USD+ is a fully collateralized, yield-generating stablecoin developed by Overnight Finance. It is designed to be pegged 1:1 to USDC while providing holders with passive income through a daily rebase mechanism. The yield is generated from a portfolio of automated, low-risk Decentralized Finance (DeFi) strategies. USD+ integrates into the broader DeFi ecosystem as a stable asset for lending, liquidity provision, and yield farming, aiming to combine the stability of the U.S. dollar with the efficiency of on-chain finance. ^{[1] [2]}​

Overview

USD+ was created by Overnight Finance to function as a capital-efficient, yield-bearing stablecoin. Its primary purpose is to allow users to earn passive income on their stablecoin holdings without active management. The project operates on the principle that idle money should be productive, encapsulated in the tagline "Your money shouldn’t sleep." ^[1]​

The stablecoin is designed to maintain a stable value pegged to the U.S. dollar by being fully collateralized with assets that are immediately convertible into USDC. This structure aims to provide predictable value in the volatile cryptocurrency market. The yield distribution model is a key feature, utilizing a daily "rebase" that adjusts the quantity of USD+ tokens in a holder's wallet. This mechanism allows earnings to be reflected as an increase in the token balance rather than a change in the token's price, providing a transparent way to track profit and loss. ^{[2] [3]}​

Within the DeFi ecosystem, USD+ is used as a foundational asset for various financial activities. Its stability makes it suitable for yield farming, where users can stake it in protocols to earn rewards without exposure to the price volatility of other crypto assets. It is also used for providing liquidity on decentralized exchanges (DEXs), lending on platforms like Aave, and as collateral for borrowing other digital assets. By providing a stable, liquid medium of exchange, USD+ facilitates more fluid trading and supports a wide range of on-chain financial applications. ^{[2] [3]}​

Core Mechanism and Technology

Collateralization

USD+ is fully backed by a portfolio of liquid, yield-generating DeFi assets that are convertible to USDC on demand. The protocol's commitment to 100% collateralization is a cornerstone of its stability, ensuring that an equivalent value of underlying assets backs every USD+ token in circulation. This structure is intended to maintain user confidence and support the 1:1 peg with USDC. The collateral is actively managed and deployed in various DeFi strategies to generate yield. ^{[2] [3]}​

Rebase Model

USD+ employs a rebase mechanism to distribute yield to its holders. Unlike typical stablecoins where yield must be actively claimed or is reflected in a fluctuating price, USD+ automatically adjusts the number of tokens in a user's wallet daily. This process allows holders to earn passive income simply by holding the token. ^[1]​

• Positive Rebase: When the underlying collateral's value grows to be greater than 100% of the circulating USD+ supply's value, the protocol executes a positive rebase. The surplus value is distributed proportionally to all holders by increasing their token balance. This allows the price of each USD+ token to remain at its $1 peg. ^[2]
• Negative Rebase: If the value of the collateral portfolio falls below 100% of the circulating supply due to market conditions or strategy underperformance, a negative rebase can occur. In this event, the token balance in holders' wallets is reduced to bring the total value of USD+ back in line with the collateral value. This feature ensures that the asset's backing remains transparent, though it also means that yield is not guaranteed and losses are possible. ^[1]

The rebase system provides clear daily visibility into the performance of the asset. Holders can track their profit and loss directly by observing the change in their USD+ balance, simplifying investment management. ^[2]​

Yield Generation

The yield for USD+ is generated through a portfolio of proprietary, automated strategies described as "delta-neutral" and low-risk. The protocol prioritizes generating "real yield," which it defines as sustainable returns sourced from established DeFi protocols rather than from the inflationary emission of a native governance token. ^{[1] [2]}​

The strategies involve integrations with established DeFi platforms, including:

• Lending protocols such as Aave.
• Stable-to-stable liquidity pools.
• Liquidity provision on concentrated liquidity market makers like Uniswap V3.

The annualized percentage yield (APY) for USD+ is variable and depends on the daily performance of these collateral strategies. While the protocol targets an APY of 8-12%, actual returns can fluctuate and may be negative. For its suite of yield-bearing stablecoins, including USD+, the stated APY range is 5-12%. ^{[1] [3]}​

Peg Stability

The 1:1 peg between USD+ and USDC is primarily maintained through an arbitrage mechanism. The protocol allows for instant minting and redemption of USD+ against USDC, which creates an opportunity for arbitrageurs. If the market price of USD+ deviates from 1 worth of USDC, or by minting it for $1 and selling it for a premium on the market. This activity helps to guide the price back to its peg. The protocol can also utilize flash loans to perform arbitrage across its trading pools without deploying its own capital, further enhancing the efficiency of the peg-keeping mechanism. ^[3]​