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1. General & Product Overview

An automated, capital-efficient yield harvesting vault for USDT. The strategy employs algorithmic leverage looping via the sUSDD/USDT market on Morpho Blue, the USDD PSM (Peg Stability Module), and flashloans to maintain high APRs without AMM slippage.
You can monitor real-time performance and the 30-day strategy APR directly on the official L2Pass Vault UI.
The vault utilizes flashloans to execute a “looping” strategy within a single atomic transaction. It deposits sUSDD as collateral on Morpho Blue, borrows USDT, and converts that USDT back into sUSDD via the PSM to be re-deposited. This process creates an efficiently leveraged position that multiplies the underlying staking yield without manual intervention.
No. The sUSDD Recursive Strategy is designed for maximum flexibility. There are no lock-up periods, no withdrawal cooldowns, and no minimum allocation required.
The strategy is deployed on Ethereum Mainnet and currently accepts USDT (Tether) as the deposit asset.Note: The strategy has a TVL cap set by the Strategy Curator. Please contact the L2Pass team to discuss current strategy cap extensions.

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2. Yield, Rewards & Economics

  1. Organic sUSDD Staking: Base interest from the USDD Smart Allocator.
  2. Leveraged Spread: The difference between sUSDD yield and USDT borrow costs, multiplied by the vault’s leverage (1-11x).
  3. External Incentives: Additional rewards (such as Morpho or protocol incentives) distributed via Merkl.
Merkl incentives are programmatically integrated into the vault’s performance. They often subsidize the cost of borrowing USDT or provide a “boost” to the collateral yield, significantly increasing the Net APY during active campaigns.
Yes. The vault harvests rewards and reinvests them into the recursive position. Your lsUSDD tokens represent a proportional claim on these growing assets; as yield is earned, each share becomes redeemable for more USDT.
The strategy uses a “performance-first” model:
  • Management Fee: 0%
  • Performance Fee: 15% (applied only to generated yield)
  • Entry/Exit Fee: 0%
All APY figures displayed on the UI are net of fees. Standard Ethereum gas fees apply for deposit and withdrawal transactions.
Yes. Yield is variable and changes based on the sUSDD staking rate, the demand for USDT borrowing on Morpho Blue, and the availability of external incentives.

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3. Deposits, Withdrawals & Positions

Yes. There are no lock-ups. You can withdraw your principal and accrued yield whenever you choose.
After depositing USDT, you receive lsUSDD tokens. These are ERC-4626 vault shares that represent your ownership of the strategy’s assets.The yield is “baked into” the token value. This means the exchange rate of lsUSDD increases over time relative to USDT. When you withdraw, you redeem your lsUSDD for more USDT than you initially deposited.
Earnings and current position value can be tracked in real-time via the L2Pass Vault UI.
Yes. There are no lock-ups. You can withdraw your principal and accrued yield whenever you choose, subject to available liquidity in the Morpho market and PSM.
Upon withdrawal, your vault shares are burned (redeemed) for USDT. Because the strategy follows the ERC-4626 standard, the value of each share increases relative to the underlying asset as yield is harvested. Your final USDT payout includes your initial principal plus all accrued earnings.

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4. Risks & Safety

The strategy is fully transparent. You can audit the vault code and its interactions directly on Etherscan.
Yes. The vault architecture has undergone a comprehensive security review by Wake Arena. You can view the report here.
Yes. Because the strategy uses leverage, a significant de-pegging of USDD or sUSDD against USDT could trigger a liquidation. To mitigate this, the vault uses an Automated De-leveraging system designed to exit positions if the LTV approaches the liquidation threshold.
If the cost to borrow USDT on Morpho Blue exceeds the sUSDD staking yield, the strategy spread becomes negative. The vault includes an Automated Unwind trigger that exits the position if the spread remains negative to protect user principal.
The vault’s risk profile is anchored to the PSM (which offers 1:1 redemptions) rather than secondary market volatility. To mitigate PSM liquidity risk, we monitor USDT reserves 24/7. Alerts trigger if liquidity falls below 5x vault exposure, and an automated unwind is executed if it drops below 2x. Current PSM status can be verified at app.usdd.io/eth/psm.
No. Like most DeFi products, there is no insurance. Users should only deposit capital they can afford to lose and remain aware of the inherent risks of smart contracts and stablecoin pegs.

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