> For the complete documentation index, see [llms.txt](https://docs.apyx.fi/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.apyx.fi/apyx-overview/how-apyx-works.md).
# How Apyx Works
Overview of how user deposits are stored and utilized in Apyx
The Apyx protocol has four core components:
* **Users:** Individuals who interact with the protocol by depositing USDC to acquire and stake to earn a yield
* **Offchain Treasury:** Allocates incoming USDC to acquire a diversified basket of low-volatility, dividend-bearing instruments or highly liquid cash-equivalents. It collects yield and converts the proceeds into onchain distributable yield.
* **Onchain Vault:** Receives yield and distributes it to holders over time by increasing redemption value.
* **Stock Market:** The external market where the protocol acquires the preferred assets or other more liquid backing assets used in the collateral basket.
### Process Flow
#### Minting
End users obtain and use minting tokens (apxUSD or alqUSD) through secondary markets. Like many other stablecoin projects, whitelisted users deposit collateral and receive newly minted apxUSD or alqUSD tokens.
Any spreads and offchain execution expenses incurred during minting and redemption may be reflected in the price. Apyx generates minimal profit from minting and redemption; costs are limited to what is necessary to operate the protocol and prevent various attacks.
All redemption activity occurs at Redemption Value.
#### Collateral Acquisition
The Offchain Treasury allocates incoming capital to acquire preferred assets ("Prefs") and short-term treasury bonds.
Acquired assets are held in custody in designated accounts, and the Offchain Treasury manages allocation and operations. Since the backing assets are held offchain, Apyx provides regular third-party accounting attestations and transparent reporting on custody and collateral composition so users can independently verify the backing.
#### Protocol Rewards Distribution
Dividends are collected offchain, converted into apxUSD or alqUSD, and sent to the Apyx Onchain Vault. The vault distributes this yield to apyUSD and aptUSD holders.
{% hint style="info" %}
The protocol is designed not to rehypothecate or lend deposited apxUSD or alqUSD. Yield is intended to be sourced from cashflows from underlying assets.
{% endhint %}
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