From the outside looking in, the decentralized finance (DeFi) arena has ushered in a financial revolution that traditional markets simply cannot compete with. For example, over the last couple of years, there has been a significant rise in the number of investment opportunities available for crypto users of all experience levels.

Amid the growing number of platforms offering these opportunities, Rivo has distinguished itself by democratizing access to the DeFi market for interested individuals. For starters, it presents users with several ‘indexes’ designed to be the perfect entry points for anyone looking to enter this realm.

The Yield USD (xUSD) index is particularly noteworthy in this regard since it allows investors (seeking stable returns) to effectively manage their risk and with minimal technical knowledge.

This review thoroughly examines the xUSD index, exploring its structure, underlying assets, and potential investor benefits.

What is the Yield USD (xUSD) Index?

Imagine an investor who wants to enter the real estate market. A straightforward approach would be to purchase a piece of property upfront. However, that requires substantial capital, market research, and property management skills.

Alternatively, it is possible to invest in a real estate investment trust (REIT) that pools funds from various investors, allowing each individual to gain indirect exposure to the real estate market without having to buy/manage individual properties.

Similarly, the Yield USD index, also known as xUSD, is an omnichain offering designed to expose users to diverse stablecoin strategies across multiple networks.

To elaborate, xUSD’s stability comes from assets that are pegged to the U.S. dollar, several carefully crafted yield generation strategies, and a cross-chain functionality module built using LayerZero technology.

Moreover, the utilized stablecoins are carefully evaluated based on factors such as protocol design, counterparty risk, smart contract security, and decentralization.

Why choose the Yield USD Index, and what’s inside?

The xUSD index is made up of multiple yield-bearing stablecoin strategies, including USDbC on Beefy, Compound USDC on Beefy, and Curve 2Pool on Beefy. Each strategy represents approximately one-third of the index's allocation.

USDbC

The USDbC strategy deposits assets on Compound on the Base network (via Beefy Finance), earning organic yield and additional $COMP token rewards.

compoundUSDC

the Compound USDC strategy utilizes one of the most battle-tested protocols in DeFi, depositing funds on Compound to earn interest and $COMP rewards.

curve2Pool

The Curve 2Pool strategy provides liquidity for the USDT-USDC.e pair on Curve via Convex, earning $CVX rewards which are automatically reinvested.

The yield generation process for the xUSD index involves the following steps:

• To start, users deposit USDC into Rivo, which then distributes the funds across various strategies.

• These strategies earn interest, LP rewards, and token incentives such as $COMP and $CVX.

• Beefy Finance acts as a yield optimizer, automatically reinvesting the accrued rewards to compound returns.

• Users can withdraw their USDC along with accrued gains anytime.

Lastly, the index’s expected APY, historically ranging from 3-20%, with the current weekly APY hovering around the 3% mark. Also, it is important to consider that despite the vault's positive APY, volatility inherent in the underlying assets can potentially lead to negative performance during bear markets.

How risk-effective is xUSD?

A robust risk assessment, including factors such as the index’s simplicity, longevity, and protocol safety, has determined the xUSD index to be extremely safe. The index currently has a safety score of 90 out of 100, indicating a high level of security, even during periods of market volatility.

Additionally, the underlying protocols used in the xUSD index have been audited by a number of reputable firms including Zellik, CertiK, OpenZeppelin, ChainSecurity, Peckshield, Nomoi, and MixBytes.

The underlying protocols (i.e. Convex, Curve, Compound) currently have $1 billion, $2.03 billion, and $1.92 billion total value locked within them, respectively.

What are some of the advantages and drawbacks of xUSD?

Pros

• Diversification and stability: The index exposes users to multiple stablecoin strategies across different networks. Moreover, the use of stablecoins helps maintain price stability while generating regular yields.

• Advanced automation: The index features an automated management module, with yield optimization and reinvestment.

• Interoperability: Its cross-chain capabilities allow access to yields from multiple blockchain networks, while the use of LayerZero technology enables easy adaptation to market trends.

• Affordable gas fees: The index is deployed on a network offering extremely low transaction costs.

• Professionally managed: All of the index’s risk management aspects are handled by seasoned industry veterans, ensuring that the strategies are carefully selected and weighted based on multiple factors.

Cons

• Smart Contract Risks: As with any DeFi product, the xUSD index relies on smart contracts. Despite multiple audits, there is always a potential risk of malicious actors exploiting vulnerabilities.

• Potentially complex operations: Even though the index is easy to invest in, its underlying strategies and protocols remain complex for some investors to fully understand.

• Dependence on multiple platforms: The index depends on several DeFi protocols, including Compound and Curve, as well as Beefy Finance (for yield optimization), increasing its exposure to potential risks associated with these platforms.

How easy is it to invest in the index?

Interacting with the Yield USD index is an extremely straightforward process.

• Connect: Connect your wallet to Rivo and deposit USDC (on the Arbitrum One network) into the xUSD vault.

• Exchange: In exchange for the deposited funds, you’ll receive xUSD tokens (representing their share of the index.)

• Monitor: Monitor your investment performance through Rivo’s dashboard.

• Withdraw: When ready to exit, initiate a withdrawal request anytime.

The fees charged for the xUSD index includes a 5% reward fee and a 0.5% streaming fee. The accrued funds are used to sustain the protocol, incentivize new participants, and optimize the index during periods of volatility.

Conclusion

xUSD devises a holistic approach to DeFi yield farming by leveraging multiple strategies across various networks. In essence, it offers investors a balanced mix of stability and potential returns.

Furthermore, the index's focus on risk management, automated yield optimization, and cross-chain capabilities make it an attractive option for those looking to gain exposure to DeFi yields without the complexity of managing multiple positions themselves.