Level is a decentralized stablecoin protocol that issues lvlUSD, a yield-generating asset backed by USDC and USDT. It deploys reserves into lending protocols to generate and distribute yield through staking and tokenized vaults. ^[11]

Overview

Level is a stablecoin protocol that issues lvlUSD, a stablecoin backed entirely by USDC and USDT. Users can mint lvlUSD using these assets, which are then deployed in blue-chip lending protocols to generate yield.

Yield is distributed through an ERC-4626 staking mechanism. When lvlUSD is staked, it becomes slvlUSD, a token that accrues yield as its value appreciates over time. Both lvlUSD and slvlUSD are transferable and compatible with DeFi protocols that have integrated them.

Level uses audited and open-source smart contracts to manage reserves and minimize risk by relying exclusively on well-established lending platforms. Yield generation is transparent and verifiable on-chain. Compared to traditional lending protocol receipt tokens, lvlUSD offers broader integration with protocols such as Morpho, Pendle, Spectra, Curve, and LayerZero, aiming to improve utility and capital efficiency.

Products

lvlUSD

lvlUSD is a stablecoin fully backed by USDC and USDT, which are used in lending protocols to generate yield. It can be minted using only USDC and USDT, which comprise its reserves. Redemptions are currently permissioned, meaning they are subject to approval.

The reserves of USDC and USDT are deployed in blue-chip lending protocols, such as Aave, to generate yield. While all reserves are currently in Aave, plans are in place to diversify into other lending protocols, including Morpho. The receipt tokens from these protocols are wrapped to become yield-accruing assets, with a small portion restaked in Symbiotic. However, the restaking process is being phased out.

The lending yield generated is accumulated by Level and passed back to users. This yield is distributed to slvlUSD via the staking contract.

slvlUSD

slvlUSD is the yield-accruing version of lvlUSD, created by staking lvlUSD in a designated vault. Users receive slvlUSD to represent their share of the vault, which increases in value as yield accumulates from the underlying lending activity.

All lvlUSD reserves generate lending yield, but only staked lvlUSD, converted into slvlUSD, receives the distributed yield. As a result, slvlUSD typically accrues yield at a higher rate than the base lending yield. The yield rate for slvlUSD depends on the proportion of lvlUSD staked; fewer stakers result in higher returns per user and vice versa.

Unstaking involves burning slvlUSD in exchange for a proportional share of lvlUSD based on the total holdings in the contract. After initiating unstaking, users must wait seven days before withdrawing lvlUSD. This cooldown allows the protocol to retrieve collateral from lending platforms, which may have time-sensitive withdrawal constraints.

The cooldown mechanism also accounts for liquidity conditions in lending protocols. For instance, during periods of high utilization, borrowing rates increase to encourage loan repayments or liquidations, which helps restore available liquidity. The waiting period ensures the system can manage these dynamics without disrupting withdrawals.

slvlUSD follows the ERC-4626 token standard, which defines a structure for tokenized vaults that manage deposits, withdrawals, and yield. This standard improves compatibility across DeFi platforms, streamlines yield distribution, and enhances efficiency.

Under ERC-4626, users deposit lvlUSD and receive slvlUSD shares. When withdrawing, they redeem slvlUSD for lvlUSD plus any accumulated yield. The vault’s total assets grow as yield is generated and distributed, increasing the value of each share. The standard also reduces gas costs by avoiding redundant contract interactions and enables straightforward integration with other DeFi applications.

Level XP

Level XP is a system that tracks user contributions within the Level protocol. It serves as a metric for ecosystem participation.

XP can be earned by depositing approved assets into the XP Farm via the Level dashboard. Deposits of lvlUSD and Curve LP tokens are handled through a contract based on Ethena’s LP Staking Pool, while other assets are deposited through a contract modeled on Zircuit’s Restaking Pool. Both contract types are adapted for use on Level and are designed to allow users to maintain control of their funds. Users can withdraw their assets at any time, as administrators cannot access user funds.

Deposits are made through the Level application, and XP accumulation begins shortly after assets are deposited. Withdrawals can be made anytime without affecting the amount of XP earned.

Funding

Level raised additional venture capital to expand its stablecoin amid growing interest in yield-generating digital assets during declining crypto prices. Peregrine Exploration, the development firm behind Level, secured $2.6 million in a funding round led by existing investor Dragonfly Capital, with participation from Polychain. New investors included Flowdesk, Echo syndicates Native Crypto and Feisty Collective by Path, and angel investors Sam Kazemian of Frax and Albert Chon of Injective. This round followed a $3.4 million raise in August, bringing total venture funding to $6 million.

Partnerships

• LayerZero
• Polychain Capital
• Dragonfly Capital
• Aave
• Morpho
• Pendle