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A common question about mortgage-backed yield is whether your dollars eat the loss when the portfolio takes a hit. The USDX Whitepaper answered that question with a new design.
Losses route through a four-step waterfall, in strict seniority, before they can ever touch the peg.
T1 — RATES Safety Module
Staked RATES is slashed first. Stakers earn protocol fees and emissions in exchange for standing at the front of the line.
T2 — Stablecoin Staking Vault
A vault of supported stablecoins, drawn second. Depositors earn above-market stablecoin yield for accepting second-loss exposure — and while the waterfall is dormant, that capital works as peg-defense liquidity.
T3 — mUSDX Yield Absorption
Stakers give up yield, never principal. There's a hard floor under every mUSDX holder's base position.
T4 — New RATES Mint
Uncapped issuance, sold to refill reserves. Dilution of RATES holders is the final backstop and continues until the loss is fully absorbed.
Combined, the first-loss stack targets absorbing a ~30% portfolio-wide loss before existing RATES holders see unbounded dilution.
It's the same subordination structure credit markets have underwritten for decades — onchain, transparent, and with someone always paid to stand in front of you. That is why USDX is built to stay $1.
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