> For the complete documentation index, see [llms.txt](https://own-protocol.gitbook.io/docs/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://own-protocol.gitbook.io/docs/yield-bearing-reserve.md).

# Yield bearing Reserve

## Leveraging Yield-Bearing Stablecoins in Own Protocol

### Introduction

One of Own Protocol’s most powerful features is its ability to integrate **yield-bearing stablecoins** like **aUSDC (from Aave)** or **cUSDC (from Compound)** as reserve tokens. This enhances capital efficiency and allows users to **offset interest costs** using DeFi-native yield.

This feature is a showcase of **DeFi composability at its best** — combining synthetic asset exposure with passive yield generation.

***

### How It Works

When minting synthetic asset exposure in Own Protocol, users deposit:

* A **deposit amount** (e.g., in aUSDC)
* Additional **collateral** (also in a yield-bearing token)

While the user pays a floating interest rate to LPs (e.g., 9% annually), their deposited stablecoins **continue to earn yield** (e.g., 6% via Aave or Compound).

#### Example:

* User pays 9% annual interest to LPs
* Their reserve token earns 6% annually from Aave
* **Net cost of exposure = 9% - 6% = 3% annualized**

This 3% effective cost is **comparable to traditional mutual fund fees**, but with:

* No intermediaries
* Real-time exposure tracking
* Onchain, composable access

***

### Why This Matters

This mechanism makes Own:

* **More attractive to users**: Lower effective cost than most synthetic platforms
* **More efficient**: Capital is never idle
* **More interoperable**: Any yield-bearing stablecoin can be integrated

It also aligns with Own’s vision of:

* Creating systems that **do more with every dollar deposited**
* Offering synthetic exposure that’s **not just cost-effective**, but **yield-aware**

***

### Supported Yield-Bearing Tokens

Own Protocol is designed to support multiple sources of reserve yield:

* **Aave aTokens** (e.g., aUSDC, aDAI)
* **Compound cTokens**

As long as the token maintains 1:1 price stability with the underlying stablecoin, it can be used.

***

### Design Philosophy

Most DeFi protocols treat collateral as dead weight. **Own flips this model**:

* Your reserve tokens keep earning yield
* You gain asset exposure **without full capital cost**
* You retain **DeFi-native composability** and flexibility

This model rewards users for choosing protocols that integrate **smart money flows** over static deposits.

***

### TL;DR

| Feature                    | Description                                                 |
| -------------------------- | ----------------------------------------------------------- |
| **Yield-Bearing Reserves** | Use aUSDC, cUSDC etc. as deposit tokens                     |
| **Net Fee Reduction**      | Offset LP interest cost with yield from reserve token       |
| **Example Outcome**        | Pay 9% to LP, earn 6% from Aave → net 3% annual fee         |
| **Composable Finance**     | Use ERC-4626 vaults to integrate with other DeFi primitives |
| **Capital Efficiency**     | Keep deposits productive while gaining synthetic exposure   |