# How It Works High level summary of USD.AI, with detailed sections following throughout the rest of the docs. USD.AI is a two-sided credit protocol that connects AI infrastructure operators who need capital with depositors who want yield exposure to compute-backed lending. The protocol originates GPU-secured loans, funds them through onchain deposits, and distributes yield through a tokenized instrument stack; all while maintaining a traditional, legally enforceable lending structure off-chain. The system operates across three layers: a depositor layer where capital enters, a lending layer where loans are originated and serviced, and a governance layer where protocol parameters are set by CHIP token holders. ### Capital In: USDai and sUSDai Capital enters the protocol when depositors deposit PYUSD (PayPal's regulated, dollar-backed stablecoin) in exchange for USDai, a synthetic dollar pegged 1:1 and fully backed by the underlying PYUSD. USDai itself does not generate yield; it is a stable, composable asset designed for holding, transferring, or use across DeFi. To earn yield, depositors stake USDai in exchange for sUSDai, the protocol's yield-bearing token. sUSDai captures income from two sources: interest payments on active GPU-backed loans, and Treasury bill yield earned on idle reserves. This yield accrues continuously and is reflected in a rising exchange rate between USDai and sUSDai - holders do not need to claim anything manually. Direct minting and redemption of USDai at the smart contract level is currently permissionless, but will be restricted to whitelisted, KYC-verified market makers and institutions in Q2 2026. However, USDai and sUSDai are always permissionless to hold, transfer, stake, and trade on secondary markets. ### Loans Out: GPU Infrastructure Financing On the borrowing side, AI infrastructure operators — neoclouds, data center companies, and compute providers — apply for financing to acquire GPU hardware. Loans are non-recourse and secured by the physical GPU assets themselves along with their contracted cashflows, structured similarly to traditional equipment finance. Every loan follows a four-phase process. First, an escrow is established and funded (held by Wilmington Trust). Second, the OEM builds and ships the servers. Third, hardware is installed, tested, and verified at the datacenter, and a permanent lien is filed. Fourth, escrow is released, bridge lenders (or the OEM, if providing net terms) are repaid, and the borrower enters standard repayment — interest and principal due every 30 days over a 3-year amortization schedule. Each borrower operates through a bankruptcy-remote Delaware SPV, legally isolating the GPU collateral from the operator's broader balance sheet. A comprehensive legal package — including a Loan and Security Agreement, UCC-1 filings, pledge agreements, and datacenter lien waivers — ensures enforceable collateral rights in the real world. ### The Hybrid Structure: Onchain Meets Offchain USD.AI operates simultaneously across two record systems. Offchain, the legal infrastructure provides real-world enforceability: perfected liens, SPV structures, bank accounts, escrow, and insurance. Onchain, the protocol provides transparency and programmability: Loan NFTs represent collateral positions, the Onchain Record serves as the authoritative lender register, and smart contracts automate the payment waterfall and reserve drawdowns. These two layers are synchronized at every material event. The Loan NFT is only minted once all off-chain conditions are met (servers delivered, installed, verified, liens filed) and all on-chain conditions are satisfied (wallet provisioned, record updated). Escrow cannot release until the NFT exists. In default, enforcement runs on both layers simultaneously — the on-chain NFT freezes and the waterfall shifts to acceleration, while off-chain the Agent exercises UCC remedies and can physically repossess hardware. ### Risk Mitigation and Collateral Protection Loans are originated at 70–80% loan-to-value ratios. Borrowers fund a Debt Service Reserve Account (DSRA) at closing, covering approximately three months of peak debt service. The protocol maintains layered protections including property insurance (via Alliant), value reinsurance against hardware depreciation (via Barkr), real-time hardware monitoring (via Aravolta), and partnerships with ITAD firms for physical retrieval and resale in default scenarios. Borrowers who hold their DSRA in USDai receive a rate compression benefit: the yield generated by that USDai (from the PayPal PYUSD incentive and T-bill income) flows back into their interest rate, reducing their effective borrowing cost. ### Redemptions and Liquidity Because the protocol's capital is deployed into illiquid, amortizing GPU loans, sUSDai redemptions operate on a 30-day epoch cycle using a FIFO queue. Available USDai is distributed to queued redemptions at each epoch close. During periods of high utilization, redemption queues may extend across multiple epochs. The protocol does not prematurely liquidate loans to satisfy withdrawals. A future mechanism called Queue Extractable Value (QEV) will introduce auction-based priority bidding for redemption positioning, allowing depositors to pay for faster exits while redistributing those fees to passive stakers. ### Governance: CHIP CHIP is the protocol's governance token. CHIP holders vote on the parameters that shape how the system operates: which GPU hardware qualifies as eligible collateral, how interest rates are tiered across different offtake qualities, what borrower eligibility criteria apply, how protocol fees are set and routed, and when smart contract upgrades or new integrations are approved. CHIP can also be staked for sCHIP, which serves a backstop function — in the event of a shortfall, staked CHIP may be used to cover the deficit, making stakers active participants in the protocol's risk framework. ### The Sections That Follow The pages that follow provide detailed documentation for each side of the protocol. The **Borrower** section covers the full loan lifecycle, legal structure, onchain/offchain mechanics, and partner ecosystem. The **Depositor** section covers USDai, sUSDai, yield mechanics, redemption processes, and QEV. The **Governance** section covers CHIP utility, staking, and tokenomics. The **Technical Overview** provides smart contract architecture, audit reports, and deployed contract addresses. # InfraFi Market InfraFi: Financing the Infrastructure Golden Age
| Risk Category | Mitigant | Details |
|---|---|---|
| ECONOMIC | Equity Buffer | 70-80% Loan-to-Value (LTV) ratio provides a safety margin against asset value fluctuations and default risks. |
| ECONOMIC | Debt Service Reserve Account | ~3 months of peak debt service held in a restricted cash account (or in USDai directly) to cover potential ramp up delays, cash flow lumpiness of borrower. Structural protection to ensure borrower maintains healthy cash reserves |
| ECONOMIC | Amortization | Regular principal repayment schedule reduces exposure over time, with first successful implementation complete. |
| ECONOMIC | Queue Extractable Value | A market-based pricing mechanism for liquidity bottlenecks for each amortization loan repayment. |
| ECONOMIC | Value Insurance | Value insurance policy placed to provide insurance coverage over the life of the loan. In the event of default, GPUs are sold in the secondary market, if sale price is under the insured amount, insurer pays out the delta. |
| LEGAL | Bankruptcy Remote SPV | Clear legal structure secures asset ownership and collateral rights throughout the financing period, assets and contractual revenue split from parent corporate balance sheet prevents other creditors from attempting to claim rights to assets in event of default. |
| LEGAL | Onboarding Diligence | Thorough vetting of counterparties' financial status and compliance requirements before participation. |
| LEGAL | Software Oversight | Ongoing software oversight into machine usage, uptime and location |
| MODULAR | Underwriting Process | Comprehensive system including asset appraisal, default handling, and flexible amortization options. |
| MODULAR | Risk Incentive | Interest rates range based on cash flow qualities (ie, on demand rentals charged higher rate than contractual multi year offtake agreements). Higher yield compensates underwriter economic interests, which align with platform success. |
| MODULAR | Controls | Built-in safeguards include auction repurchase guarantees and robust appraisal systems. |
| TOKENOMIC | Governance Whitelist | Community oversight of loan terms and asset selection promotes long-term sustainability. |
| TOKENOMIC | Last line of defense | Token functions as ultimate risk buffer in case of major depeg, similar to Aave and Maker models. |
| Offtake Type | Interest Rate Band | Description |
|---|---|---|
| Tier 1: Investment-grade | 7% - 9% p.a. | Applies where the offtake counterparty carries an investment-grade credit rating (BBB-/Baa3 or above from S&P or Moody's), or where the borrower holds a customer default insurance policy covering the contract. |
| Tier 2: Non-investment-grade multi-year contracted offtake | 10% - 12% p.a. | Applies where the counterparty is not investment-grade but has executed a binding multi-year agreement with documented payment history. |
| Tier 3: On-demand or spot rental | 12% - 15% p.a. | Applies where compute is sold without a multi-year contract. Revenue is real but uncontracted; the rate reflects that variability |
| Party | Role |
|---|---|
| USD.AI Foundation | Cayman Islands Foundation Company. Parent entity of the protocol; acts as Tokenizing Agent for GPU loans and manages ecosystem partnerships that expand borrower access to hardware, financing, and infrastructure networks. |
| GPU Finance Ltd. | Subsidiary of the USD.AI Foundation. Acts as Administrative Agent and Lender on all loan agreements; enforces events of default and manages collateral on behalf of protocol depositors. |
| Permian Labs | Delaware corporation. Technical and operational service provider to the Foundation; built the original protocol and provides day-to-day engineering, deal origination, and operational support. |
| Bridge | Gap financing provider. Funds the purchase order period and is fully taken out upon escrow release at closing. |
| Independent Custodian | Third escrow signatory. Provides independent oversight of the escrow release process. |
| OEM | Original equipment manufacturer. Receives the borrower's equity deposit directly and builds/ships the servers. |
| Datacenter | Warehouses and custodies the GPUs; provides power, cooling, connectivity, and security. |
| PayPal / Paxos Trust Company | PayPal provides the payment infrastructure and lending currency used across USD.AI loans. Paxos Trust Company (NYDFS-regulated) ensures the currency is fully backed 1:1 by U.S. dollar deposits and short-term Treasuries, with monthly third-party attestations, giving borrowers confidence that the funds they receive and repay are stable and fully redeemable. |
| Borrower | Bankruptcy-remote Delaware LLC SPV; sole purpose is to own the GPU collateral and borrow under the loan |
| Parent / Operator | Operating company that contributes the servers to the SPV and acts as Limited Guarantor |
| Independent Manager | Third party service provider required to consent to Material Actions taken by the SPV (ie, blocks consolidation efforts) |
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# Onchain / Offchain Interplay Mapping legal contracts and enforcements with onchain representation and structural rights USD.AI's core innovation is a hybrid legal-and-technical structure that operates simultaneously across two record systems. Neither is complete on its own, and the form documents are engineered so that the two systems remain synchronized at every material event. #### The Two Layers **The offchain layer** consists of real-world legal, banking, and physical infrastructure: * The Delaware SPV (a registered legal entity) * UCC filings at state filing offices * Deposit accounts at regulated U.S. banks * The escrow account at a qualified trust company * Physical GPU servers in data center facilities * Insurance policies, tax filings, regulatory compliance * Executed hard-copy legal contracts with Parent, lenders, data center operators, and service providers This is where the loan is actually legally enforceable. The offchain layer gives lenders real rights in a real court: perfected liens, priority in bankruptcy, the ability to take possession of servers, the ability to sue for breach. **The onchain layer** consists of the USD.AI Protocol smart contracts: * Loan NFTs, Lender NFTs, and Participation NFTs * The Borrower's onchain smart account wallet (used for all stablecoin inflows and outflows) * The Onchain Record (the authoritative ledger of loan positions, balances, and payment history) * The automated payment waterfall and reserve-drawdown logic * Default freeze and NFT lifecycle controls (mint / freeze / burn) This is where the loan is transparent, programmable, and composable. The onchain layer gives depositors real-time visibility into performance, automated execution of the waterfall, and a tokenized position that can be held, transferred, or composed into other onchain products. #### Why Both Layers Are Necessary The offchain layer exists because: * GPU servers are physical property; only UCC filings and a true-sale structure can give the SPV enforceable title and the Agent an enforceable first lien * Bankruptcy remoteness requires a Delaware LLC with an Independent Manager and real-world separateness covenants * Customer revenue often arrives in U.S. dollars via traditional banking rails; control agreements and a bank-held collection account are how you capture that revenue before it commingles with operator funds * Real-world compliance (insurance, tax, anti-terrorism, securities law) requires real-world actors * Smart contracts cannot physically enter a data center; only legal process and executed lien waivers do The onchain layer exists because: * Depositors need a liquid, transparent, composable instrument to hold * Lender position tracking (the "lender register") in a syndicated loan is traditionally a bottleneck; onchain, it becomes a public, tamper-evident record * Automated waterfall execution and reserve drawdowns remove administrative friction and operational risk from payment processing * Payment status, collateral status, and default status become publicly verifiable in real time, rather than sitting in private agent reports * A tokenized collateral position (the Loan NFT) allows onchain parties to interact with a verifiable representation of a real, perfected, legally enforceable loan #### The Loan NFT: The Bridge Between the Two Layers The Loan NFT represents: * The specific GPU collateral securing a given series * The Agent's first-priority lien on that collateral * The rights of the lenders and participants to receive payment The Loan NFT is only minted once every offchain condition is satisfied (servers delivered, installed, tested, liens released) and every onchain condition is satisfied (wallet provisioned, Onchain Record populated). The minting is itself a **closing condition**: escrowed funds cannot be released to pay the Parent until the Loan NFT exists and is recorded. This ensures the onchain and offchain pictures of the deal snap into place at the same instant. Throughout the life of the loan, the Loan NFT is held and controlled by the Agent, so that onchain control mirrors the offchain collateral agent relationship. #### Capital Flow: End-to-End The structure is cleanest when viewed as a sequence of flows that cross the onchain / offchain boundary multiple times: 1. **Depositor capital in (onchain)**: Lenders deposit stablecoin into the USD.AI Protocol. The Protocol mints a Participation NFT and deposits it into the sUSDai vault, representing the pro rata claim to cash flows generated from the relevant financing. 2. **Funding (onchain → offchain)**: The Agent applies the capital onchain to pay closing fees and fund the Reserve Account. The remainder is transferred into an **offchain escrow account** at the Escrow Agent, where it earns a reduced rate pending release. 3. **Escrow release (dual-layer)**: When both sets of conditions are satisfied (offchain: servers delivered, installed, tested, third-party-verified, prior liens released; onchain: Loan NFT minted and Onchain Record updated), the Agent delivers a release instruction. The Escrow Agent releases the escrowed funds offchain to pay the parent for the servers. 4. **Revenue generation (either layer, depending on the customer)**: End customers pay the SPV for use of the servers. Cash payments go to the collection account (offchain); the Borrower is obligated to convert collection account cash into stablecoin and deposit it into the digital wallet in advance of each payment date. 5. **Distribution to lenders (onchain)**: Stablecoin distributions flow through to lenders via the Protocol, verifiable onchain in real time. #### The Onchain Record as the Authoritative Ledger The Onchain Record is not a mirror or reporting layer; it is the **authoritative lender register** for the loan. It records: * Each lender's share of the loan * Principal outstanding * Interest accrued and paid * Required payments due and due dates * Aggregate outstanding amount across all series * Payment performance and delinquency status Absent manifest error, the Onchain Record is determinative evidence of payment status. This replaces the paper lender register that traditionally sits with the agent in a syndicated loan and that historically has been opaque to anyone outside the lender group. #### Enforcement: Dual-Track Default On an Event of Default, enforcement runs on both layers simultaneously: **Onchain (immediate, automatic):** * The Loan NFT is automatically frozen on the USD.AI Protocol. It cannot be transferred, pledged, or encumbered except as directed by the Agent. * The Onchain Record is updated to reflect the default and to accrue interest at the default rate. * The Protocol's automatic distribution logic shifts from the standard waterfall to the acceleration waterfall, with all Collections directed to lenders pro rata until the loan is repaid. **Offchain (agent-driven, real-world remedies):** * The Agent accelerates the loan and declares all obligations immediately due. * The Agent exercises UCC remedies: foreclosure sale, taking possession, private sale. * The Agent uses the data center lien waivers to enter the facility, disconnect, and remove the servers (or assume the master services agreement in place of the Borrower). * The Agent can foreclose on the parent's equity in the SPV, taking direct control of the entire enterprise rather than having to enforce against each asset individually. * The Agent directs all bank accounts (collection account, reserve account) via the control agreements. **Convergence (onchain reflection of offchain outcome):** * Once an offchain foreclosure, sale, or other disposition is complete, the Agent permanently burns the Loan NFT on the Protocol by deposting the proceeds from the sale or insurance claim (or combination thereof) to the sUSDai vault. #### Why This Works The offchain layer provides enforceability in the real world. The onchain layer provides transparency, programmability, and composability for depositors. The documents are engineered so that: * Every major state change (funding, release, payment, default, enforcement, close-out) happens in both layers at the same time * Onchain events are conditioned on offchain performance, and vice versa, so the two records cannot drift apart * The Agent is a single counterparty with authority in both layers, preventing coordination failure between the legal and technical sides * Lenders can rely on the onchain record for day-to-day interaction with their position, without giving up any of the protections that come from a real, legally enforceable, first-priority-secured GPU loan # Partners USD.AI has built a holistic ecosystem of partnerships and risk management tools that work together to protect lenders and ensure loan performance. These are not simply vendor relationships; they represent a productized approach to credit risk mitigation for AI infrastructure. *** #### PayPal & Paxos Trust Company — Lending Currency & Payment Rails All USD.AI loans are denominated in PYUSD, PayPal USD, a fully-backed stablecoin issued by Paxos Trust Company on behalf of PayPal. PYUSD enables the protocol's smart contract escrow, automated payment waterfalls, and on-chain transparency, all while maintaining full dollar backing. For borrowers, this means institutional-grade payment infrastructure without the friction of traditional wire-based settlement. **The 4.5% Customer Incentive Program** PayPal provides a 4.5% annual incentive on PYUSD held in the protocol, on up to $1 billion in loan backing for 2026. This incentive accrues at the protocol level and flows through to sUSDai yield, creating a mechanism to compress borrower rates across the network. Borrowers who elect to hold their Debt Service Reserve Account (DSRA) in USDai are eligible to receive a reduced effective borrowing rate as a result of this arrangement. Looking ahead, PayPal's payment rail infrastructure provides the foundation for USD.AI's broader payments vision: a settlement layer where GPU financing, counterparty payments, and end-user compute billing all operate on a single, yield-generating rail. More information about this partnership can be found [here](https://usd.ai/insights/pyusd-paypal-usdai-integration). *** #### Aravolta — Hardware Monitoring Aravolta provides real-time hardware monitoring for all collateralized GPU assets in the USD.AI portfolio. This includes continuous software-level oversight of machine usage, uptime, and physical location, giving the protocol ongoing visibility into the health and productivity of its collateral base throughout the life of each loan. For borrowers, Aravolta's integration is a standard component of the loan onboarding process. The monitoring layer supports the protocol's underwriting standards and provides the operational data needed for ongoing loan servicing and, where necessary, enforcement. *** #### Alliant Insurance Services — Cluster Insurance Alliant Insurance Services is USD.AI's insurance provider for GPU cluster coverage. One of the largest insurance brokers in the world, Alliant sources and places property and casualty insurance on the collateralized hardware underlying every USD.AI loan, covering physical GPU clusters against loss, damage, and other insurable events throughout the life of the financing. This coverage is a standard requirement for all collateralized loans. *** #### Barkr — Value Reinsurance Barkr provides value reinsurance for GPU collateral, a dedicated form of hardware insurance that protects against unexpected depreciation or loss events beyond what standard insurance covers. This adds a protection layer on top of collateral value in the event of a default or liquidation scenario, preserving recovery value for the protocol and its depositors. Barkr coverage is part of the standard collateral protection stack embedded in every USD.AI loan, not an optional add-on. More information can be found on our [blog](https://usd.ai/insights/usdai-barker-insured-gpu-loan-coverage). *** #### ITAD Partners — Hardware Retrieval & Resale USD.AI maintains partnerships with IT Asset Disposition (ITAD) firms who provide the operational capability to physically retrieve and resell GPU hardware in the event of a default. This ensures that recovery value is realizable in practice, not merely theoretical, a critical distinction when collateral consists of physical infrastructure distributed across datacenters. ITAD partnerships complement the on-chain auction mechanism: once an NFT is sold at auction, ITAD partners provide the logistical infrastructure for the new owner to take physical possession of the underlying hardware if needed. *** #### Wilmington Trust — Escrow Agent Wilmington Trust, National Association serves as the independent Escrow Agent for all USD.AI loan transactions, holding loan proceeds in segregated per-loan sub-accounts from purchase order funding through to hardware installation and escrow release. Disbursements require Joint Written Instructions from at least two of three authorized signatories, the Lender, the Bridge, and the Independent Custodian, ensuring no single party can unilaterally release funds. Wilmington Trust provides the neutral, institutionally credible custody layer that sits between capital commitment and verified hardware deployment. *** #### Real-Time Financial Verification - Coming Soon USD.AI is integrating a real-time financial verification partner to provide independent, cryptographically-backed confirmation that loan funds are properly escrowed throughout the pre-closing process. This verification layer will give the protocol and its depositors continuous assurance that escrowed capital is accounted for at every stage and will sit alongside Wilmington Trust's custodial role as a complementary, independent data source supporting USD.AI's broader commitment to on-chain transparency and proof of reserves. *** #### Regional Origination Partner USD.AI works with regional origination partners across select jurisdictions to identify prospective borrowers, conduct initial screening, and refer qualified opportunities to the USD.AI underwriting team for approval. Transactions originated through these partnerships follow the same loan process, legal architecture, and underwriting standards as all other USD.AI loans. *** #### iDenfy — Identity Verification & Compliance iDenfy is USD.AI's identity verification partner, powering the KYC and KYB compliance layer for all borrower onboarding. Every prospective borrower must complete identity and business verification before accessing GPU financing. iDenfy handles this end-to-end, verifying government-issued documents, running biometric face matching, and screening against global sanctions lists and PEP databases. *** #### Bridge Lenders — Purchase Order & Gap Financing USD.AI works with a network of bridge lenders who provide short-term gap financing during the period between purchase order placement and permanent debt takeout. Bridge lenders fund the OEM directly during the server build and shipping period, taking an interim UCC-1 security interest in the hardware during transit. Upon installation, verification, and escrow release, the bridge is fully repaid from loan proceeds and their security interest is released. This structure allows borrowers to move quickly on hardware procurement without waiting for the full permanent financing close, a meaningful operational advantage in a market where GPU availability and delivery timelines are competitive. # FAQ ### Getting Started & Eligibility
Who is eligible to borrow?
USD.AI lends to neoclouds and AI infrastructure operators with installed, revenue-generating GPU hardware. The protocol does not finance speculative hardware, purchase orders alone, or general business loans. All loans are collateralized directly against the physical assets.How do I get started?
Visit [GPUloans.com](https://gpuloans.com) and fill out our [intake form](https://www.gpuloans.com/contact). Borrowing is not publicly self-serve. The team will conduct initial diligence before presenting loan terms.How long does the loan process take?
The full process, from initial inquiry through purchase order, hardware build, shipping, installation, and escrow release, typically takes several weeks to a few months depending on deal complexity and hardware lead times.Why aren't there more loans?
The loan process takes from a few days to several months depending on complexity. In these early stages, the protocol is being deliberately prudent to ensure robust underwriting. The process involves two main stages: (1) Underwriting — evaluating the business, assets, and legal structure; (2) Install — receiving hardware, installing, and verifying.What is an SPV and why do I need one?
A Special Purpose Vehicle (SPV) is a bankruptcy-remote legal entity that holds your GPU assets separately from your operating company. This is a standard requirement for all USD.AI loans; it protects the collateral from your broader balance sheet and is a core part of what makes the loan structure enforceable.How many loans are live?
Check the current status of all loans at [app.usd.ai/reserves](https://app.usd.ai/reserves).What happens to my operations if I default?
In the event of default, USD.AI works collaboratively with the borrower to find a buyer for the hardware. This process is supported by partnerships with IT Asset Disposition (ITAD) firms who can physically retrieve and resell the GPUs if needed, and Barkr's value reinsurance coverage protects against unexpected hardware depreciation. Your datacenter operations are not automatically disrupted.What is a DSRA and how much do I need to fund it?
A Debt Service Reserve Account is a reserve retained at closing, typically around 10% of the gross loan amount, to cover interest payments in the event of a shortfall. Borrowers who fund their DSRA in USDai are eligible for a reduced interest rate.GPUs depreciate fast. How is that risk handled?
Through conservative credit structuring: \~75% LTV (25% equity cushion), amortizing loan structures (\~36 months), focus only on installed revenue-generating GPUs (not speculative hardware), and the existence of an active secondary market supporting recovery in liquidation scenarios. The protocol underwrites GPUs as productive infrastructure with near-term cash flow, not as long-duration assets held for appreciation.Who is behind USD.AI?
USD.AI is governed by the USD.AI Foundation, a Cayman Islands Foundation Company that holds the protocol's intellectual property and represents all stakeholder interests. The Foundation is the shepherd of governance and the parent entity of GPU Finance Ltd. USD.AI Foundation is also the current approved Tokenizing Agent for GPU loans. Permian Labs is the technical and operational service provider — the team that built the original protocol and continues to provide engineering, deal origination, and operational services.Why is my hardware being monitored by Aravolta?
Aravolta's real-time hardware monitoring is a standard component of every USD.AI loan. It provides the protocol with ongoing visibility into collateral health (usage, uptime, and location) throughout the life of the loan. This is required as part of the underwriting and servicing infrastructure, not optional.What is the role of Wilmington Trust in my loan?
Wilmington Trust acts as the independent Escrow Agent, holding your loan proceeds in a segregated sub-account until hardware is installed, verified, and all escrow conditions are met. They provide a neutral, regulated custody layer between capital commitment and fund disbursement.What is a bridge lender and do I need one?
A bridge lender provides short-term gap financing between your purchase order and the permanent USD.AI debt takeout. Not all borrowers require a bridge — it depends on your hardware procurement timeline and equity structure. The USD.AI team will advise on whether a bridge is needed during the underwriting process.1. **Available USDai is calculated:** This is **USDai** held in the vault that is not actively deployed in loans or reserved for imminent loan funding 2. **Queue is processed FIFO:** Redemption requests are serviced in the order they were submitted (first-in, first-out) 3. **Full USDai release:** The protocol releases all available free **USDai** to service the queue. There is no throttling or partial release mechanism 4. **Scenario A—Sufficient USDai:** If available **USDai** covers all queued redemptions, every request in the queue is fulfilled in full 5. **Scenario B—Insufficient USDai:** If available **USDai** is insufficient to cover all queued redemptions: 1. Requests are fulfilled FIFO until **USDai** is exhausted 2. Partially fulfilled requests receive their partial amount; the remainder carries forward 3. Unfulfilled requests carry to the next 30-day epoch 4. No priority is given except queue position #### Critical Constraints The protocol does not prematurely terminate or liquidate active GPU loans to satisfy redemptions. Loans run to maturity or scheduled paydown. This means: * During periods of high utilization (most capital deployed in loans), available cash may be limited * Redemption queues may extend across multiple epochs during high-utilization periods * Users cannot force immediate liquidity from the protocol #### QEV A Queued Redemption Engine with auction-based priority (see: [QEV](/depositor/susdai/queue-extractable-value)) is planned but not yet implemented as of April 2026. QEV will allow users to bid for priority in the redemption queue, providing a mechanism for time-sensitive exits at a cost. Implementation timeline and specifications are not finalized.
# Queue Extractable Value Queue Extractable Value is a novel DeFi Primitive for Long-Dated Redemptions and Low-Liquidity Collateral ## Introduction to Queue Extractable Value (QEV) QEV is a DeFi primitive designed to address liquidity challenges associated with long-dated redemptions and low-liquidity collateral within the USD.AI protocol. By introducing a market-driven mechanism for pricing and sequencing redemptions, QEV enables depositors to access liquidity more efficiently while mitigating the risks of illiquid assets and extended lockup periods. This section provides an in-depth explanation of QEV’s purpose, mechanics, and implementation within USD.AI, focusing on its role in optimizing capital efficiency for amortizing assets such as high performance compute hardware loans. ## Motivation and Background In traditional DeFi systems, liquidity is often assumed to be readily available through automated market makers (AMMs) or secondary markets. However, assets with long maturities or low liquidity —such as tokenized real-world assets (RWAs) or fixed-income instruments — present unique challenges. Rigid redemption mechanisms can lead to liquidity mismatches, forcing participants into disorderly exits via secondary markets at steep discounts, as observed in events like the [USDO++ depeg](https://leviathannews.substack.com/p/collateral-damage-usd0-depeg-leaves?r=1yj9r\&utm_campaign=post\&utm_medium=email\&triedRedirect=true). These mismatches echo historical financial crises, such as the 2023 regional banking crisis, where liquidity constraints, rather than asset quality, precipitated systemic instability. The USD.AI protocol addresses these issues by integrating QEV as a core mechanism to dynamically price liquidity and manage redemption queues. QEV is inspired by Flashbots’ MEV-Boost (or proposer-builder separation) design. Just as Flashbots abstracted away MEV extraction from miners and validators by introducing a structured market for transaction inclusion, QEV applies the same principle to redemption sequencing in loan repayments for amortizing assets. Instead of treating liquidity constraints as a passive problem, QEV pre-solves the issue by embedding an auction-based prioritization mechanism directly into the system at launch, integrating it seamlessly into the cash flow & loan repayment stream. A transparent and demand-driven market determines queue positioning, preventing opaque or unfair liquidity bottlenecks. Passive stakers also benefit, as queue priority is priced into an open auction model rather than being dictated by rigid withdrawal rules. This makes liquidity access more flexible and market-efficient, while still maintaining predictable “amortization” epoch schedules. By defining Queue Extractable Value as an expected problem to solve for, QEV aligns liquidity optimization with the native constraints of long-maturity/amortizing assets, ensuring structured, scalable and frictionless capital deployment & withdrawal. ## Mechanism Design ### Amortization as "block production"
What is USDai and sUSDai? What’s the difference?
**USDai** is a synthetic dollar token backed by short dated Treasury bills, cash and cash equivalents. **sUSDai** is the staked, yield-bearing version of USDai. Staking USDai mints sUSDai, which accrues yield represented through the exchange ratio between USDai and sUSDai. * **USDai** = liquid, non-yielding, eligible for rewards * **sUSDai** = staked, yield-bearing, withdrawable after an unstaking period, eligible for rewardsHow do I get USDai or sUSDai?
* **USDai** can be minted on the USD.AI app atWhat does it mean to redeem USDai?
Redeeming means burning USDai directly via the protocol’s smart contracts to withdraw stablecoin (e.g., PYUSD). This is the protocol-native exit path and provides near-instant conversion with no exchange rate impact. You can redeem USDai atWhat does it mean to swap USDai?
Swapping USDai means exchanging it for another token (e.g., USDC or USDT) via a liquidity pool on a DEX. This provides near-instant conversion, but the rate depends on current market conditions and pool liquidity.What are the token contracts?
* USDai: 0x0A1a1A107E45b7Ced86833863f482BC5f4ed82EF * sUSDai: 0x0B2b2B2076d95dda7817e785989fE353fe955ef9\ View View on browser: * [Arbitrum USDai](https://arbiscan.io/token/0x0A1a1A107E45b7Ced86833863f482BC5f4ed82EF) * [Plasma USDai](https://plasmascan.to/token/0x0A1a1A107E45b7Ced86833863f482BC5f4ed82EF?type=erc20\&chainid=9745) * [Base USDai](https://basescan.org/token/0x0A1a1A107E45b7Ced86833863f482BC5f4ed82EF) * [Arbitrum sUSDai](https://arbiscan.io/token/0x0B2b2B2076d95dda7817e785989fE353fe955ef9) * [Plasma sUSDai](https://plasmascan.to/token/0x0B2b2B2076d95dda7817e785989fE353fe955ef9?type=erc20\&chainid=9745) * [Base sUSDai](https://basescan.org/token/0x0B2b2B2076d95dda7817e785989fE353fe955ef9)Where can I buy USDai/sUSDai?
[app.usd.ai](https://app.usd.ai)What happens if my wallet is hacked or compromised? Can the team stop or reverse it?
No. The protocol cannot pause, freeze, reverse, or redirect funds for individual wallets. All contracts execute strictly based on **current on-chain ownership and predefined rules**, and do not distinguish between an original user and a new holder. This means the team cannot intervene in cases of lost keys, compromised wallets, or unauthorized transfers.Where does USD.AI’s yield come from?
USD.AI's yield comes from GPU backed loans and Treasury bills.How do I unstake sUSDai?
1. Navigate toHow long is the unstaking period?
Redemptions are processed in **fixed windows every 30 days**, so your actual wait time will depend on when you submit your request relative to the next window.Why is the unstaking period variable?
USD.AI batches redemptions every 30 days. * If you unstake 1 day before the redemption window, your redemption will be available in 1 day. * If you unstake 15 days before the redemption window, your redemption will be available in 15 days. In all cases, redemptions are subject to redemption liquidity.Is there a withdrawal queue? Where does instant liquidity come from?
Yes, there is a defined redemption mechanism with:\ • A limited instant liquidity buffer (visible on-chain)\ • Additional redemptions handled via the protocol’s standard redemption flow The instant liquidity is pre-funded protocol liquidity.How does USDai redemption actually work?
Redemption is governed entirely by on-chain contracts with predefined rules. There is no discretionary approval, no manual intervention, and no ability for the team to selectively process or block redemptions. If redemption conditions are met, the transaction is processed.Why are there fluctuations in USD.AI TVL?
USDai and sUSDai holders can mint and redeem at will.What is the best bridge to move USDai or sUSDai between chains?
The official bridge is available directly on the USD.AI app:What is Allo™?
Allo™ is USD.AI’s rewards system designed to reward ecosystem participation. Read more about it on the ICO [blog post.](https://usd.ai/stories)\ \ Allo™ is represented visually by this logo:How can I earn Allo™?
You can earn Allo™ by participating in the USD.AI ecosystem through: * Buy and hold USDai or sUSDai * Stake USDai * Provide liquidity (LP) * Participate in DeFi integrations * Refer others using your unique link (you earn 10% of the Allo™ they generate from eligible actions) Check out the [Allo sheets](https://docs.google.com/spreadsheets/d/1lI8-9RrVP-FcmlUytJG1x8yIg-9IZMn1b_t9PqRAzGQ/edit?gid=1294412414#gid=1294412414) for more details.What actions qualify for Allo™?
Check the [Allo Sheets](https://docs.google.com/spreadsheets/d/1lI8-9RrVP-FcmlUytJG1x8yIg-9IZMn1b_t9PqRAzGQ/edit?gid=1294412414#gid=1294412414) for a full list of eligible activities. Bonus multipliers may apply during special campaigns or promotions.How often do Allo Points update?
Points update every \~1 hour. Any change in holdings is reflected in the next cycle.If I transfer tokens to a new wallet, will points start accumulating in the new one?
Yes, but only on the next 1h update cycle. The old wallet stops earning and the new wallet starts earning.How do multipliers work when I lock or transfer locked-YTs among different wallets?
There are two factors that determine a user's Allo Rate (or multiplier) for locked-YTs 1. **Rate Decay** - Locked YT Allo Rates decrease over time, so every deposit will use the current multiplier, which you can find atCan I move USDai to another wallet but keep points in the original?
Points earned stay in the original wallet and cannot be transferred. If you move USDai then the new wallet will start earning from that point forward.Why are Allo multipliers changing?
Multipliers are adjusted for a variety of reasons (i.e. direct liquidity where it’s needed). These changes are always announced publicly ahead of time, and are always visible on the [Allo Sheet](https://docs.google.com/spreadsheets/d/1lI8-9RrVP-FcmlUytJG1x8yIg-9IZMn1b_t9PqRAzGQ/edit?gid=1294412414#gid=1294412414) for the latest multipliers.I can't see my tokens in my wallet, what do I do?
You will need to add a custom token, which differs for each wallet and add the contract address for the token you would like to add. You can find all of the relevant contract addresses [here](https://docs.google.com/spreadsheets/d/1lI8-9RrVP-FcmlUytJG1x8yIg-9IZMn1b_t9PqRAzGQ/edit?gid=1294412414#gid=1294412414) in the `Contract` column.Do I earn yield and Allo Points during the unstaking period?
**Yield:** Yes. Your sUSDai continues to earn yield **until the scheduled unstaking date**. Can check here:Are Allo points wallet-based or email-based?
Allo points and alignment are wallet-based. Emails are only used for UI or communication purposes and have no bearing on allocation, eligibility, or alignment.Does USDai earn yield?
**No.** USDai is not a yield-bearing token. However, it earns Allo™ and other partner incentives through ecosystem activity and participation.What yield does sUSDai earn?
sUSDai earns yield from GPU-backed loans and Treasury bills.How is the yield delivered when holding sUSDai?
Yield accrues to via the exchange ratio between sUSDai and USDai.Why does APR for YT positions look “inflated,” especially near maturity?
APR shown on Pendle and dashboards rises as maturity approaches because YT value trends toward 0. This makes any remaining rewards divided by a very small denominator → APR spikes. “The closer to maturity, the higher the APR displayed will be pretty meaningless. What matters is IY(Implied Yield), true economic cost of entering YT.”Why is Pendle APY different from the APY shown on USD.AI’s dashboard?
Pendle uses a backward-looking formula based on realized yield over a sample period. USD.AI’s dashboard APY shows real-time yield, not historical averages. Thus, the numbers will always differ.What is the correct way to calculate “earnings” from YT?
APR should be calculated as: **APR = rewards / YT notional (the yield you're entitled to).** If you divide by the market price, APR looks unrealistically high, especially near maturity, because YT prices naturally fall toward zero.Do YTs for USDai go to zero at maturity?
**Yes. YT goes to zero at maturity.**\ YT only gives you the right to earn yield **until** the maturity date.\ Once that date arrives, there is **no more future yield to claim**, so the YT has no remaining value.Does PayPal’s 4.5% incentive apply to PT holders?
Not directly. PayPal’s 4.5% incentive is applied at the **protocol level**, not paid out separately to PT holders. As incentives contribute to the protocol’s overall yield, they are **gradually reflected in the implied APY and PT pricing through the market**, rather than being distributed as a standalone reward to PT holders.Does locking YT earn Pendle-side APY or USDai-side APY?
YT earns Pendle yield, not USDai dashboard yield.\ YT ≠ holding USDai or sUSDai, so holders benefit from Pendle yield mechanics.Where/How do I claim yield from my locked YT?
You don’t need to claim it manually.\ Yield from locked YT is **automatically distributed to lockers in batches (about every 20 days)**. When a distribution happens, the rewards are sent to your wallet.If I lock my YT USDai from Pendle into the USDAI Lock YT program, do I still receive Pendle yield?
Once you lock your YT into the USDai **Lock YT program**, you **stop receiving any yield on Pendle**. All yield from your locked YT is instead **accumulated inside the USD.AI's Lock YT contract** and then **automatically distributed** to your wallet. Distributions happen in **batches roughly every 20 days**, and the yield is **sent directly to your wallet—no manual claiming needed**.How do multipliers work when I lock or transfer YTs among different wallets?
There are two factors that determine a user's Allo Rate (or multiplier) for locked-YTs 1. **Rate Decay** - Locked YT Allo Rates decrease over time, so every deposit will use the current multiplier, which you can find atHow yield was calculated?/Is the yield amount correct? I think I received less than expected.
{% hint style="info" %} * **Yield / APY is NOT fixed.** The displayed APY is an estimate and can change over time depending on yield conditions and when rewards are claimed. * **Allo™ rate IS locked per deposit**. Once you lock YTs, your Allo™ earning rate is fixed for that deposit and does not change. {% endhint %} Yield is not calculated using a fixed APY or a simple deposit × days formula. Instead: * Yield was claimed on-chain at a specific block * Rewards were distributed pro-rata based on time-weighted locked YT ownership From deposit start to the claim block, every minute you held locked YTs counted equally toward your share of total yield. For example: *1 locked YT for 20 days = 20 locked YTs for 1 day* Because yield rates fluctuate and rewards are claimed at a specific point in time, the effective APY you experience may differ from what you initially saw. Additionally, 5% of yield / points from Pendle YT markets go to the Pendle Treasury, which is standard across all Pendle markets. If this still doesn’t explain your payout, please open a support ticket via @usdai\_support\_bot for individual review.How many loans are live?
You can check can the status of all the loans on the “Reserves” page of the USD.AI app [https://app.usd.ai/reserves ](https://app.usd.ai/reserves)Why aren't there more loans?
The loan process can take as little as a few days or as long as a few months depending on its complexity and in these early stages, the protocol is being more prudent to ensure users and USD.AI is not negatively impacted. The 2 main stages of a loan are: 1. Underwriting = evaluating business, assets, legal, etc 2. Install = receiving hardware, installing, verifyingGPUs depreciate fast. How is that risk handled?
See [Risks & Mitigants](/usdai/risks-and-mitigants) section| Column | Description |
|---|---|
| Collateral | The asset(s) securing the loan (e.g., NVIDIA B300s [20] — x20 Servers) |
| Loan Status | The current state of the loan (see statuses below) |
| Principal | The original loan amount borrowed |
| APR | Annual Percentage Rate applied to the loan |
| Payment Due | The date or frequency of the next payment |
| Payment Amt | The dollar amount due for the current payment period |
| Action | View Borrow or View Payment depending on loan status |
| Strategy | Risk | Description |
|---|---|---|
| Basic | 1 | Holding USDai or sUSDai |
| Auto | 2 | Depositing into a curated LP/MM vault (via concrete.xyz) |
| Boost | 2 | Providing Pendle liquidity (via pendle.finance) |
| Max | 3 | Buying Allo via YT tokens (via pendle.finance) |
| Lock | 3 | Locking YT tokens for boosted Allo |
| NFT Function | Applicability to Participation NFT | Notes |
|---|---|---|
| Routing Token | Yes | The Participation NFT is minted by the Protocol and deposited directly into the sUSDai vault, representing the pro rata claim to loan cashflows. It routes yield from the borrower's onchain wallet through the automated payment waterfall to sUSDai holders — the NFT's presence in the vault is what technically enables the distribution logic to fire. |
| Evidence of contractual participation | Yes | The Onchain Record (the authoritative lender register) tracks each lender's share of the loan, principal outstanding, interest accrued, and payment status. The Participation NFT is the onchain instrument that represents a lender's position in that register. It does not create the contractual right — the executed legal documents and SPV structure do — but it is the tamper-evident, publicly verifiable evidence that a participation exists and is in good standing. |
| Record of payment right | Indirect | The Participation NFT sits inside the sUSDai vault, which captures yield (yield on GPU loans plus T-bill yield or PYUSD incentives on idle reserves) and reflects it in the sUSDai exchange rate. The NFT's lifecycle — mint on loan closing, vault-lock on default (unitl sale proceeds compensate the position), nonfucntional artifact when the Agent deposits sale/insurance proceeds — tracks the existence and status of the underlying payment stream. When the NFT is live and unfrozen, the payment right is active. The NFT does not itself confer the right to sue for payment (the legal docs do that), but it is the onchain record that payments are due and flowing. |
| Transfer Instrument | Limited | The Participation NFT is deposited into the sUSDai vault at issuance — it does not circulate freely. What does transfer is sUSDai itself, which is a fungible ERC-20 token that can be held, traded, or composed into other onchain products. So the NFT provides the economic exposure that makes sUSDai transferable, but the NFT itself is vault-locked. |
# Audits {% hint style="info" %} Live Bug Bounty:
| Contract | Address |
|---|---|
| CHIP | 0x0C1c1C109FE34733fca54b82d7B46B75CFb71F6e |
| sCHIP | 0x0D2d2D20962F2468566F4D1a4DdeB482915C4D4A |
| USDai | 0x0A1a1A107E45b7Ced86833863f482BC5f4ed82EF |
| sUSDai | 0x0B2b2B2076d95dda7817e785989fE353fe955ef9 |
| USDai OAdapter | 0xffA10065Ce1d1C42FABc46e06B84Ed8FfEb4baE5 |
| sUSDai OAdapter | 0xffB20098FD7B8E84762eea4609F299D101427f24 |
| OUSDaiUtility | 0x24a92E28a8C5D8812DcfAf44bCb20CC0BaBd1392 |
| Price Oracle | 0xd40a5298c6fCeD81eB5da8bB1F9328b16f741EBc |
| Loan Router | 0x0C2ED170F2bB1DF1a44292Ad621B577b3C9597D1 |
| Deposit Timelock | 0x0D710CC05f34d2eaD9fbA3c78d53d76a0623c9F8 |
| Bundle Collateral Wrapper | 0x80E3146FB2328fE1b79f92F5a3a6bF35515AEe37 |
| Simple Interest Rate Model | 0xEA0eae46bC15cd975F0545ba35584D96c7b35A1e |
| Amortized Interest Rate Model | 0xe01520FD4F249efa4d905F60b6b54E2ade6fA18D |
| Base Yield Escrow | 0x9Ddfd49AC4689CF894203794d792dcB38E4b1A9E |
| Timelock Controller | 0x0EEC1EE03ADD82342a6ac68A9C5cf62CB2398221 |
| Chip Governor | 0x0DDC1DD03C58E425f96567679b52F349dB847b26 |
| Contract | Address |
|---|---|
| CHIP (OFT) | 0x0C1c1C109FE34733fca54b82d7B46B75CFb71F6e |
| USDai (OFT) | 0x0A1a1A107E45b7Ced86833863f482BC5f4ed82EF |
| sUSDai (OFT) | 0x0B2b2B2076d95dda7817e785989fE353fe955ef9 |
| CHIP OAdapter | 0xffC1002994B1e9A744036d0abDAefe8356B7cF4e |
| USDai OAdapter | 0xffA10065Ce1d1C42FABc46e06B84Ed8FfEb4baE5 |
| sUSDai OAdapter | 0xffB20098FD7B8E84762eea4609F299D101427f24 |
| Contract | Address |
|---|---|
| CHIP (OFT) | 0x0C1c1C109FE34733fca54b82d7B46B75CFb71F6e |
| USDai (OFT) | 0x0A1a1A107E45b7Ced86833863f482BC5f4ed82EF |
| sUSDai (OFT) | 0x0B2b2B2076d95dda7817e785989fE353fe955ef9 |
| CHIP OAdapter | 0xffC1002994B1e9A744036d0abDAefe8356B7cF4e |
| USDai OAdapter | 0xffA10065Ce1d1C42FABc46e06B84Ed8FfEb4baE5 |
| sUSDai OAdapter | 0xffB20098FD7B8E84762eea4609F299D101427f24 |
| Contract | Address |
|---|---|
| USDai (OFT) | 0x0A1a1A107E45b7Ced86833863f482BC5f4ed82EF |
| sUSDai (OFT) | 0x0B2b2B2076d95dda7817e785989fE353fe955ef9 |
| USDai OAdapter | 0xffA10065Ce1d1C42FABc46e06B84Ed8FfEb4baE5 |
| sUSDai OAdapter | 0xffB20098FD7B8E84762eea4609F299D101427f24 |
| Contract | Address |
|---|---|
| CHIP (NTT) | chipCAT7vi5CZtbZsn9z7iMPXvFwyAnKz3QFu8XVuHm |