressed.

Solving fragmentation necessitates credibly neutral protocols that aggregate individual stablecoins.

cUSD offers singleness of money, by aggregating compliant stablecoins into a unified reserve, creating an interconnected web of assets. It serves as a neutral bridge between the reserve assets, where users can redeem cUSD for any underlying asset. All logic is on-chain, enabling fast, secure, and 24/7 swaps without preferential treatment of any reserve asset.

As more institutions join Cap, the protocol can serve as a settlement layer, offering an open standard for interoperability.

Why stcUSD?

Many of today’s yield-bearing stablecoins are no different from tokenized hedge funds, relying on centralized teams to manage strategies. This model faces two major issues:

1. Scalability: A single team is limited by its resources and capacity, regardless of their capabilities. There are only so many strategies a dApp team can run, and no strategy can infinitely scale. They quickly become obsolete as market conditions change, and users are left chasing the next dApp.

2. Safety: Centralized management exposes users to uncovered risks that are opaque and subject to change at the discretion of the team. Users occupy the most junior position within protocol hierarchies, often lacking verifiable protection and remaining exposed to risk during adverse events.

stcUSD addresses these challenges by decentralizing the capital allocation process and providing verifiable recourse. An open network of operators competes to deliver the best yield, with their strategies underwritten by restakers’ delegated capital. This model enables:

1. Verifiable Downside Protection: End users are covered from the risk of yield generation via Shared Security Networks. Operators must secure credit delegations via restaking to participate. All risk coverage is transparent and enforced by smart contracts, allowing users to verify protections on-chain.

2. Perpetual competitive yield: An autonomous layer of operators ensures continuous access to the most effective yield strategies. Smart contracts and game theory dynamically dictate capital allocation, ensuring stcUSD to deliver competitive yield invariant to market condition or scale.

3. Democratization of Yield: By opening participation to a global network of operators, stcUSD provides access to yield opportunities that were previously constrained by geographic or institutional barriers.

For our detailed thesis of yield-bearing stablecoins, please refer to Type III stablecoins