# Yield Distribution

### Protocol Revenue Explanation

apyUSD yield is sourced from semi-stable preferred shares held offchain in custody. For example, STRC pays dividends at an annualized rate of 11% and SATA at an initial rate of 12.5%, with dividends paid monthly in cash. These proceeds are converted into apxUSD and credited to the apyUSD vault via the `YieldDistributor`.

{% hint style="info" %}
The protocol does not rehypothecate, lend, or otherwise utilize deposited apxUSD for any purpose.
{% endhint %}

### Distribution Mechanism

Yield credited to the apyUSD vault utilizes a linear vesting mechanism implemented by the `LinearVestV0` contract. Instead of a single lump-sum distribution, yield is streamed continuously over a configurable period (e.g., 20 days).

Each month, the yield rate is set for the following month, based on the yield generated by the collateral base the prior month. The yield rate is set in dollar terms, e.g. $1M of yield will be paid this month. That yield is paid across all apyUSD not currently undergoing cooldown, meaning new apyUSD that is locked instantly begins receiving yield, reducing the overall % yield for everyone else. On the flip side, any apyUSD that enters the cooldown phase is removed from the pool set to receive yield, meaning the remaining apyUSD receive a higher % yield.

This structure supports protocol stability (potentially at the expense of growth), by creating a slower expansion and contraction curve.


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