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💡 How It Works

A high level overview of how Volt Protocol works currently and how it will work under market governance.

Minting VOLT or redeeming for stablecoins

You can mint VOLT using either DAI or USDC, and can redeem for either so long as there is a sufficient balance in the system. There is no fee to mint or redeem.

Stablecoin optimization

A traditional yield aggregator or lending market accepts deposits of a certain stablecoin, like DAI or USDC, and gives a deposit receipt, like yvDAI for Yearn or cUSDC for Compound.

Volt Protocol on the other hand gives VOLT no matter what was deposited, and can optimize which stablecoins it holds to earn a higher yield.

Right now only DAI and USDC are supported, but more can be added in the future. At any time, Volt Protocol will hold whichever of DAI or USDC it can earn higher yields on in its supported venues.

Higher rates through illiquid venues

The highest yielding venues both on and off chain are not fully liquid. For example, Maple Finance offers over 6% yield not including incentives, but requires a meaningful lockup and, at worst, may take months to mature. This may be too much risk for an individual, and it wouldn't make sense for them to put only 10% or other smaller portion of their money there due to gas fees.

Volt Protocol fixes this -- a portion of the backing can be deposited in higher yield, less liquid venues like Maple, while the majority remains in safe, highly liquid venues like Compound. This results in a higher blended VOLT rate compared to depositing in a standard yield aggregator or lending pool.

Safety through the surplus buffer

Volt Protocol targets a surplus buffer (first loss system capital) of 5-20% of the VOLT supply. This protects VOLT holders to a large extent from losses in any yield venue, and also means that if there is heightened demand to redeem, the VOLT yield rate can be increased to attract more liquidity and provide for redemptions at peg. This is a similar mechanism to the utilization-based rates on Compound or Aave.