SuiDollar
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  • Delta Neutral USDC Vault
    • Vault Strategy
    • Deposits and Withdrawals
    • Protocol Fees and Reserves
    • Risks
      • Funding Risk
      • Liquidation Risk
      • Collateral Risk
      • Smart Contract Risk
  • Resources
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  1. Delta Neutral USDC Vault
  2. Risks

Collateral Risk

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Last updated 6 months ago

Execution of the Vault strategy involves holding SUI and USDC tokens on the Sui blockchain.

, the issuer of the USDC stablecoin, recently began to issue a native version of USDC on Sui. In time, we expect all Sui protocols will adopt this native USDC version. Currently, however, some of the USDC tokens circulating on Sui have been bridged from other chains via cross chain messaging protocol.

As a result, these USDC tokens on Sui are Wormhole-wrapped USDC tokens. Holding these USDC tokens therefore requires implicit trust in the Wormhole protocol, which holds the native USDC collateral on the chain of origin.

Collateral Risk refers to 2 potential events:

  • The Wormhole protocol is exploited, resulting in a loss of the native USDC collateral backing the wrapped USDC tokens that are circulating on Sui.

  • Failure of Circle, the company that issues the USDC stablecoin and holds USD collateral (such as bank deposits and US Treasuries) backing all circulating USDC.

is a cross-chain bridge developed and maintained by xLabs, the team behind the Wormhole protocol. Portal Bridge is currently the most popular way to move assets to Sui from other chains.

User's can convert between wrapped USDC tokens and native USDC tokens using or any other Sui DEX.

Circle
Wormhole's
Portal Bridge
Cetus Exchange