Protocol Architecture

When you mint USDM, your USDC doesn't sit idle. It's deployed into a delta-neutral portfolio on Hyperliquid. Here's the plain-language flow.

The flow, at a glance

1. You deposit USDC → the Monetrix Vault receives it.

2. The vault buys spot assets (e.g. BTC, ETH) as backing.

3. The vault opens short perpetual positions equal to the spot, so price moves cancel out.

4. The protocol earns funding, lending interest, maker rebates, and optional HLP returns.

5. Earnings flow into sUSDM's value: if you've staked, your sUSDM becomes worth more USDM.

Who's managing what

All of the above happens inside on-chain contracts on Hyperliquid. No off-chain server, no custodian, no manual operator. The two contracts you interact with directly:

• MonetrixVault: handles mint, redeem, and the protocol's positions.

• sUSDM: handles staking, unstaking, and yield distribution through its exchange rate.

Everything else (rebalancing, ADL defense, HLP allocation) runs automatically from contract logic.

What that means for you

• You can verify the protocol's position health on-chain at any time. No "trust us" required.

• If Hyperliquid itself is up and functioning, the protocol can function. There's no third-party exchange in the path.

• The worst-case failure mode is a Hyperliquid-level issue or a smart contract bug, both of which are visible on-chain.

For the mechanics of how yield is generated, see Delta-Neutral Strategy.