Savings YU Mechanism

Overview

Savings YU (sYU) is the native yield-bearing token within the Yala Protocol, designed as the foundation of its sustainable yield infrastructure. When users deposit YU, the stable settlement asset of Yala, into the Yala Savings Pool, they receive sYU in return.

Over time, the protocol continuously allocates a portion of its system-wide revenue, which comes from stability fees, cross-chain bridge fees, liquidity provisioning, and other protocol income, into the Savings Pool. This mechanism ensures that the price of sYU increases monotonically relative to YU, representing an ever-growing claim on protocol yield and reflecting the expanding value captured by Yala’s ecosystem.

The sYU design bridges capital efficiency and user simplicity, allowing participants to earn passive income while preserving full liquidity and interoperability within the broader DeFi ecosystem. In essence, sYU serves as the interest-bearing wrapper for YU, seamlessly combining yield accrual with composable utility across multiple chains.

Why sYU

The sYU mechanism is designed to simplify yield participation and enhance composability across the DeFi ecosystem. It allows users to earn sustainable on-chain yield effortlessly while supporting deep integration with other DeFi protocols.

🔹 Simplified Yield Access

• Users can earn yield simply by holding sYU — no need to manually claim or compound rewards.

🔹 Automated Compounding

• All accrued yield is automatically reflected in the exchange rate between sYU and YU. Users’ balances remain constant while value appreciates over time.

🔹 DeFi Composability

• Integrations: sYU can be used as collateral in other protocols to borrow assets, providing both yield and liquidity.

• Liquidity Incentives: sYU’s underlying yield and stable growth attract liquidity providers and enhance DeFi integrations (e.g., Pendle-like yield splitting).

🔹 Protocol Revenue Alignment

• The Savings Pool distributes rewards at a fixed emission rate, not a fixed ratio.

• Unclaimed rewards accumulate in a pending reward pool, strengthening Yala’s revenue base and supporting token economics.

Mechanism Design

The Savings Pool is implemented using the ERC-4626 Tokenized Vault Standard, which ensures:

• Free deposits and withdrawals (no fees, now or in the future)

• Compatibility with existing DeFi vault integrations

• Accurate accounting of share-based yield accumulation

Token Economics

sYU Price Formula

The price of sYU increases as the pool accumulates protocol rewards, reflecting users’ earned yield automatically.