# API Reference
Source: https://docs.royco.org/api-reference
Programmatic access to Royco vault data.
The Royco vault API provides programmatic access to vault and market data.
**Vault API documentation → ([https://vault.api.royco.org/docs)](https://vault.api.royco.org/docs)**
# Deposits and Withdrawals
Source: https://docs.royco.org/deposits-and-withdrawals
#### Users are currently able to:
* **Permissionlessly Acquire/Dispose.** Buy or sell any vault or individual tranche through decentralized AMM pools. SLP can be acquired by providing ST share or stablecoin liquidity into their corresponding BPT E-CLP pool, and then depositing the resulting BPT into the SLP.
* **Direct Mint/Redeem Tranches.** Deposit the accepted asset into any individual ST, SLP, or JT market through the RoycoEntryPoint and receive the corresponding tranche token, or redeem it for the strategy base asset. ST can exit through the SLP, or has a primary exit option if a market hits its **Protected Exit Threshold**. If JT’s full balance is backing ST exposure (utilization at 100%), JT withdrawals are restricted until additional JT capital enters or ST capital exits. During an Observation Period, ST deposits and redemptions, JT deposits and redemptions, and SLP redemptions are blocked. SLP deposits remain available; multi-asset SLP deposits can only use the quote leg while ST deposits are disabled.
* **Direct Mint/Redeem Vaults.** Transfer accepted reserve assets (USDC for srRoyUSDC, wstETH for roywstETH) and receive an ERC-4626 share token whose exchange rate accrues yield over time; burn to redeem. Vault redemptions are processed via **30-day withdrawal epochs**: request enters the open epoch, epoch closes every 30 days, the vault sources liquidity from Senior Tranches over a \~2-day processing window, then funds are claimable. Subject to KYC/KYB.
#### Exit routes for SLP
Senior and Junior redemptions always exit in-kind. The SLP tranche can choose how to exit:
* **In-kind:** receive the LP position and any accrued senior shares directly.
* **Multi-asset:** unwind the LP position into its underlying constituents plus the quote asset.
* **Optimized:** the market takes whichever of the two routes fills more of the request.
***
*This document is provided for informational purposes only and does not constitute investment advice, a solicitation, or an offer to sell any securities or financial instruments. Participation in Royco products involves risk, including the potential loss of all capital deployed. Prospective participants should conduct their own independent due diligence and consult with qualified legal, financial, and tax advisors before making any investment decisions.*
# Frequently Asked Questions
Source: https://docs.royco.org/faq
Common questions about Royco's tranches, coverage, secondary liquidity, yields, and how to participate.
The Senior tranches have a structural first-loss buffer: JT capital absorbs all losses before ST is affected, up to the full coverage amount. However, this is not a guarantee of principal in the legal or insurance sense. If losses exceed the JT buffer, ST capital is exposed to the remainder. ST depositors may lose some or all of their capital. If a drawdown reaches the market's Protected Exit Threshold, ST can withdraw with the strategy base asset while JT may still have remaining capital.
The vault's independent curator makes all investment decisions: which yield sources to allocate to, at what coverage levels, and how to size positions. The Foundation does not direct specific allocations. The depositor chooses which vault or tranche to enter.
If a base asset suffers an exploit, the Royco market built on it will experience a loss. JT capital absorbs the loss first, up to the coverage percentage. If collateral losses exceed the remaining JT buffer, ST is exposed to the remainder. SLP has separate exposure through its market-making position, including its ST and quote-asset holdings. Diversification across multiple sources means a single exploit does not necessarily affect the entire vault, only the portion allocated to that specific source.
Vault withdrawals are processed through 30-day epochs. Requests enter the current open epoch, which is processed when it closes. A secondary market for vaults may provide an alternative exit path for immediate liquidity. Seniors can request a withdrawal at any time, settling after a queue of about a day. (During an Observation Period, withdrawals are locked until the market recovers, the term ends, or Protected Exit is triggered.) JT withdrawals are available when excess JT capital exists above the coverage requirement.
Royco has been deployed on Ethereum, Avalanche, Arbitrum, and Base. The srRoyUSDC vault operates across multiple chains, moving capital via Circle's CCTP to access the best available yield opportunities. The ETH-based vaults operate on Ethereum.
The curator is bound by a contractual standard of care and defined performance expectations. The Foundation can terminate the curator relationship for material breach, sustained underperformance attributable to curator decisions, failure to maintain risk controls, or unauthorized actions. On termination, the curator must cooperate in an orderly transition to a successor.
There is no fixed lock-up for Senior deposits at the tranche level. Vault withdrawals from srRoyUSDC and roywstETH are processed through **30-day withdrawal epochs**. Depositors should plan for up to 30 days between submitting a withdrawal request and being able to claim funds. Institutional depositors may face additional processing steps in the updated withdrawal flow. In markets with SLP enabled, SLP can be used as an alternative exit for immediate liquidity, but availability is not guaranteed. Junior capital may be restricted from withdrawing when it is actively backing Senior exposure at the minimum coverage level.
All protocol state: coverage ratios, yield rates, vault composition, fee accrual, and transaction history, is recorded on public blockchains and can be independently verified using any blockchain explorer. The protocol's smart contracts are published and can be reviewed by any party.
Royco raised a Series A in 2025 led by Electric Capital. Ecosystem partners have also raised from Coinbase Ventures, Hashed, Amber Group, and DCF God.
***
*This document is provided for informational purposes only and does not constitute investment advice, a solicitation, or an offer to sell any securities or financial instruments. Participation in Royco products involves risk, including the potential loss of all capital deployed. Prospective participants should conduct their own independent due diligence and consult with qualified legal, financial, and tax advisors before making any investment decisions.*
# For Issuers
Source: https://docs.royco.org/for-issuers
Vault providers & strategy managers
**Reach entirely new investor segments:** Liquidity or risk-sensitive users can access Senior, while yield-seeking users can access the Junior or SLP Tranches.
**DeFi composability:** Previously illiquid yield sources can now be distributed through liquid on chain vaults, opening up composability and TVL.
**Go Up the Duration Spectrum:** Freely offer assets with longer redemption periods. The SLP enables those who want a shorter duration or flexibility to allocate into your Senior Tranche.
**Native Liquidity:** Liquidity can be embedded directly into the asset, rather than existing as an external wrapper. This also improves capital efficiency by allowing the liquidity sleeve to actively earn yield and fees rather than sitting idle.
**Reduce slippage and unwind costs:** Liquidity comes from the SLP pool instead of vault withdrawals, improving position management.
**Capital Security:** When an issuer deposits into the junior tranche of their own market, they absorb losses before seniors do. The party who knows the asset best is choosing to stand in front of depositors. This deepens the buffer for senior holders, who will be more willing to accept a lower yield and lower the issuer's cost of capital.
**Issue Volatile Assets:** Coverage can stabilize a volatile asset, smoothing yield and making rates more predictable for LPs.
**Anytime Deposits:** Currently, users must wait for narrow vault deposit windows. If they miss them, this capital sits idle and can churn to competing assets. Royco enables continuous onboarding, allowing users to deploy capital into vaults at any time (in Perpetual state).
# For Liquidity Providers
Source: https://docs.royco.org/for-lps
Choose your yield. Get liquid, protected yield (Senior), high-yield (Junior), or market-making (SLP) exposure, all based on the same underlying strategy.
**Senior - Access Strategies with Liquidity:** Invest in duration strategies without the lockup. Receive protected exposure to the underlying yield without giving up flexibility.
**SLP - Access Higher Returns with a Buffer:** By combining Senior exposure with stablecoins, the SLP Tranche earns both the underlying yield and a liquidity premium. This can result in higher returns than the underlying while maintaining a risk profile similar to, or safer than, the underlying itself.
**Junior - Access the Highest Return:** The Junior Tranche takes the first loss in exchange for the highest yield of the three tranches. Royco's Observation Period means a Junior position is only marked down when a NAV drop is genuinely severe or sustained.
**Risk is quantified upfront:** Every market's contracts transparently define how stress events are handled, removing uncertainty around downside scenarios.
**Collateral/DeFi:** Royco tokens are fully composable, so they can be used in DeFi as collateral or to fix rates.
# Glossary
Source: https://docs.royco.org/glossary
Definitions of Royco terms: Senior, Junior, and SLP tranches, utilization, coverage, risk and liquidity premiums, observation period, and more.
**Senior Tranche (ST):** First-loss covered capital. Earns the base asset’s yield minus a risk premium paid to JT (for loss coverage) and a liquidity premium paid to SLP (for secondary liquidity). Backed by JT first-loss capital and exitable via the SLP pool or Protected Exit.
**Junior Tranche (JT):** First-loss capital co-invested in the same base asset as ST. Absorbs all losses first, in exchange for a risk premium paid by ST. Highest yield and highest risk of the three tranches.
**Senior Liquidity Provider (SLP):** Capital that provides secondary liquidity for ST by seeding an AMM pool of ST shares and a stablecoin. Earns a liquidity premium, trading fees, ST appreciation, and stablecoin yield, minus impermanent loss.
**Senior Vault (srRoyUSDC):** Managed USDC vault that allocates deposits across the Senior tranches of multiple Royco markets for diversified, coverage-backed senior yield. Curated by Dialectic.
**Royco ETH (roywstETH):** Managed wstETH vault. Posts wstETH as collateral, borrows USDC against it, and deploys the USDC into srRoyUSDC. Returns come from stETH staking rewards plus the spread between senior yield and borrow cost. Curated by Dialectic.
**Yield Distribution Model (YDM):** Royco uses separate YDMs for JT’s risk premium and SLP’s liquidity premium. Depending on the selected model, each premium may be fixed or determined by a utilization-sensitive curve.
**Coverage Utilization:** How close JT coverage sits to its required minimum floor. Drives the risk premium.
**Liquidity Utilization:** How close SLP secondary liquidity sits to its required minimum floor. Drives the liquidity premium.
**Coverage:** JT capital as a percentage of the JT + ST pool. Defines the maximum base-asset drawdown that can be absorbed before ST capital is affected.
**Risk Premium:** The share of Senior yield paid to JT in exchange for first-loss coverage. Sized by coverage utilization through the YDM.
**Liquidity Premium:** The share of Senior yield paid to SLP in exchange for providing secondary liquidity. Sized by liquidity utilization through the YDM, and paid as Senior Tranche shares that are progressively redeployed into SLP's liquidity position.
**Observation Period:** A per-market recovery window that may begin when an accounting sync observes a collateral drawdown absorbed by JT and leaves a recoverable JT loss. JT effective NAV is marked down during the period, but JT cannot redeem and subsequent collateral recovery restores the outstanding JT loss first. If the drawdown reverses within the window, no loss is realized; if it persists past the window (or breaches the Protected Exit Threshold), the loss is allocated to JT. During the Observation Period, direct ST redemptions, new JT deposits, and SLP redemptions are paused and 100% of yield routes to rebuilding JT's buffer. However, ST can still exit through the SLP pool. Window length is set per market and may be 0 days (immediate finalization).
**Strategy Base Asset (Base Asset):** The single underlying yield source a Royco market is built on. Both ST and JT capital are invested in it, and its returns and losses flow to the tranches according to the YDM.
***
*This document is provided for informational purposes only and does not constitute investment advice, a solicitation, or an offer to sell any securities or financial instruments. Participation in Royco products involves risk, including the potential loss of all capital deployed. Prospective participants should conduct their own independent due diligence and consult with qualified legal, financial, and tax advisors before making any investment decisions.*
# Governance and Fees
Source: https://docs.royco.org/governance-and-fees
Royco's per-market parameters and protocol fee structure.
#### Roles
**The Royco Foundation** is responsible for the protocol's governance and infrastructure, and deploying its smart contracts. Critical protocol changes (smart contract upgrades, authorization structure changes, or parameter changes that affect user positions) are subject to a timelock. The Foundation does not make investment decisions.
**The Curator** makes all investment decisions for a given vault: which yield sources to allocate to, coverage levels, position sizes, collateral management, and withdrawal processing. The curator operates on the vault's multisig with scoped permissions. It can allocate and rebalance within approved parameters, but cannot move funds to unauthorized addresses or alter protocol mechanics. The Foundation retains the ability to revoke curator access at any time.
**Depositor/User** selects which vault or tranche to enter based on their own objectives. Identity verification (KYC/KYB) is required before withdrawing directly from vaults. U.S. persons are not eligible to participate.
#### Permission Architecture
Vault assets are held in a Concrete Vault. The curator's operational permissions are scoped per vault and per operation: it can rebalance between approved markets, update NAVs, manage collateral positions, and whitelist depositors; but it has limitations on actions outside this scope. Funds cannot be routed to addresses outside the whitelist.
The Royco Foundation Multisig sits above this structure. It sets the permissions framework and manages protocol-level configurations. Critical changes (as defined above) are subject to a role-based delay.
#### Fee Structure
Fees are collected programmatically through an onchain fee mechanism:
| Product | Management Fee | Performance Fee | Fee on Yield Share (Risk Premium) |
| - | - | - | - |
| srRoyUSDC | 0% | 10% | 0% |
| roywstETH | 0% | 10% | 0% |
| Junior tranches | 0% | 0% | 0% |
| Senior tranches | 0% | 0% | 0% |
| LP tranches | 0% | 0% | 0% |
For swaps, LiFi route fees apply at a rate of 3 bps for stablecoins and 20 bps for assets not classified as stablecoins.
*Where applicable, performance fees are calculated on yield generated, defined as all income received by a vault minus borrowing costs. No fee is charged in periods where the yield is zero or negative. Fees are visible onchain.*
***
*This document is provided for informational purposes only and does not constitute investment advice, a solicitation, or an offer to sell any securities or financial instruments. Participation in Royco products involves risk, including the potential loss of all capital deployed. Prospective participants should conduct their own independent due diligence and consult with qualified legal, financial, and tax advisors before making any investment decisions.*
# How Royco Works
Source: https://docs.royco.org/how-royco-works
How Royco tranches a single yield source: JT provides loss coverage, SLP provides secondary liquidity, and ST receives protection/liquidity.
#### The Tranching Mechanism
Every Royco market begins with a single strategy base asset. Contracts govern how strategy returns and losses flow back to the different tranches.
The fundamental mechanism: **Junior capital provides first-loss coverage for Senior capital, while SLP provides liquidity.** The protocol enforces a minimum amount of JT capital (the Coverage Ratio) and SLP capital (the Liquidity Ratio), respectively, that must stand behind every dollar of ST deposits. If either minimum is not met, new ST deposits are not accepted and yield is redirected to JT and SLP to incentivize enough capital to come in and restore the proper ratio.
Both ST and JT capital are deployed into the same base asset. The difference is that JT also earns a risk premium for providing first-loss coverage, and in exchange, JT absorbs losses.
SLP is not directly deployed into the same base asset. Instead, it is deployed into a rate-scaled AMM pool made up of StT tokens and the market's configured quote asset. ST holders can use this pool as a secondary exit route, with the resulting price discrepancies creating arbitrage opportunities that maintain the pool’s peg.
**Pool Example**
Suppose a market is deployed on top of a USDC lending strategy yielding 8% annualized:
| | Deposits | APY | Source |
| - | - | - | - |
| Senior (ST) | \$8,000,000 | \~5% | Base Asset Yield − Risk Premium − Liquidity Premium |
| Junior (JT) | \$2,000,000 | \~13.5% | Base Asset Yield + Risk Premium |
| SLP | \$2,000,000 | \~11% | Liquidity Premium + (ST Appreciation \* ST Shares) + (Stablecoin Yield *\** Stable Shares) + Trading Fees − Impermanent Loss |
| Total | \$12,000,000 | | |
| Coverage | 20% | | \$2M JT / \$10M JT + ST |
| Liquidity | 25% | | \$2M SLP / \$8M ST |
Coverage is measured on the JT + ST pool: \$2M JT / \$10M (JT + ST) = 20% coverage. Coverage of 20% means JT can absorb up to a 20% drawdown on the \$10M pool before ST is affected.
Liquidity is measured against ST: \$2M SLP / \$8M ST = 25% liquidity. This sizes the SLP's market-making depth to an amount equivalent to 25% of Senior's value, in the pool as exit depth behind ST shares.
**Loss Scenarios**
![Liquidity Tranche Seniority Slp]()
JT absorbs any losses. ST and SLP are only exposed once JT's entire balance is consumed. Because the SLP’s assets are partially composed of ST shares, its exposure to losses in the base asset is similarly protected by the Junior buffer.
**Unlike JT and ST, SLP losses are path-dependent.** During a drawdown, ST holders sell into the pool, raising SLP's exposure to the senior asset. If the market recovers, this creates a profit: the SLP bought discounted ST shares that recover to full value. However, in a realized drawdown, the SLP suffers losses because it actively converted stablecoins into devalued ST shares.
#### Coverage Requirements
Royco enforces a **minimum coverage requirement** for each market. Coverage represents the maximum percentage drawdown the underlying can experience before ST capital is affected. It is a hard constraint: if coverage falls below the minimum, JT absorbs the loss and coverage is consumed. New ST deposits and Junior withdrawals will be paused until JT capital returns to the required level.
ST depositors are shielded by the JT buffer, and are able to exit via the SLP. The minimum buffer is smart-contract-enforced, so Seniors know the transparent, market-specific protection threshold.
**Coverage minimums are set per market** by pool creators. The minimum coverage requirement is calibrated individually for each market based on its individual risk factors.
#### Liquidity Requirements
Royco also enforces a **minimum liquidity requirement** for markets with liquidity functionality enabled. The liquidity requirement reflects the size of the AMM pool available for ST to exit into. If liquidity falls below the minimum, new ST deposits and SLP withdrawals will be paused, similar to the coverage mechanism.
#### How Yield Is Split
In every Royco market, the **Yield Distribution Model (YDM)** decides how base asset returns are divided between the tranches. Yield distribution between tranches works similarly to lending markets. Two premiums are paid out of ST yield: a Risk Premium to the JT and a Liquidity Premium to the SLP. The two are constrained together so that the **risk premium plus the liquidity premium never exceeds 100% of ST yield**.
#### **Coverage utilization → Junior's risk premium**
**Coverage utilization measures how much JT capital is currently backing ST exposure.** For example, if the market needs \$1 of JT coverage and there is exactly \$1 of JT capital, utilization is 100%. If there is \$2 of JT, it is 50%. When JT capital is scarce, more yield flows to JT to attract more first-loss capital. When JT capital is abundant, more yield flows to ST. The pool rebalances toward equilibrium based on where each side wants to deploy.
The protocol targets **90% utilization** as the equilibrium point:
* **Senior depositors** need the 10% buffer. At 100%, the market closes to new Senior deposits because there’s no Junior left to back them.
* **Junior depositors** need utilization high enough that their boosted yield is meaningful. At low utilization, Junior’s premium gets diluted across the pool and the risk isn’t sufficiently compensated. At 90%, Junior earns real extra yield, and the curve steepens aggressively above that point; so when coverage gets tight, new Junior capital is strongly incentivized to show up.
#### **Liquidity utilization → the SLP Tranche's liquidity premium**
Using the same model, liquidity utilization measures how much required secondary liquidity the SLP is providing. When secondary liquidity is scarce, more yield flows to the SLP through the liquidity premium in order to attract capital. When liquidity is abundant, more yield stays with the ST.
The same **90% target** applies, for the same reasons:
* **Senior depositors** need secondary liquidity so their shares remain tradable. At 100%, the SLP is exactly at its floor, and the market stops accepting new ST deposits to avoid exceeding available liquidity.
* **SLP depositors**: At low utilization, the premium fails to sufficiently compensate the capital commitment. There is a tail risk at exceptionally low utilization where SLP depositors may underperform the baseline Senior yield. However, at a healthy utilization, the SLP earns meaningful extra yield, with the curve steepening above that point to incentivize new market-making capital.
The liquidity premium itself is minted as ST shares, credited to the SLP's position, which are then periodically redeployed into the SLP's AMM pool as single-sided liquidity. This design ensures that SLP yield compounds rather than sitting idle.
**The Yield Curve**
Each market sets two yield curves. One sets JT's risk premium from coverage utilization, the other sets the SLP's liquidity premium from liquidity utilization. Each curve is defined by three points:
> * Y0: at 0% utilization
> * YT: at 90% (the target)
> * Y100: at 100%, the maximum spend
Each curve is bounded by a maximum spend, expressed as a % of Senior yield. The two curves' maximums combined never exceed 100% of Senior yield.
**Below 90%: essentially flat.** Y0 and YT are close together. When JT or SLP capital is plentiful, excess supply already dilutes their returns.
**Above 90%: steep.** Y100 is typically set notably higher than YT , meaning that as capital becomes scarce, the yield share ramps aggressively to attract new depositors. Y100 is set per market such that at 100% utilization, the resulting JT or SLP yield is attractive enough to draw in new capital.
**Self-Adapting Yield Curve Over Time**
Adaptive YDMs adjust their pricing curves to market conditions over time. When a tranche's utilization runs above target, its curve shifts up to attract more capital. When utilization sits below target, the curve shifts down. The further from 90%, the faster the adjustment. These shifts happen gradually, over days or weeks.
The result is a self-balancing system. If JT or SLP capital leaves, utilization rises for that tranche and the premium increases. If ST capital leaves, the opposite happens, allowing the market to find its own equilibrium.
**What Depositors See**
The APY shown on the interface is the trailing APY, the annualized rate from actual yield accrued over the stated duration. If utilization shifts or capital enters or exits the pool, future yields will differ.
#### Observation Period
Yield sources sometimes experience short-term drawdowns; temporary dislocations, oracle lag, or brief liquidity events that reverse within hours or days. The Observation Period lets the market observe whether a drawdown is sustained before allocating any loss to JT capital.
When a drawdown is detected by an accounting sync, the market automatically enters the Observation Period. Seniors can no longer deposit or redeem directly via redemption, new JT deposits/redemptions, and SLP redemptions are blocked, and 100% of any base-asset recovery is applied to restoring JT until its outstanding loss is fully recovered.
However, ST holders are not locked into their positions. The SLP continues to provide secondary liquidity throughout the Observation Period, allowing ST holders to exit by selling ST shares into the SLP AMM pool at the pool's current price.
The protocol then observes a defined time window per market. If the strategy recovers within that window, no loss is realized. If the drawdown persists beyond the window, it is treated as a genuine loss and permanently allocated against JT capital. If the drawdown is severe enough to reach the market's Protected Exit Threshold before the window expires, JT losses are finalized immediately, and ST gains the option to withdraw.
**The Observation Period window is set per market.** Some markets may define a 7-day window; others 30 days; some markets may define a window of 0 days, in which case losses are finalized immediately upon detection with no observation period. The specific window for each market is displayed on its market page in the protocol interface.
If a deployer chooses, they can configure an Observation Grace Period; a period after deployment where an Observation Period is blocked from triggering. This period exists in order to allow creators and liquidity providers to smoothly bootstrap liquidity, rather than being subject to market fluctuations causing a freeze.
#### Protected Exit
The **Protected Exit** allows ST depositors to safely withdraw their base assets at fair value when a market drawdown breaches a pre-configured threshold. If a strategy suffers a markdown that breaches this **Protected Exit Threshold**, the Observation Period is terminated and ST can withdraw their assets, subject to the EntryPoint's configured settlement delay. This realizes losses against JT capital. Those who believe the remaining JT buffer is sufficient can choose to stay. If losses exhaust JT capital entirely and the user has not withdrawn, their ST position becomes directly exposed to further drawdowns.
Senior's exits are complementary: the SLP pool gives an instant exit at the pool's current price. During an Observation Period, primary redemption of the underlying becomes available again once a drawdown breaches the Protected Exit Threshold.
#### Protected Exit Bonus
Some markets may include an optional configuration called **Protected Exit Bonus**. When the Protected Exit Threshold is exceeded in a market with Protected Exit Bonus enabled, any Seniors who withdraws may receive a Bonus % (up to the market-defined %) for withdrawing. This is designed to assist ST in unwinding their positions, and help restore the market into a healthy state. The Bonus is sourced from remaining Junior capital.
**Example:** A market has Minimum Coverage = 10%, Protected Exit Threshold = 5% and Protected Exit Bonus = 2%. The base asset drops below 5% coverage remaining, breaching the threshold.
Alice (Senior, \$100k) chooses to exit. She receives her \$100k back plus up to a \$2k bonus from Junior capital: a reward for helping restore the market to a healthy state. Seniors who stay forgo the bonus.
***
*This document is provided for informational purposes only and does not constitute investment advice, a solicitation, or an offer to sell any securities or financial instruments. Participation in Royco products involves risk, including the potential loss of all capital deployed. Prospective participants should conduct their own independent due diligence and consult with qualified legal, financial, and tax advisors before making any investment decisions.*
# Vaults Overview
Source: https://docs.royco.org/how-the-vaults-work
The **Senior Royco USDC Vault** and the **Royco ETH Vault** are winding down and are now in withdrawal-only mode. Deposits are closed, but you can still withdraw your funds.
Dialectic offers two Vault products for the Royco ecosystem.
The Senior Vault (srRoyUSDC) deploys USDC across a diversified set of Royco Senior Tranches for coverage-backed yield. Royco ETH (roywstETH) borrows USDC against wstETH collateral and deploys it into srRoyUSDC, earning staking rewards plus the carry spread.
**About Dialectic**
Dialectic is a Swiss crypto-native investment firm founded in 2019. The firm specializes in systematic, market-neutral DeFi yield strategies, powered by proprietary on-chain automation and risk-management tooling built by its in-house research arm, Atelier.
Vault performance is variable and depends on underlying market conditions, borrow costs, and yield source performance. Past performance is not indicative of future results. All depositors should review its [Risk Framework](/risk-framework) before participating.
### Portfolio Strategy
Dialectic has built a robust framework for how they will manage the following parameters across the Vaults:
1. Concentration limits
2. Rebalancing expectations
3. Market evaluation criteria
It can be found at: [https://www.notion.so/dialectic/Dialectic-DD-Framework-31feeae9e9298020a8fbfc5f15d1347b](https://www.notion.so/dialectic/Dialectic-DD-Framework-31feeae9e9298020a8fbfc5f15d1347b)
### **Withdrawals & Liquidity**
**Delays**
It may take up to 30 days for a withdrawal to process. Each Vault requires users to request a redemption. Dialectic will then process the liquidity for the redemption. Users will then need to claim the assets once the liquidity is open for redemption.
Users may be able to sell Vault positions via decentralized protocols such as LiFi, Curve, Balancer and Uniswap, bypassing the processing period associated with native deposit or withdrawal.
**Sequence**
The Vault will process withdrawals in the following priority:
1. Royco's own Vaults (i.e., srRoyUSDC and roywstETH)
2. Priority Partners
3. Remaining Withdrawals
### **Flow of Funds**
The funds are managed through both Makina and Concrete to preserve self-custody. Depositors can review each custodian's infrastructure and security documentation directly: [docs.makina.finance](https://docs.makina.finance) and [docs.concrete.xyz](https://docs.concrete.xyz).
![Royco Flow Of Funds Usdc]()
### **Fees**
Vault-level fees are detailed in [Governance and Fees](/governance-and-fees).
### Key Risks
Dialectic has published an overview of all key risks, accessible at: [https://www.notion.so/dialectic/Royco-Vault-Risk-Overview-31feeae9e9298090add8c1dea433517d](https://www.notion.so/dialectic/Royco-Vault-Risk-Overview-31feeae9e9298090add8c1dea433517d)
### **Audits**
Royco's audits can be found in [Security and Audits](/security-and-audits). Concrete has completed audits with [Cantina](https://docs.concrete.xyz/assets/files/cantinacode-concrete-finance-813b45d86d6450723139b0cc55857c4d.pdf/) and [Halborn](https://docs.concrete.xyz/assets/files/Standard-Implementation-9948d7fcebb518e5c29051bc2326b5ec.pdf/). Additionally, Makina has completed audits from [ChainSecurity, Enigma Dark, Sigma Prime, Cantina and Ottersec](https://docs.makina.finance/contracts/security).
***
*This document is provided for informational purposes only and does not constitute investment advice, a solicitation, or an offer to sell any securities or financial instruments. Participation in Royco products involves risk, including the potential loss of all capital deployed. Prospective participants should conduct their own independent due diligence and consult with qualified legal, financial, and tax advisors before making any investment decisions.*
# Junior Tranche (JT)
Source: https://docs.royco.org/junior-tranche
The Junior Tranche (JT) earns boosted yield as first-loss capital, absorbing losses before Senior and collecting a risk premium in return.
Junior earns the highest yield of the three tranches, in exchange for the highest risk profile. The JT takes the first losses, and receives a risk premium from the ST in exchange for providing coverage. JT is deployed into the same yield bearing base asset as the ST.
JT yield is calculated as follows:
> Base Asset Yield + Risk Premium
Junior also holds first claim on recoveries during an Observation Period. When junior coverage absorbs a drawdown, the amount absorbed is recorded as junior's claim on future appreciation and is repaid off the top of any subsequent gain, before any yield is split. This helps to restore junior's position at its original proportions. Junior forfeits this claim if the Observation Period elapses without recovery, on a Protected Exit Threshold breach, or if junior capital is exhausted.
***
*This document is provided for informational purposes only and does not constitute investment advice, a solicitation, or an offer to sell any securities or financial instruments. Participation in Royco products involves risk, including the potential loss of all capital deployed. Prospective participants should conduct their own independent due diligence and consult with qualified legal, financial, and tax advisors before making any investment decisions.*
# Key Addresses
Source: https://docs.royco.org/key-addresses
Deployed Day contract addresses for the protocol scaffolding, core market contract implementations, and yield distribution models.
Contract addresses are the same across ETH, ARB, Base, and AVAX. Template addresses are chain-specific.
**Protocol Scaffolding**
| Name | Address |
| - | - |
| AccessManager | `0x82EecE4a736db0767370d2DfFdE9BDF6e38AaeB8` |
| Gatekeeper | `0x716fFB13728Aec2F376883d00689679A418537f6` |
| Factory | `0xaAAaaAAAaE46cA12Bf3810DF8C13c5E8A4400812` |
**Royco Periphery**
| Name | Address |
| - | - |
| EntryPoint | `0xaf55a0c251690d9322b5F94b7e50EE895750262c` |
| MarketSyncer | `0x387e025306cb1C41fe7AB752D9C04607E03Bb8CE` |
**Core Market Contract Implementations**
| Name | Address |
| - | - |
| SeniorTranche | `0x029b8117Fd9BE010E32B19D7d9E35dCa9e44AE6e` |
| JuniorTranche | `0xaE2ce905230B0cd11Dd0d6eb09be5881F4bE2237` |
| LPTranche | `0x8CC25B62251D96CBFCe61aF89a97d61E0E84FCC8` |
| Accountant | `0xB872a1E6F37c66CcE3eB704cC756ea681C0e5B5a` |
| Kernel | `0x20745842191bEF60f9ED0DebdfD166F04f8AbD4d` |
**Yield Distribution Models**
| Name | Address |
| - | - |
| JT: Static Curve | `0x8ab738e264B9737BC853D454f3FCC07e18543527` |
| LPT: Static Curve | `0x662206BAEf133078dd139705F8E08DAAa4F92181` |
| JT: Scaling Adaptive Curve | `0x8e31615a90C78Ab0D68EA64F91438BbBfe706044` |
| LPT: Scaling Adaptive Curve | `0xbe1355FeAced109206fEf2a832b52EBF00610D4a` |
| JT: Shifting Adaptive Curve | `0x7D17C89A7777b25bA9dabb9730014E2Fc7f15B96` |
| LPT: Shifting Adaptive Curve | `0xBe18C1fC7a09567AA2cDa6bF7c5398A68491530d` |
| JT: Fixed Yield Share | `0x2DeCecd7bbA7D7c4Ac13af8ED0685561B3FA9C03` |
| LPT: Fixed Yield Share | `0xB8cA2c85C2C6F14cB4A64F0dB5E160b15cf5B4D4` |
**Royco Day Balancer V3 Market Templates**
| Chain | Address |
| - | - |
| ETH | `0xDA3fd0EFF34f201436F21806A0F2A0B55A5b97f1` |
| ARB | `0x281EaB0FFC407F17BdFC5964984490DF58F3A25d` |
| Base | `0x51b1000A0eF7199d2D37Ee1Bb70bB9118D65F3DB` |
| AVAX | `0x6a5F3284E6b1882061D80339602A6c0eA36D0594` |
*This document is provided for informational purposes only and does not constitute investment advice, a solicitation, or an offer to sell any securities or financial instruments. Participation in Royco products involves risk, including the potential loss of all capital deployed. Prospective participants should conduct their own independent due diligence and consult with qualified legal, financial, and tax advisors before making any investment decisions.*
# Senior Liquidity Provider (SLP)
Source: https://docs.royco.org/liquidity-provider-tranche
The **Senior Liquidity Provider (SLP)** is a dedicated capital pool that earns yield by providing constant secondary liquidity for the senior tranche.
SLP yield is calculated as follows:
> Liquidity Premium + (ST Appreciation \* ST Shares) + (Stablecoin Yield \* Stable Shares) + Trading Fees − Impermanent Loss
Unlike ST and JT, SLP is not deployed directly into the yield-bearing asset. Instead, it is deployed into a Balancer Pool Token in an AMM pool made up of ST tokens and a tokenized-treasury stablecoin.
SLP earns yield from the assets deployed in the pool: both the underlying yield of the ST shares, as well as the rate earned by the paired stablecoin.
In this mechanism, SLP gets paid a premium for providing exit liquidity to the ST. SLP also gets additional sources of yield: a % of swap fees from the Balancer Pool, as well as swap premiums when ST flow imbalances the pool.
***
*This document is provided for informational purposes only and does not constitute investment advice, a solicitation, or an offer to sell any securities or financial instruments. Participation in Royco products involves risk, including the potential loss of all capital deployed. Prospective participants should conduct their own independent due diligence and consult with qualified legal, financial, and tax advisors before making any investment decisions.*
# Market Deployment
Source: https://docs.royco.org/market-deployment
Learn how to deploy a Royco market
# **How to Participate**
1. Explore Royco Markets
1. Familiarize yourself with Royco’s market structure and deployment process using the [Royco Market Simulator](https://simulator.royco.org/).
2. Request Creator Access
1. Submit an [access request](https://forms.gle/xgybBP6NCyhWpdj69) to join the Creator Rewards Program (more details below)
1. If your application is approved, your deployer address will be whitelisted on the Royco app.
2. Only markets from enrolled creators will appear on the Royco frontend.
2. Contact support if you need help with the request process: [support@royco.org](mailto:support@royco.org)
3. Deploy a Market
1. Once approved, use the Royco Deployer to configure and launch your markets, including its yield source, pricing, coverage, liquidity parameters, and other applicable terms.
2. **Important: Royco markets are IMMUTABLE. If you would like to change parameters, you must deploy a new pool.**
# **Inflation Attack Protection**
ERC4626 vaults are susceptible to share inflation attacks, where an attacker manipulates the share price to cause rounding losses for subsequent depositors. In order to protect depositors, **deployers should ensure that they have made a "dead deposit" of 1e12 shares worth of ST and JT tokens** into the dead deposit address (0x000000000000000000000000000000000000dEaD). Once deposited, this dead deposit can not be withdrawn.
# **Creator Rewards Program**
**Overview**
The Royco Creator Rewards Program is designed to support and incentivize eligible creators who deploy new markets through Royco.
Approved creators are eligible to receive 5% of the risk and liquidity premiums generated by all markets they deploy that sustain \$20,000 TVL over a 7-day rolling period. Program terms, reward rates, eligibility requirements, and fee arrangements may be modified at any time at the Royco Foundation’s discretion.
For assistance with the application process, contact [support@royco.org](mailto:support@royco.org).
**Eligibility and Restrictions**
Participation is subject to the Royco Foundation’s review and approval. U.S. persons and entities are not eligible to participate.
Deployers must have a minimum level of prior onchain activity on recognized decentralized protocols, based on transaction count and/or volume thresholds set by the Royco Foundation. Applicants may designate a separate wallet to demonstrate prior onchain activity; the wallet used to deploy Royco markets does not need to have prior history.
**Current Creators**
* R13N
* Xerberus
* Concrete
* Tulipa
* Dialectic
# Market Dynamics
Source: https://docs.royco.org/market-dynamics
### **Market States**
Markets operate as perpetual instruments with full liquidity for all tranches under normal conditions. If a collateral drawdown is absorbed by Junior and leaves a recoverable JT loss, the market may enter an Observation Period. This gives the underlying position time to recover before Juniors realize any losses. If the position recovers, Juniors are made whole and the market shifts back to a perpetual state. In the event that losses persist and coverage runs thin, Seniors can exit early with their guaranteed protection intact.
The two states are:
**PERPETUAL**: The normal operating state governed by market forces, and the permanent state of a market configured with no fixed-term duration. The market is either healthy (no losses beyond the dust tolerance), severely undercollateralized (its liquidation coverage utilization breached), or uncollateralized (no junior NAV remaining against a non-zero senior NAV). All three tranches are liquid, subject to the coverage and liquidity requirements. Premiums and protocol fees accrue on Senior yield, and adaptive-curve models adapt to the market's coverage and liquidity utilization.
**OBSERVATION PERIOD**: A temporary recovery state entered when Junior coverage first absorbs a Senior drawdown while coverage stays within the liquidation threshold, giving the underlying position time to recover before Junior LPs realize any losses. Senior and Junior deposits and redemptions are all blocked. This stops Seniors from withdrawing coverage from existing Juniors, and new Juniors from diluting existing Juniors, on arbitrary volatility. SLP tranche redemptions are also blocked so the SLP keeps market-making the Senior when secondary liquidity is most valuable, while SLP Tranche deposits stay open (multi-asset deposits accept only the quote leg during a fixed term, since minting the Senior leg is a Senior deposit). No liquidity premium is paid and no protocol fees are taken, and the adaptive-curve models do not adapt, since utilization moves on underlying PnL rather than market forces during recovery.
**State Transitions**: A market configured with no Observation Period duration is permanently perpetual and never leaves the perpetual state. A market still in its post-deployment Observation Grace Period also cannot enter the Observation Period, regardless of drawdown. Otherwise, the market enters an Observation Period from PERPETUAL when a non-dust collateral drawdown is absorbed by Junior and creates a recoverable JT loss. It returns to PERPETUAL when the Junior coverage impermanent loss clears to within the market's dust tolerance, meaning the position recovered and Junior was made whole (any dust remainder is erased), or when the fixed-term duration elapses. The market is additionally forced back to PERPETUAL on a liquidation breach or an uncollateralized market. When the return is forced, or the fixed-term elapses before the loss recovers, the Junior coverage impermanent loss is reset, so Junior forfeits its recovery claim.
### **Impermanent Loss**
When losses occur, they are handled differently based on which tranche experiences them:
**Losses**: A collateral loss is absorbed Junior-first: the Junior buffer (its effective NAV) takes the whole loss up to exhaustion, and every unit absorbed is tracked as the Junior coverage impermanent loss, JT's first claim on future collateral appreciation. Only the loss exceeding JT's remaining buffer is borne by Senior effective NAV, and a market whose Junior buffer is exhausted against live senior exposure is uncollateralized, which forces the PERPETUAL state and resets JT's recovery claim.
**Recovery**: When the collateral appreciates, the Junior coverage impermanent loss is repaid off the top of the gain before any distribution, restoring Junior's claim at its original proportions so a dip-and-recover path lands exactly where the direct path would. The residual gain splits pro-rata across the restored claims: Junior's share is Junior yield, and Senior's share pays the risk premium to Junior and the liquidity premium to the SLP tranche via the two YDM instances, accrues protocol fees, and the remainder accrues to Senior. Repayment is restoration, never yield, so it is never fee'd.
**JT Coverage IL Reset**: The JT coverage impermanent loss is reset (JT forfeits its claim) when the market is forced back to PERPETUAL. This happens when the fixed-term duration elapses, on a liquidation breach, or on an uncollateralized market (no Junior NAV remaining against a non-zero Senior NAV).
# Risks
Source: https://docs.royco.org/risk-framework
This section describes the primary risk categories, organized by where they apply: risks inherent to Royco markets (affecting both Senior and Junior tranche depositors directly), risks specific to vaults that aggregate across markets, and operational risks that span the protocol.
#### Market-Level Risks
**ERC-4626 Inflation Attack**
ERC4626 vaults are susceptible to share inflation attacks, where an attacker manipulates the share price to cause rounding losses for subsequent depositors. Before interacting with a market, verify that a dead deposit has been made. Deployers should ensure that they have deposited 1e12 shares worth of ST and JT tokens into the dead deposit address to protect depositors.
**Smart Contract Risk**
All protocol functionality is executed by smart contracts. A bug or exploit could result in partial or total loss of deposited capital.
> **Mitigants:** Multiple independent audits of the core vault infrastructure (Concrete Earn v2), multiple audits on the core tranche infrastructure, active \$250,000 bug bounty on Immunefi, real-time monitoring via Hypernative. See [Security and Audits](/security-and-audits) for details.
**Underlying Strategy Risk**
Each Royco market depends on its underlying yield source. If a lending market accrues bad debt, a staking protocol suffers slashing, or an RWA fund defaults, the market is affected.
> **Mitigants:** Junior absorbs losses first up to the coverage percentage. The curator conducts independent due diligence before allocating.
**Senior-Specific: Loss Exposure After Junior Exhaustion**
Senior is backed by Junior's first-loss buffer, but if losses exceed Junior's balance, Senior is exposed to the remainder. The coverage requirement sets the smart-contract-enforced minimum buffer, but it is not a guarantee against all losses. If the market's Protected Exit Threshold is reached, Senior can withdraw with the underlying asset and liquidate it to prevent further losses during a gradual drawdown. Junior may still have remaining capital at this point, providing a buffer for Seniors who choose to stay.
> **Mitigants:** Senior sits behind a minimum amount of Junior capital. Senior remains untouched until Junior is fully exhausted.
**Junior-Specific: First-Loss and Liquidity Constraints**
Junior absorbs all losses from the first dollar. Because both tranches are co-invested (beta = 1), losses are amplified by the coverage ratio: at 20% coverage, Junior is effectively 5x levered on the downside. Therefore, a 2% drawdown on the underlying would translate to a 10% loss on Junior's capital. Junior losses can be finalized in two ways: if the Observation Period window expires without recovery, or if the drawdown reaches the market's Protected Exit Threshold. Once finalized, Junior loses recovery optionality but may still have remaining capital.
Junior withdrawals are constrained by the coverage requirement. If Junior's capital is fully committed to backing Senior, withdrawals are restricted until utilization decreases. Junior deposits into illiquid underlying sources (e.g., RWA positions with 30-day redemption windows) inherit that illiquidity.
> **Mitigants:** An Observation Period means that Junior is only charged for persistent or extraordinarily deep losses. Drawdowns that reverse within the window do not slash Junior capital. Additionally, Juniors are funneled additional yield to restore their position during an Observation Period.
#### Vault-Level Risks (srRoyUSDC, roywstETH)
Dialectic, the Vault's curator, has published more about the risks of each Vault at: [https://www.notion.so/dialectic/Royco-Vault-Risk-Overview-31feeae9e9298090add8c1dea433517d](https://www.notion.so/dialectic/Royco-Vault-Risk-Overview-31feeae9e9298090add8c1dea433517d)
#### Operational Risks
**Curator Risk**
The curator has operational control of vault positions. Poor allocation decisions or slow response to risk events could result in losses.
> **Mitigants:** The curator is contractually bound to a standard of care. Permissions are scoped, meaning the curator can only perform authorized actions. The Foundation can revoke curator access and transition to a successor.
**Oracle and Pricing Risk**
The protocol relies on price feeds to value positions and determine collateral ratios. Oracle manipulation or failure could lead to incorrect valuations.
> **Mitigants:** Established oracle providers (Chainlink, RedStone). For tokenized RWAs, admin-controlled configurations source prices from NAV rather than thin secondary markets. Vault-level pricing is reviewed daily through the NAV update process.
**Smart Contract Risk**
A bug or vulnerability in the contract code could lead to loss of funds, incorrect accounting, or unexpected behavior.
> **Mitigants:** All protocol, curator, and infrastructure contracts have been independently audited by multiple firms. Royco Day has been formally verified and employs real-time monitoring, as well as a \$250,000 bug bounty through ImmuneFi.
***
*This document is provided for informational purposes only and does not constitute investment advice, a solicitation, or an offer to sell any securities or financial instruments. Participation in Royco products involves risk, including the potential loss of all capital deployed. Prospective participants should conduct their own independent due diligence and consult with qualified legal, financial, and tax advisors before making any investment decisions.*
# 5. Deposits and Withdrawals
Source: https://docs.royco.org/royco-dawn/deposits-and-withdrawals
**Dawn is a legacy deployment.** Contracts remain operational, but Dawn is no longer under active development and has known accounting limitations. [Learn more →](/royco-dawn/legacy-deployment)
#### Users are currently able to:
* **Permissionlessly Acquire/Dispose.** Buy or sell any vault or individual tranche (Senior or Junior) through decentralized AMM pools using assets like USDC or USDT. For tranche purchases routed via deposit, the **RoycoEntryPoint** applies a per-market delay (MEV/frontrunning protection) before the position settles and starts earning. Depositors can pre-pay gas for auto-execution.
* **Direct Mint/Redeem Tranches.** Deposit the accepted asset into any individual Senior or Junior Dawn market and receive the corresponding tranche token, or burn it to redeem the underlying. Tranche deposits route through the **RoycoEntryPoint** with the same per-market delay. Redemptions are immediate at the protocol layer, but bounded by the underlying yield source's liquidity (if the underlying position has a lock-up or redemption window, the tranche inherits it). Senior gains an immediate-exit option if a market hits its **Protected Exit Threshold**. If Junior's full balance is backing Senior exposure (utilization at 100%), Junior withdrawals are restricted until either additional Junior capital enters or Senior capital exits. During an Observation Period, Senior withdrawals and new Junior deposits in that market are paused.
* **Direct Mint/Redeem Vaults.** Transfer accepted reserve assets (USDC for srRoyUSDC, wstETH for roywstETH) and receive an ERC-4626 share token whose exchange rate accrues yield over time; burn to redeem. Vault redemptions are processed via **30-day withdrawal epochs**: request enters the open epoch, epoch closes every 30 days, the vault sources liquidity from Senior tranches over a \~2-day processing window, then funds are claimable. Subject to KYC/KYB.
***
*This document is provided for informational purposes only and does not constitute investment advice, a solicitation, or an offer to sell any securities or financial instruments. Participation in Royco Dawn products involves risk, including the potential loss of all capital deployed. Prospective participants should conduct their own independent due diligence and consult with qualified legal, financial, and tax advisors before making any investment decisions.*
# 9. Frequently Asked Questions
Source: https://docs.royco.org/royco-dawn/faq
**Dawn is a legacy deployment.** Contracts remain operational, but Dawn is no longer under active development and has known accounting limitations. [Learn more →](/royco-dawn/legacy-deployment)
The Senior tranche has a structural first-loss buffer: Junior capital absorbs all losses before Senior is affected, up to the full coverage amount. However, this is not a guarantee of principal in the legal or insurance sense. If losses exceed the Junior buffer, Senior capital is exposed to the remainder. Senior depositors may lose some or all of their capital. If a drawdown reaches the market's Protected Exit Threshold, Senior can withdraw immediately with the underlying asset while Junior may still have remaining capital.
The vault's independent curator makes all investment decisions: which yield sources to allocate to, at what coverage levels, and how to size positions. The Foundation makes yield sources available based on objective criteria but does not direct specific allocations. The depositor chooses which vault or tranche to enter.
If an underlying yield source suffers an exploit, the Dawn market built on it will experience a loss. Junior capital absorbs the loss first, up to the coverage percentage. If the loss exceeds coverage, Senior is exposed to the remainder. Diversification across multiple sources means a single exploit does not necessarily affect the entire vault, only the portion allocated to that specific source.
Vault withdrawals are processed through 30-day epochs. Requests enter the current open epoch, which is processed when it closes. A secondary market for vaults may provide an alternative exit path for immediate liquidity. Senior tranche withdrawals are available at any time. Junior withdrawals are available when excess Junior capital exists above the coverage requirement.
Dawn has been deployed on Ethereum and Avalanche. The srRoyUSDC vault operates across multiple chains, moving capital via Circle's CCTP to access the best available yield opportunities. The ETH-based vaults operate on Ethereum.
The curator is bound by a contractual standard of care and defined performance expectations. The Foundation can terminate the curator relationship for material breach, sustained underperformance attributable to curator decisions, failure to maintain risk controls, or unauthorized actions. On termination, the curator must cooperate in an orderly transition to a successor.
There is no fixed lock-up for Senior deposits at the tranche level. Vault withdrawals from srRoyUSDC and roywstETH are processed through **30-day withdrawal epochs**. Depositors should plan for up to 30 days between submitting a withdrawal request and being able to claim funds. Institutional depositors may face additional processing steps in the updated withdrawal flow. A secondary market may offer an alternative exit for immediate liquidity, but availability is not guaranteed. Junior capital may be restricted from withdrawing when it is actively backing Senior exposure at the minimum coverage level.
All protocol state: coverage ratios, yield rates, vault composition, fee accrual, and transaction history, is recorded on public blockchains and can be independently verified using any blockchain explorer. The protocol's smart contracts are published and can be reviewed by any party.
Royco raised a Series A in 2025 led by Electric Capital. Ecosystem partners have also raised from Coinbase Ventures, Hashed, Amber Group, and DCF God.
[https://royco-school.vercel.app/#/](https://royco-school.vercel.app/#/)
***
*This document is provided for informational purposes only and does not constitute investment advice, a solicitation, or an offer to sell any securities or financial instruments. Participation in Royco Dawn products involves risk, including the potential loss of all capital deployed. Prospective participants should conduct their own independent due diligence and consult with qualified legal, financial, and tax advisors before making any investment decisions.*
# 4. Governance and Fees
Source: https://docs.royco.org/royco-dawn/governance-and-fees
**Dawn is a legacy deployment.** Contracts remain operational, but Dawn is no longer under active development and has known accounting limitations. [Learn more →](/royco-dawn/legacy-deployment)
#### Roles
**The Royco Foundation** is responsible for the protocol's governance and infrastructure. It deploys smart contracts, configures tranching parameters, and makes yield sources available based on published criteria (audit status, time since deployment, minimum size, risk scoring). Critical protocol changes (smart contract upgrades, authorization structure changes, or parameter changes that affect user positions) are subject to a timelock. The Foundation does not make opinionated or investment decisions.
**The Curator** makes all investment decisions for a given vault: which yield sources to allocate to, coverage levels, position sizes, collateral management, and withdrawal processing. The curator operates on the vault's multisig with scoped permissions. It can allocate and rebalance within approved parameters, but cannot move funds to unauthorized addresses or alter protocol mechanics. The Foundation retains the ability to revoke curator access at any time.
**Depositor/User** selects which vault or tranche to enter based on their own objectives. Identity verification (KYC/KYB) is required before withdrawing. U.S. persons are not eligible to participate.
#### Permission Architecture
Vault assets are held in a Concrete Vault. The curator's operational permissions are scoped per vault and per operation: it can rebalance between approved markets, update NAVs, manage collateral positions, and whitelist depositors; but it has limitations on actions outside this scope. Funds cannot be routed to addresses outside the whitelist.
The Royco Foundation Multisig sits above this structure. It sets the permissions framework and manages protocol-level configurations. Critical changes (as defined above) are subject to a timelock, giving depositors advance notice.
#### Fee Structure
Fees are collected programmatically through an onchain fee mechanism:
| Product | Management Fee | Performance Fee | Fee on Yield Share (Risk Premium) |
| - | - | - | - |
| srRoyUSDC | 0% | 0% | 0% |
| roywstETH | 0% | 0% | 0% |
| Junior tranches | 0% | 0% | 0% |
| Senior tranches | 0% | 0% | 0% |
For swaps, LiFi route fees apply at a rate of 3 bps for stablecoins and 20 bps for assets not classified as stablecoins.
*Where applicable, performance fees are calculated on yield generated, defined as all income received by a vault minus borrowing costs. No fee is charged in periods where the yield is zero or negative. Fees are visible onchain. Prior versions of the protocol included a junior tranche fee that is not applicable with the latest version.*
***
*This document is provided for informational purposes only and does not constitute investment advice, a solicitation, or an offer to sell any securities or financial instruments. Participation in Royco Dawn products involves risk, including the potential loss of all capital deployed. Prospective participants should conduct their own independent due diligence and consult with qualified legal, financial, and tax advisors before making any investment decisions.*
# 2. How Dawn Works
Source: https://docs.royco.org/royco-dawn/how-dawn-works
**Dawn is a legacy deployment.** Contracts remain operational, but Dawn is no longer under active development and has known accounting limitations. [Learn more →](/royco-dawn/legacy-deployment)
#### The Tranching Mechanism
Every Royco Dawn market begins with a single underlying yield source. The protocol deploys capital from Senior and Junior depositors into that source and governs how returns and losses flow back to each group.
The fundamental mechanism: **Junior capital provides first-loss coverage for Senior capital.** The protocol enforces a coverage ratio; the minimum amount of Junior capital that must stand behind every dollar of Senior deposits. If this ratio is not met, new Senior deposits are not accepted.
Both Senior and Junior capital are deployed into the same underlying strategy. Junior is not sitting in a separate reserve; it is co-invested alongside Senior, earning the base yield from the same source. The difference is that Junior also earns a risk premium for providing first-loss coverage, and in exchange, Junior absorbs losses immediately. Any drawdown reduces Junior's capital before Senior is affected.
Because Junior is co-invested, the coverage ratio represents real, active capital that is earning yield, not idle collateral. This makes the structure capital-efficient for both sides.
**An Example**
Suppose a Dawn market is deployed on top of a USDC lending strategy yielding 8% annualized. Both Senior and Junior capital are co-invested in the same strategy:
| | Deposits | APY | Source |
| - | - | - | - |
| Senior | \$8,000,000 | \~6.5% | Base yield minus premium paid to Junior |
| Junior | \$2,000,000 | \~14% | Base yield plus premium for first-loss protection |
| Total | \$10,000,000 | | |
| Coverage | 20% | | |
Both tranches are deployed into the same 8% underlying strategy. A drawdown of X% applies to the full \$10M pool. Junior absorbs those losses first. Coverage of 20% means Junior can absorb up to a 20% drawdown on the total pool before Senior is affected.
**Loss Example Scenarios**
| Drawdown | Loss on \$10M pool | Junior absorbs | Senior exposure | Result |
| - | - | - | - | - |
| 5% | \$500K | \$0 | Junior reduced to \$1.5M. Senior unaffected. | |
| 15% | \$1.5M | \$0 | Junior reduced to \$500K. Senior unaffected. | |
| 25% | \$2.5M | \$500K | Junior fully consumed. Senior reduced to \$7.5M. | |
Junior absorbs losses immediately, from the first dollar. Senior is only exposed once Junior's entire balance is consumed.
#### Coverage Requirements
Dawn enforces a **minimum coverage requirement** for each market. Coverage represents the maximum percentage drawdown the underlying can experience before Senior capital is affected. It is a hard constraint: if coverage falls below the minimum, new Senior deposits and Junior withdrawals are paused until Junior capital returns to the required level.
Senior depositors are shielded by the Junior buffer, and have first right to withdraw liquidity. The minimum buffer is smart-contract-enforced, so Seniors always know the floor backing their position.
**Coverage minimums are set per market.** The minimum coverage requirement is calibrated individually for each market based on several factors, including but not limited to: the risk profile and historical volatility of the underlying yield source, the asset class (lending, staking, tokenized RWA), the liquidity depth of the strategy, and the overall risk tolerance of the Senior vault (if it is a participant in the market). A lending market backed by a blue-chip protocol may carry a lower minimum than a newer yield source with a shorter track record. This per-market calibration ensures the coverage floor reflects the profile of the underlying source rather than a one-size-fits-all threshold.
#### How Yield Is Split
In every Royco Dawn market, the underlying yield source generates returns. The **Yield Distribution Model (YDM)** decides how those returns are divided between Senior and Junior.
Junior provides first-loss protection to Senior. In exchange, Junior earns a risk premium; a share of Senior's yield. The YDM determines the size of that premium based on supply and demand.
The core idea: when Junior capital is scarce, Junior earns more. When Junior capital is plentiful, Junior earns less. This happens automatically with no governance votes or manual adjustments.
**What Drives the Split: Understanding Utilization and Coverage**
The YDM looks at one number: **utilization.** Utilization measures how much of Junior's coverage capacity is currently being used to back the market. Understanding utilization requires understanding how coverage works:
**Coverage** is the percentage of the total pool that Junior represents. It represents the maximum drawdown of the underlying yield source that Junior can absorb before Senior is affected. For instance, $2M Junior backing a $10M pool gives 20% coverage, meaning Junior can absorb a 20% loss on the pool without touching Senior.
**Each market has a minimum coverage requirement** (set per market as described above). Junior's capital must stay at or above this floor. If it falls below, new Senior deposits and current Junior withdrawals are blocked until a Junior buffer is replenished.
**Utilization measures how close Junior is to that floor.** At 40% utilization, Junior holds far more than the required minimum, with plenty of cushion above the floor. At 100% utilization, Junior is exactly at the required minimum, disabling both Senior deposits and Junior withdrawals. At the 90% target, Junior is 90% of the way from 'maximum excess' to 'exactly at the floor.' The market is efficiently deployed but still has room to accept new capital.
Put simply: **coverage tells you how much loss Junior can absorb; utilization tells you how efficiently that coverage capacity is being used.** High utilization means Junior is close to its required floor and Junior depositors earn a higher premium to attract new capital. Low utilization means Junior has built up excess above the floor, and their effective premium is lower.
**The Yield Curve**
Each market sets three values at creation that define Junior's yield share across utilization:
> * Y0: at 0% utilization
> * YT: at 90% (the target)
> * Y100: at 100%
**Below 90%: essentially flat.** Y0 and YT are close together. When Junior capital is plentiful, excess supply already dilutes Junior returns.
**Above 90%: steep.** Y100 is typically set notably higher than YT , meaning that as Junior capital becomes scarce, the yield share ramps aggressively to attract new Junior depositors. Y100 is set per market such that at 100% utilization, the resulting Junior yield is attractive enough to draw in new capital.
**Self-Adapting Yield Curve Over Time**
These three points don't stay fixed, as the curve adapts to market conditions over time. When utilization consistently runs above target, the curve shifts up to offer Juniors a bigger premium and attract more capital. When utilization consistently sits below target, the curve shifts down. The further from 90%, the faster the adjustment. These shifts happen gradually, over days or weeks.
The result is a self-balancing system. If Junior capital leaves, utilization rises and the premium increases, attracting new Juniors. If Senior capital leaves, the opposite happens. The market continuously finds its own equilibrium.
***For an interactive yield model, feel free to check out our simulator: [https://royco-school.vercel.app/](https://royco-school.vercel.app/)***
**What Depositors See**
The APY shown on the Dawn interface is the trailing 24-hour APY, the annualized rate from actual yield accrued over the previous 24 hours. A 7-day average is shown alongside it for a smoother view. Both are backward-looking. If utilization shifts or capital enters or exits the pool, future yields will differ.
#### Observation Period
Yield sources sometimes experience short-term drawdowns; temporary dislocations, oracle lag, or brief liquidity events that reverse within hours or days. The Observation Period lets the protocol observe whether a drawdown is real and sustained or just noise before allocating any loss against Junior capital.
When a drawdown is detected, the protocol enters the Observation Period. Senior withdrawals are paused, new Junior deposits are blocked, and 100% of yield is redirected to Junior to accelerate the rebuilding of the first-loss buffer. During this period, Senior deposits and Junior redemptions remain enabled, provided the market remains above its minimum coverage requirement. Junior holders who redeem during the Observation Period realize the applicable impermanent loss at the time of withdrawal.
The protocol then monitors the market over a defined recovery window. If the tracked Junior impermanent loss is recovered during that window, the market may return to normal operation. Recovery of tracked Junior impermanent loss is an accounting condition and does not necessarily mean that Junior share value has fully returned to its pre-observation level. If the drawdown persists beyond the recovery window, the remaining loss is finalized and permanently allocated against Junior capital. If the drawdown becomes severe enough to reach the market's Protected Exit Threshold before the window expires, Junior losses are finalized immediately and Senior holders gain the option to withdraw.
**The Observation Period window is set per market.** Some markets may define a 7-day window; others 30 days; some markets may define a window of 0 days, in which case losses are finalized immediately upon detection with no observation period. The specific window for each market is displayed on its market page in the protocol interface.
#### Protected Exit
Each market provides Seniors with first-loss coverage against persistent drawdowns through a **Protected Exit Threshold**. If a drawdown is deep enough, the Observation Period is terminated and Seniors can withdraw the underlying asset when there is a predefined level of coverage remaining, realizing losses against Junior capital. Those who believe the remaining Junior buffer is sufficient can choose to stay. If losses exhaust Junior capital entirely, Seniors become directly exposed to further drawdown.
#### Protected Exit Bonus
Some markets may include an optional configuration called **Protected Exit Bonus**. When the Protected Exit Threshold is exceeded in a market with Protected Exit Bonus enabled, any Seniors who optionally withdraw may additionally receive a small Bonus % (up to the market-defined %) for withdrawing. This is designed as a minor incentive for Seniors to withdraw into the underlying asset, which assists in restoring the market into a healthy state. The Bonus is sourced from remaining Junior capital.
**Example:** A market has Minimum Coverage = 10%, Protected Exit Threshold = 5% and Protected Exit Bonus = 2%. The underlying drops below 5% coverage remaining, breaching the threshold.
Alice (Senior, $100k) chooses to exit. She receives her $100k back plus a \$2k bonus from Junior capital: a reward for helping restore the market to a healthy state. Seniors who stay forgo the bonus.
***
*This document is provided for informational purposes only and does not constitute investment advice, a solicitation, or an offer to sell any securities or financial instruments. Participation in Royco Dawn products involves risk, including the potential loss of all capital deployed. Prospective participants should conduct their own independent due diligence and consult with qualified legal, financial, and tax advisors before making any investment decisions.*
# 10. Key Addresses
Source: https://docs.royco.org/royco-dawn/key-addresses
**Dawn is a legacy deployment.** Contracts remain operational, but Dawn is no longer under active development and has known accounting limitations. [Learn more →](/royco-dawn/legacy-deployment)
**Senior Royco USDC**
| Contract | Address |
| - | - |
| Senior Royco USDC (srRoyUSDC) | `0xcD9f5907F92818bC06c9Ad70217f089E190d2a32` |
| Multisig Safe | `0x170ff06326eBb64BF609a848Fc143143994AF6c8` |
| Multisig Strategy | `0xd3F8Edff57570c4F9B11CC95eA65117e2D7A6C2D` |
**Dawn Markets**
| Contract | Ethereum | Avalanche |
| - | - | - |
| Factory | `0xD567cCbb336Eb71eC2537057E2bCF6DB840bB71d` | `0xD567cCbb336Eb71eC2537057E2bCF6DB840bB71d` |
| Yield Distribution Model | `0x071B0FA065774b403B8dae0aE93A09Df5DE3DFAc` | `0x071B0FA065774b403B8dae0aE93A09Df5DE3DFAc` |
**RoycoEntryPoint**
| Contract | Ethereum | Avalanche |
| - | - | - |
| RoycoEntryPoint | `0x63da1229be88fb4d20210147954a1a3e05f2581b` | `0x63da1229be88fb4d20210147954a1a3e05f2581b` |
# Legacy Deployment
Source: https://docs.royco.org/royco-dawn/legacy-deployment
Status and known accounting limitations of the Royco Dawn deployment.
**Dawn is a legacy deployment.** Its contracts remain operational, but Dawn is no longer under active development. Users should understand the accounting behavior below before interacting with a Dawn market.
## Junior Tranche recovery shortfall
When a Senior Tranche drawdown is absorbed by Junior Tranche capital, Dawn records the amount as Junior Tranche impermanent loss. While the market remains in its fixed-term recovery state, subsequent gains are first applied toward restoring Junior Tranche value before normal yield distribution resumes.
In certain cases, Dawn can record the recovery as complete and clear the remaining impermanent-loss balance before Junior Tranche value has fully returned to its pre-observation level. This can leave Junior Tranche holders with a shortfall relative to the value they held before the Observation Period.
The limitation concerns incomplete recovery rather than the loss of the entire recovery amount. As a result, an underlying asset returning to its pre-drawdown value does not necessarily return Junior Tranche value to exactly its pre-observation level.
Users should evaluate Dawn positions based on the deployed contracts and current onchain state, and should not assume that behavior described for Royco Day also applies to Dawn.
# 1. Overview
Source: https://docs.royco.org/royco-dawn/overview
Royco Dawn is a non-custodial risk-tranching protocol. It takes a given yield source: a lending market, a staking deposit, or tokenized RWA, and splits it into two risk tranches:
**Dawn is a legacy deployment.** Contracts remain operational, but Dawn is no longer under active development and has known accounting limitations. In certain cases, Junior Tranche value may not fully recover to its pre-observation level even when the protocol records recovery as complete. [Learn more →](/royco-dawn/legacy-deployment)
* **Senior**: earns yield with smart-contract-enforced downside coverage. A defined amount of Junior capital absorbs losses before Senior is ever impacted.
* **Junior:** earns higher yield by serving as first-loss capital and receiving a risk premium paid by Senior in return.
#### **The Yield Distribution Model**
Yield distribution between tranches works similarly to lending markets. In Morpho or Aave, high utilization pushes supply rates up to attract lenders, and vice versa. Dawn utilizes a similar mechanism, with a different definition of utilization.
**In Dawn, utilization measures how much Junior capital is currently backing Senior exposure.** If the market needs \$1 of Junior coverage and there is exactly \$1 of Junior, utilization is 100%. If there is \$2 of Junior, it is 50%. When Junior is scarce, more yield flows to Junior to attract more first-loss capital. When Junior is abundant, more yield flows to Senior. The pool rebalances toward equilibrium based on where each side wants to deploy.
For example, if the market needs \$1 of Junior coverage and there is exactly \$1 of Junior, utilization is 100%. If there is \$2 of Junior, it is 50%.
The protocol targets **90% utilization** as the equilibrium point:
* **Senior depositors** need the 10% buffer. At 100%, the market closes to new Senior deposits because there's no Junior left to back them.
* **Junior depositors** need utilization high enough that their boosted yield is meaningful. At low utilization, Junior's premium gets diluted across the pool and the risk isn't sufficiently compensated. At 90%, Junior earns real extra yield, and the curve steepens aggressively above that point; so when coverage gets tight, new Junior capital is strongly incentivized to show up.
#### Why Does This Matter?
**Seniors get smart-contract-enforced downside coverage.** Every Senior position has a quantified Junior buffer defined in the protocol's contracts. This gives risk committees a concrete, verifiable loss-absorption layer. This enables Seniors to evaluate yield sources they might otherwise be prevented from accessing.
**Junior absorbs losses from the first dollar.** There is no buffer on losses. Junior capital absorbs any Senior drawdown from the very first dollar, up to the full coverage amount. Seniors are not impaired until Junior capital is fully exhausted. For Juniors, this effect is similar to a levered position.
**Juniors benefit from an observation period.** When the underlying strategy draws down, the protocol enters a time-bounded observation window before allocating losses. Temporary, expected volatility that reverses within the window does not slash Junior capital. Juniors only absorb actual, persistent losses, not noise. (Note that not all markets have an observation period. See Section 2 for details on when the observation period is triggered and how it resolves.)
**Juniors earn a premium for risk they already underwrite.** Every yield source Dawn tranches already has LPs depositing into the underlying asset directly. Dawn lets those same participants earn a risk premium for formally taking the first-loss position, rather than simply accepting the base rate. This risk premium is paid by Senior positions.
#### The Vault Products
For investors who do not want to evaluate and manage individual Dawn markets, the protocol offers managed vaults.
| Vault | Deposit Asset | What It Does |
| - | - | - |
| Dawn Senior Vault (srRoyUSDC) | USDC | Allocates across multiple Senior tranches for diversified, Senior-tranche yield. May utilize Senior tokens in lending protocols for levered exposure while still retaining first-loss coverage. |
| Royco ETH (roywstETH) | wstETH | Borrows USDC against wstETH collateral and deploys into srRoyUSDC, earning staking rewards plus the carry spread |
The **Dawn Senior Vault (srRoyUSDC)** is the foundational product, deploying USDC into Senior tranches across a diversified set of yield sources to offer buffered yield backed by Junior first-loss capital. **Royco ETH (roywstETH)** is built for ETH holders who want to earn yield without selling their ETH: it borrows USDC against wstETH collateral and deploys the proceeds into srRoyUSDC, capturing staking rewards plus the carry spread. Each vault is managed by a professional, independent curator.
***
*This document is provided for informational purposes only and does not constitute investment advice, a solicitation, or an offer to sell any securities or financial instruments. Participation in Royco Dawn products involves risk, including the potential loss of all capital deployed. Prospective participants should conduct their own independent due diligence and consult with qualified legal, financial, and tax advisors before making any investment decisions.*
# 6. Risk Framework
Source: https://docs.royco.org/royco-dawn/risk-framework
This section describes the primary risk categories, organized by where they apply: risks inherent to Dawn markets (affecting both Senior and Junior tranche depositors directly), risks specific to vaults that aggregate across markets, and operational risks that span the protocol.
**Dawn is a legacy deployment.** Contracts remain operational, but Dawn is no longer under active development and has known accounting limitations. In certain cases, Junior Tranche value may not fully recover to its pre-observation level even when the protocol records recovery as complete. [Learn more →](/royco-dawn/legacy-deployment)
#### Market-Level Risks (Senior and Junior Tranches)
**Smart Contract Risk**
All protocol functionality is executed by smart contracts. A bug or exploit could result in partial or total loss of deposited capital. **Mitigants:** Multiple independent audits of the core vault infrastructure (Concrete Earn v2), multiple audits on the core tranche infrastructure, active \$250,000 bug bounty on Immunefi, real-time monitoring via Hypernative. See [Section 7](/royco-dawn/security-and-audits) for details.
**Underlying Strategy Risk**
Each Dawn market depends on its underlying yield source. If a lending market accrues bad debt, a staking protocol suffers slashing, or an RWA fund defaults, the market is affected. **Mitigants:** Junior absorbs losses first up to the coverage percentage. The Foundation applies onboarding criteria (audit status, track record, minimum size) before making a source available. The curator conducts independent due diligence before allocating.
**Senior-Specific: Loss Exposure After Junior Exhaustion**
Senior is backed by Junior's first-loss buffer, but if losses exceed Junior's balance, Senior is exposed to the remainder. The coverage requirement sets the smart-contract-enforced minimum buffer, but it is not a guarantee against all losses. If the market's Protected Exit Threshold is reached, Senior can withdraw immediately with the underlying asset and liquidate it to prevent further losses during a gradual drawdown. Junior may still have remaining capital at this point, providing a buffer for Seniors who choose to stay.
**Junior-Specific: First-Loss and Liquidity Constraints**
Junior absorbs all losses from the first dollar. Because both tranches are co-invested (beta = 1), losses are amplified by the coverage ratio: at 20% coverage, Junior is effectively 5x levered on the downside. Therefore, a 2% drawdown on the underlying would translate to a 10% loss on Junior's capital. Junior losses can be finalized in two ways: if the Observation Period window expires without recovery, or if the drawdown reaches the market's Protected Exit Threshold. Once finalized, Junior loses recovery optionality but may still have remaining capital.
Junior withdrawals are constrained by the coverage requirement. If Junior's capital is fully committed to backing Senior, withdrawals are restricted until utilization decreases. Junior deposits into illiquid underlying sources (e.g., RWA positions with 30-day redemption windows) inherit that illiquidity.
**Junior-Specific: Recovery Accounting**
During an Observation Period, Dawn separately tracks Junior impermanent loss arising from coverage provided to Senior. Subsequent appreciation may repay this tracked amount and cause the protocol to treat the recovery condition as satisfied.
Repayment of tracked JT IL should not be interpreted as a guarantee that Junior share value has returned to its pre-observation-period level. The Junior tranche may have experienced other changes in NAV during the same period, and the deployed Dawnaccounting system does not use restoration of the pre-observation Junior share value as the condition for determining that JT IL has been recovered.
**Vault-Level Risks (srRoyUSDC, roywstETH)**
Dialectic, the Vault's curator, has published more about the risks of each Vault at: [https://www.notion.so/dialectic/Royco-Vault-Risk-Overview-31feeae9e9298090add8c1dea433517d](https://www.notion.so/dialectic/Royco-Vault-Risk-Overview-31feeae9e9298090add8c1dea433517d)
#### Operational Risks
**Curator Risk**
The curator has operational control of vault positions. Poor allocation decisions or slow response to risk events could result in losses. **Mitigants:** The curator is contractually bound to a standard of care. Permissions are scoped, meaning the curator can only perform authorized actions. The Foundation can revoke curator access and transition to a successor.
**Oracle and Pricing Risk**
The protocol relies on price feeds to value positions and determine collateral ratios. Oracle manipulation or failure could lead to incorrect valuations. **Mitigants:** Established oracle providers (Chainlink, RedStone). For tokenized RWAs, admin-controlled configurations source prices from NAV rather than thin secondary markets. Vault-level pricing is reviewed daily through the NAV update process.
***
*This document is provided for informational purposes only and does not constitute investment advice, a solicitation, or an offer to sell any securities or financial instruments. Participation in Royco Dawn products involves risk, including the potential loss of all capital deployed. Prospective participants should conduct their own independent due diligence and consult with qualified legal, financial, and tax advisors before making any investment decisions.*
# 8. EntryPoint
Source: https://docs.royco.org/royco-dawn/roycoentrypoint
**Dawn is a legacy deployment.** Contracts remain operational, but Dawn is no longer under active development and has known accounting limitations. [Learn more →](/royco-dawn/legacy-deployment)
**RoycoEntryPoint** is the protocol's tranche deposit gateway contract. All deposits into Royco Dawn markets are routed through the RoycoEntryPoint rather than depositing directly into tranche contracts. This design enables several protocol-level guarantees:
1. **Queued execution:** Deposits are batched and executed in processing cycles, preventing front-running and ensuring fair ordering.
2. **Fee routing:** Protocol-level execution fees are applied at the entry point before assets are forwarded to the vault.
3. **Upgradeability:** Entry point logic can be updated by the Foundation without requiring vault contract changes.
Depositors should always interact with Royco products via the official app at royco.org, which routes transactions through the RoycoEntryPoint. Direct vault deposits bypass access controls and are not supported.
***
*This document is provided for informational purposes only and does not constitute investment advice, a solicitation, or an offer to sell any securities or financial instruments. Participation in Royco Dawn products involves risk, including the potential loss of all capital deployed. Prospective participants should conduct their own independent due diligence and consult with qualified legal, financial, and tax advisors before making any investment decisions.*
# 7. Security and Audits
Source: https://docs.royco.org/royco-dawn/security-and-audits
**Dawn is a legacy deployment.** Contracts remain operational, but Dawn is no longer under active development and has known accounting limitations. [Learn more →](/royco-dawn/legacy-deployment)
This page gives an overview of Royco's comprehensive due diligence and security processes. To read more, visit our dedicated security page at:
[https://www.royco.org/security](https://www.royco.org/security)
#### Access Controls
Funds can only be withdrawn to pre-approved addresses.
#### Audits
The protocol's core smart contract infrastructure has undergone independent security reviews:
**Royco Day:**
| Auditor | Scope | Type |
| :- | :- | :- |
| Tomer Ganor | [Royco Day protocol contracts](https://github.com/roycoprotocol/royco-day/blob/main/audit/Tomer-Royco-Day.pdf) | Manual review |
| Certora | [Royco Day protocol contracts](https://github.com/roycoprotocol/royco-day/blob/main/audit/Certora-Royco-Day.pdf) | Manual review |
| Hexens | [Royco Day protocol contracts](https://github.com/roycoprotocol/royco-day/blob/main/audit/Hexens-Royco-Day.pdf) | Manual review |
| Olympix | [Royco Day protocol contracts](https://github.com/roycoprotocol/royco-day/blob/main/audit/Olympix-Royco-Day.pdf) | Agentic AI review |
**Royco Dawn:**
| Auditor | Scope | Type |
| :- | :- | :- |
| Halborn | Vault infrastructure (Concrete Earn v2 Core — Standard + Async) | Manual review |
| Cantina Public Competition | [Royco Dawn protocol contracts](https://github.com/roycoprotocol/royco-dawn/blob/main/audit/Cantina-Royco-Dawn-Whitelist.pdf) | Competitive audit |
| Hexens | Royco Dawn protocol contracts ([Jan 2026 Audit](https://hexens.io/audit-reports/royco-perpetual-risk-tranching-protocol-jan-2026) \| [Mar 2026 Update](https://hexens.io/audit-reports/royco-risk-tranching-protocol-update-mar-2026) \| [Apr 2026 Update](https://hexens.io/audit-reports/royco-entry-point-contract-update-apr-2026)) | Manual review |
| Certora | Royco Dawn protocol contracts ([Jun 2026 Audit](https://github.com/roycoprotocol/royco-dawn/blob/main/formal-verification/Certora-Royco-Dawn-FV.pdf)) | Manual review + Formal Verification |
#### Curator Infrastructure Audits
The vault curator's own operational infrastructure integration has undergone independent security review for Makina V1.1: [docs.makina.finance/contracts/security](https://docs.makina.finance/contracts/security)
#### Bug Bounty Program
The protocol maintains a **\$250,000 active bug bounty program** through Immunefi at [immunefi.com/bug-bounty/royco](https://immunefi.com/bug-bounty/royco/). Rewards are scaled to the severity of the finding. The scope includes the protocol's core smart contracts; specifically, any vulnerability where a privileged role can bypass whitelist protections or direct funds to non-whitelisted addresses.
#### Real-Time Monitoring
Hypernative is configured for real-time onchain monitoring, detecting anomalous contract interactions, unusual fund movements, and known attack patterns. The protocol also maintains an upgrade system and emergency response plan for rapid response to potential threats.
#### Permission Architecture as Security
As described in [Governance and Fees](/governance-and-fees), the permission architecture is itself a security measure. The curator can only perform actions explicitly granted within its scoped permissions. Funds cannot be routed to arbitrary addresses, and protocol parameters cannot be modified outside the defined permission boundaries.
The Foundation Root Multisig operates with a timelock on critical parameter changes, ensuring depositors have advance notice and can exit before changes take effect.
***
*This document is provided for informational purposes only and does not constitute investment advice, a solicitation, or an offer to sell any securities or financial instruments. Participation in Royco products involves risk, including the potential loss of all capital deployed. Prospective participants should conduct their own independent due diligence and consult with qualified legal, financial, and tax advisors before making any investment decisions.*
# 3. Vault Products
Source: https://docs.royco.org/royco-dawn/vault-products
Royco offers two key Vault products, managed by an external curator: Dialectic.
**Dawn is a legacy deployment.** Contracts remain operational, but Dawn is no longer under active development and has known accounting limitations. [Learn more →](/royco-dawn/legacy-deployment)
### **About Dialectic**
Dialectic is a Swiss crypto-native investment firm founded in 2019. The firm specializes in systematic, market-neutral DeFi yield strategies, powered by proprietary on-chain automation and risk-management tooling built by its in-house research arm, Atelier.
### **The Vaults**
**Senior Royco USDC (srRoyUSDC)**
srRoyUSDC is Royco Dawn's Senior Vault token. Users deposit USDC and receive a yield-bearing ERC-4626 token. Dawn splits every yield opportunity into two tranches: Junior capital absorbs losses first (up to the coverage amount) before Senior is affected, while Senior earns yield on the remaining share. srRoyUSDC deposits are allocated exclusively to Senior tranches. Dialectic manages the vault, selecting which Senior tranches to allocate to and rebalancing based on real-time coverage and risk signals.
**Royco ETH (roywstETH)**
roywstETH is Royco Dawn's Carry Vault, allowing users to deposit wstETH and earn yield without selling wstETH. The vault posts deposited wstETH as collateral to a lending venue, borrows USDC against it, and deploys that USDC into srRoyUSDC to earn the Senior tranche yield. Returns come from two sources: the underlying stETH staking reward plus the spread between the Senior tranche yield and the borrow cost. Dialectic manages the vault, handling collateral management, borrowing, and rebalancing across market conditions. Carry vault depositors are exposed to collateral liquidation risk if ETH price declines significantly relative to the outstanding borrow position.
Vault performance is variable and depends on underlying market conditions, borrow costs, and yield source performance. Past performance is not indicative of future results. All depositors should review Section 6 (Risk Framework) before participating.
### Portfolio Strategy
Dialectic has built a robust framework for how they will manage the following parameters across the Vaults:
1. Concentration limits
2. Rebalancing expectations
3. Market evaluation criteria
It can be found at: [https://www.notion.so/dialectic/Dialectic-DD-Framework-31feeae9e9298020a8fbfc5f15d1347b](https://www.notion.so/dialectic/Dialectic-DD-Framework-31feeae9e9298020a8fbfc5f15d1347b)
### Key Risks
Dialectic has published an overview of all key risks, accessible at: [https://www.notion.so/dialectic/Royco-Vault-Risk-Overview-31feeae9e9298090add8c1dea433517d](https://www.notion.so/dialectic/Royco-Vault-Risk-Overview-31feeae9e9298090add8c1dea433517d)
### Allocation Delays
New strategy allocations are subject to a notice period. When a curator queues a new strategy, it is displayed in the app and remains visible for a minimum of 7 days before the curator may allocate capital to it.
### **Audits**
Royco's audits can be found in [Section 7](/royco-dawn/security-and-audits). Concrete has completed audits with [Cantina](https://docs.concrete.xyz/assets/files/cantinacode-concrete-finance-813b45d86d6450723139b0cc55857c4d.pdf/) and [Halborn](https://docs.concrete.xyz/assets/files/Standard-Implementation-9948d7fcebb518e5c29051bc2326b5ec.pdf/). Additionally, Makina has completed audits from [ChainSecurity, Enigma Dark, Sigma Prime, Cantina and Ottersec](https://docs.makina.finance/contracts/security).
### **Withdrawals & Liquidity**
**Delays**
It may take up to 30 days for a withdrawal to process. Each Vault requires users to request a redemption. Dialectic will then process the liquidity for the redemption. Users will then need to claim the assets once the liquidity is open for redemption.
Users may be able to sell Vault positions via decentralized protocols such as LiFi, Curve, Balancer and Uniswap, bypassing the processing period associated with native deposit or withdrawal.
**Sequence**
The Vault will process withdrawals in the following priority:
1. Royco's own Vaults (i.e., roywstETH and sroywstETH)
2. Priority Partners
3. Remaining Withdrawals
### **Flow of Funds**
The funds are managed through both Makina and Concrete to preserve self-custody. Depositors can review each custodian's infrastructure and security documentation directly: [docs.makina.finance](https://docs.makina.finance) and [docs.concrete.xyz](https://docs.concrete.xyz).
### **Fees**
Vault-level fees are detailed in [Section 4](/royco-dawn/governance-and-fees) (Governance and Fees).
***
*This document is provided for informational purposes only and does not constitute investment advice, a solicitation, or an offer to sell any securities or financial instruments. Participation in Royco Dawn products involves risk, including the potential loss of all capital deployed. There is no guarantee of returns, and depositors may lose some or all of their capital. Prospective participants should conduct their own independent due diligence and consult with qualified legal, financial, and tax advisors before making any investment decisions. By participating, depositors acknowledge that they have reviewed the Risk Framework (Section 6) and the Terms of Service.*
# Royco ETH (roywstETH)
Source: https://docs.royco.org/royco-eth-roywst-eth
roywstETH lets wstETH holders earn Royco yield on top of staking rewards by borrowing USDC against their wstETH and deploying into srRoyUSDC.
The **Senior Royco USDC Vault** and the **Royco ETH Vault** are winding down and are now in withdrawal-only mode. Deposits are closed, but you can still withdraw your funds.
The vault posts deposited wstETH as collateral to a lending venue, borrows USDC against it, and deploys that USDC into srRoyUSDC to earn the Senior Tranche yield. Returns come from two sources: the underlying stETH staking reward plus the spread between the ST yield and the borrow cost. Dialectic manages the vault, handling collateral management, borrowing, and rebalancing across market conditions. Carry vault depositors are exposed to collateral liquidation risk if ETH price declines significantly relative to the outstanding borrow position.
Vault performance is variable and depends on underlying market conditions, borrow costs, and yield source performance. Past performance is not indicative of future results. All depositors should review Section 6 (Risk Framework) before participating.
***
*This document is provided for informational purposes only and does not constitute investment advice, a solicitation, or an offer to sell any securities or financial instruments. Participation in Royco products involves risk, including the potential loss of all capital deployed. Prospective participants should conduct their own independent due diligence and consult with qualified legal, financial, and tax advisors before making any investment decisions.*
# Royco Overview
Source: https://docs.royco.org/royco-overview
Royco is a non-custodial risk and liquidity tranching protocol that splits any yield source into Senior, Junior, and Senior Liquidity Provider tranches, letting depositors choose their risk and liquidity profile.
Every Royco market starts from a single yield source: a lending market, a staking deposit, or tokenized RWA, and splits it into three tranches:
* **Senior Tranche (ST)**: earns the least yield but benefits from seniority and secondary liquidity.
* **Junior Tranche (JT):** earns the highest yield by serving as first-loss capital and receives a risk premium paid by Senior, in addition to the base asset yield.
* **Senior Liquidity Provider (SLP):** earns a premium and trading fees by providing secondary liquidity for the Senior tranche.
**Yield Distribution**
Yield flows from the ST to both JT and SLP, paying for Senior's coverage and liquidity based on pre-defined ratios.
#### Why This Matters
**ST get real downside coverage.** Every ST position has a minimum amount of JT capital in front of it. ST is not impaired until this JT capital is fully exhausted.
**ST gets secondary liquidity.** Many yield opportunities are illiquid by design. Despite that, ST can buy/sell their positions, without having to wait out the asset's full duration. This functions as an alternative exit in addition to primary redemption.
**JT takes the first loss.** JT absorbs any ST drawdown. For JT, this effect is similar to a levered position without the negative carry.
**JT benefits from an observation period.** When the base asset draws down, the protocol enters a time-bounded observation window before allocating losses. Temporary, expected volatility that reverses within the window does not slash JT capital. JT only absorbs actual, persistent losses, not noise.
**JT earns a premium for risk.** JT earns a risk premium, paid by ST positions, for formally taking the first-loss position.
**SLP gets paid to be the exit.** SLP provides secondary exit liquidity for ST by providing liquidity to an AMM pool composed of ST shares and the market's quote asset. SLP earns a liquidity premium and trading fees, as well as buying shares at a discount when ST sells shares into the pool.
#### The Vault Products
For users who do not want to evaluate and manage individual Royco markets, curators offer automated products.
| Vault | Curator | Deposit Asset | What It Does |
| - | - | - | - |
| Senior Vault (srRoyUSDC) | Dialectic | USDC | Allocates across multiple Senior tranches for diversified, Senior-tranche yield. May utilize Senior tokens in lending protocols for levered exposure while retaining first-loss coverage. |
| Royco ETH (roywstETH) | Dialectic | wstETH | Borrows USDC against wstETH collateral and deploys into srRoyUSDC, earning staking rewards plus the carry spread |
The **Senior Vault (srRoyUSDC)** is the foundational product, deploying USDC into Senior tranches across a diversified set of yield sources to offer buffered yield backed by JT first-loss capital. **Royco ETH (roywstETH)** is built for ETH holders who want to earn yield: it borrows USDC against wstETH collateral and deploys the proceeds into srRoyUSDC, capturing staking rewards plus the carry spread. Each vault is managed by a professional, independent curator.
***
*This document is provided for informational purposes only and does not constitute investment advice, a solicitation, or an offer to sell any securities or financial instruments. Participation in Royco products involves risk, including the potential loss of all capital deployed. Prospective participants should conduct their own independent due diligence and consult with qualified legal, financial, and tax advisors before making any investment decisions.*
# EntryPoint
Source: https://docs.royco.org/roycoentrypoint
The EntryPoint contract is the single interface for tranche operations across Royco markets.
**EntryPoint** is the protocol's tranche deposit and redemption gateway contract. Deposits and redemptions are routed through the EntryPoint, and both are asynchronous.
Deposit delays are configurable per market. Redemption delays are also configurable, with a minimum T+1 delay. This T+1 delay is an intentional design choice, closing the window where someone could deposit/redeem to take advantage of a mark that is about to move.
Once submitted, a request becomes executable after its set market delay. Once this delay elapses, anyone can execute it in a separate transaction; the depositor can attach an optional executor bonus to incentivize autonomous execution.
#### **Your request is priced at submission**
* A deposit is pinned to the tranche shares it would have minted at request time. If the share price falls during the delay, the extra shares your assets would now buy are forfeited to the protocol.
* A redemption is pinned to the value its shares were worth at request time. If that value rises or yield accrues during the delay, the increase is forfeited to the protocol.
#### **Oracle Gate**
* Deployers can optionally enable the oracle gate; executing a deposit or redemption request only after the collateral asset's oracle posts a new price update. This prevents someone from submitting a deposit just before a scheduled NAV update to capture yield from a period they did not hold through.
#### Expiry and cancellation
* Every request has an execution window. Once it elapses, the request can no longer be executed and may only be cancelled.
* You can cancel a pending request at any time and reclaim your escrowed assets or shares.
* Requests can also be filled partially. If a market can only serve part of your request right now, the rest stays queued at its original request-time price and can be filled as capacity frees up.
Depositors should always interact with Royco products via the official app at royco.org, which routes transactions through the EntryPoint. Direct vault deposits bypass the EntryPoint's queue protections and are not supported.
***
*This document is provided for informational purposes only and does not constitute investment advice, a solicitation, or an offer to sell any securities or financial instruments. Participation in Royco products involves risk, including the potential loss of all capital deployed. Prospective participants should conduct their own independent due diligence and consult with qualified legal, financial, and tax advisors before making any investment decisions.*
# Security and Audits
Source: https://docs.royco.org/security-and-audits
Royco's audit history, formal verification, and security practices, including audited contracts and verification partners.
This page gives an overview of Royco's comprehensive due diligence and security processes. To read more, visit our dedicated security page at:
[https://www.royco.org/security](https://www.royco.org/security)
#### Access Controls
Funds can only be withdrawn to pre-approved addresses.
#### Audits
The protocol's core smart contract infrastructure has undergone independent security reviews:
**Royco Day:**
| Auditor | Scope | Type |
| - | - | - |
| Tomer Ganor | [Royco Day protocol contracts](https://github.com/roycoprotocol/royco-day/blob/main/audit/Tomer-Royco-Day.pdf) | Manual review |
| Certora | [Royco Day protocol contracts](https://github.com/roycoprotocol/royco-day/blob/main/audit/Certora-Royco-Day.pdf) | Manual review |
| Hexens | [Royco Day protocol contracts](https://github.com/roycoprotocol/royco-day/blob/main/audit/Hexens-Royco-Day.pdf) | Manual review |
| Olympix | [Royco Day protocol contracts](https://github.com/roycoprotocol/royco-day/blob/main/audit/Olympix-Royco-Day.pdf) | Olympix BugPOCer |
| Cyfrin | [Royco Day protocol contracts](https://github.com/roycoprotocol/royco-day/blob/4eac294e055660d98cc89d14670fd3dd3aa37951/audit/Cyfrin-Solace-Royco-Day.md) | Cyfrin Solace |
**Royco Dawn:**
| Auditor | Scope | Type |
| - | - | - |
| Halborn | Vault infrastructure (Concrete Earn v2 Core — Standard + Async) | Manual review |
| Cantina Public Competition | [Royco Dawn protocol contracts](https://github.com/roycoprotocol/royco-dawn/blob/main/audit/Cantina-Royco-Dawn-Whitelist.pdf) | Competitive audit |
| Hexens | Royco Dawn protocol contracts ([Jan 2026 Audit](https://hexens.io/audit-reports/royco-perpetual-risk-tranching-protocol-jan-2026) \| [Mar 2026 Update](https://hexens.io/audit-reports/royco-risk-tranching-protocol-update-mar-2026) \| [Apr 2026 Update](https://hexens.io/audit-reports/royco-entry-point-contract-update-apr-2026)) | Manual review |
| Certora | Royco Dawn protocol contracts ([Jun 2026 Audit](https://github.com/roycoprotocol/royco-dawn/blob/main/formal-verification/Certora-Royco-Dawn-FV.pdf)) | Manual review + Formal Verification |
#### Curator Infrastructure Audits
The vault curator's own operational infrastructure integration has undergone independent security review for Makina V1.1: [docs.makina.finance/contracts/security](https://docs.makina.finance/contracts/security)
#### Bug Bounty Program
The protocol maintains a **\$250,000 active bug bounty program** through Immunefi at [immunefi.com/bug-bounty/royco](https://immunefi.com/bug-bounty/royco/). Rewards are scaled to the severity of the finding. The scope includes the protocol's core smart contracts; specifically, any vulnerability where a privileged role can bypass whitelist protections or direct funds to non-whitelisted addresses.
#### Real-Time Monitoring
Hypernative is configured for real-time onchain monitoring, detecting anomalous contract interactions, unusual fund movements, and known attack patterns. The protocol also maintains an upgrade system and emergency response plan for rapid response to potential threats.
#### Permission Architecture as Security
As described in [Governance and Fees](/governance-and-fees), the permission architecture is itself a security measure. The curator can only perform actions explicitly granted within its scoped permissions. Funds cannot be routed to arbitrary addresses, and protocol parameters cannot be modified outside the defined permission boundaries.
The Foundation Root Multisig operates with a timelock on critical parameter changes, ensuring depositors have advance notice and can exit before changes take effect.
***
*This document is provided for informational purposes only and does not constitute investment advice, a solicitation, or an offer to sell any securities or financial instruments. Participation in Royco products involves risk, including the potential loss of all capital deployed. Prospective participants should conduct their own independent due diligence and consult with qualified legal, financial, and tax advisors before making any investment decisions.*
# Senior Tranche (ST)
Source: https://docs.royco.org/senior-tranche
The Senior Tranche (ST) earns protected, liquid yield, paying a premium to both the JT and SLP.
ST Net Yield is calculated as follows:
> Base Asset Yield − Risk Premium − Liquidity Premium
The ST has **two key benefits: 1) risk protection, and 2) liquidity transformation.** On risk protection, if the strategy drops, the JT absorbs the losses first up to its size. On liquidity transformation, the ST benefits from a constantly funded AMM pool with stablecoins and the senior tranche assets. This enables holders to exit without waiting until the redemption. The mechanism ensures there is always a minimum amount of JT (for protection), and SLP (for liquidity), a parameter set at pool initialization. ST assets are both protected and liquid.
When looking to exit a position, Seniors have two ways out. They can redeem: claim their share of the market's collateral at full marked value, paid in the base asset. Or they can sell: trade their shares into the SLP pool for stablecoin liquidity at the current market price. Redemption settles after a queue, while selling is immediate.
***
*This document is provided for informational purposes only and does not constitute investment advice, a solicitation, or an offer to sell any securities or financial instruments. Participation in Royco products involves risk, including the potential loss of all capital deployed. Prospective participants should conduct their own independent due diligence and consult with qualified legal, financial, and tax advisors before making any investment decisions.*
# Senior Vault (srRoyUSDC)
Source: https://docs.royco.org/vault-products
srRoyUSDC is a managed USDC vault that allocates across Royco Senior Tranches for diversified, coverage-backed senior yield.
The **Senior Royco USDC Vault** and the **Royco ETH Vault** are winding down and are now in withdrawal-only mode. Deposits are closed, but you can still withdraw your funds.
Users deposit USDC and receive a yield-bearing ERC-4626 token. srRoyUSDC deposits are allocated to ST assets. Dialectic manages the vault, selecting which STs to allocate to and rebalancing based on real-time coverage and risk signals.
Vault performance is variable and depends on underlying market conditions, borrow costs, and yield source performance. Past performance is not indicative of future results. All depositors should review Section 6 (Risk Framework) before participating.
***
*This document is provided for informational purposes only and does not constitute investment advice, a solicitation, or an offer to sell any securities or financial instruments. Participation in Royco products involves risk, including the potential loss of all capital deployed. There is no guarantee of returns, and depositors may lose some or all of their capital. Prospective participants should conduct their own independent due diligence and consult with qualified legal, financial, and tax advisors before making any investment decisions. By participating, depositors acknowledge that they have reviewed the Risk Framework (Section 6) and the Terms of Service \[link].*