How csUSDL works

This section explains how funds flow through the system and how csUSDL steadily grows in value over time.

Introduction

csUSDL is a yield-bearing ERC-4626 token that accrues value through real-world interest (T-Bills via USDL) and onchain lending (via Morpho). It is designed to be permissionless, transparent, and easy to integrate across DeFi.

---

Capital Flow

Here’s what happens when a user mints csUSDL:

1. Starter Asset User can start with any asset and swap it to USDL on Cowswap.

2. Wrapping to wUSDL USDL is wrapped into wUSDL — a non-rebasing, ERC-20 token required for compatibility with DeFi protocols like Morpho.

3. Vault Deposit wUSDL is deposited into the csUSDL ERC-4626 vault. In return, users receive csUSDL tokens representing their proportional share.

4. Lending via Morpho Blue The vault supplies wUSDL to a Morpho market, where it is lent to borrowers against overcollateralized positions using blue-chip assets like wstETH and cbETH.

5. Yield Accrual Vault value increases daily from:

   • Daily yield from Paxos’s USDL (T-Bills)

   • Real-time lending interest from Morpho

   • Additional rewards in MORPHO and SHIFT tokens

   Yield is reflected in the rising share price (convertToAssets()), not in token balance.

---

Roles

Partner	Role
Paxos	Issuer of USDL, manages T-Bill reserves, regulated by FSRA (Abu Dhabi)
Morpho	Leading lending protocol for onchain lending yield generation
Coinshift	csUSDL distributor, fee recipient, and SHIFT issuer
Steakhouse	Vault curator and risk manager

---

Asset Structure

Token	Description	Yield Source	Behavior
USDL	Paxos-issued stablecoin	RWA (T-Bills)	Rebased daily
wUSDL	Non-rebasing wrapper for USDL	RWA (T-Bills)	Accrual token
csUSDL	Coinshift vault token (ERC-4626)	RWA + DeFi Lending Yield + Morpho and SHIFT rewards	Accrual token

---

ERC-4626 Mechanics

csUSDL uses the ERC-4626 standard to abstract away the complexity of yield tracking and accounting:

• Accrual token: The price of the asset grows in your wallet as the underlying position earns yield

• Daily compounding: T-Bill and lending yield accrue continuously

• Interoperable: Designed for seamless use across DeFi

---

Oracle Structure

The value of csUSDL is calculated using two layers of ERC-4626 pricing:

1. csUSDL → wUSDL Calculated via convertToAssets() on the csUSDL vault

2. wUSDL → USDL Calculated via Steakhouse’s custom ERC4626Feed oracle, reviewed by Morpho and audited by Spearbit (in progress)

3. USDL → $1.00 Peg is enforced onchain via Morpho protocol and offchain via monthly reserve attestations by Paxos.

Example: 1.00 csUSDL = 1.01 wUSDL = 1.02 USDL = $1.02

---

Up-Only Share Price

csUSDL does not support redemptions below its underlying asset value. Since both T-Bill interest and lending yield are continuously added to the vault, the token’s share price only moves in one direction: up.

There are no rebases, no staking requirements, and no manual reinvestment. Yield simply accrues into the token itself.