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At Neutron, we have built the optimal environment for issuing and maximizing the potential of tokenized yield assets. Success in this space depends on the surrounding use cases, and while most ecosystems treat applications as isolated products, Neutron enhances their interdependencies to unlock deeper utility and capital efficiency.

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A Tailored Ecosystem

Credit Protocols: Enabling Greater Liquidity & Utility

Credit protocols—such as lending, borrowing, and perpetual futures platforms—require strong spot liquidity to list new assets. Greater liquidity leads to increased capacity and more favorable listing parameters.

Leverage Looping

Two of the most prominent yield-bearing assets in crypto today are stETH (Lido’s liquid staked ETH) and eETH (EtherFi’s liquid restaked ETH). Their dominant use case in DeFi is leverage looping—using the tokenized asset as collateral to borrow the underlying (ETH), redepositing it for more tokenized assets, and repeating the process.

Supply Capacity

A crucial factor for issuers is supply capacity—the maximum amount of an asset a credit protocol is willing to hold. Supply capacity is usually set in proportion to available spot liquidity depth on the path to USDC or another stablecoin that liquidators prefer. In the event of liquidation, liquidators must swiftly convert collateral into stable assets to mitigate inventory risk.

One industry-standard methodology is assessing how much liquidity can be liquidated at -2% slippage—a threshold that ensures liquidators can exit positions profitably while maintaining stability. For tokenized assets to be effectively used at scale in leveraged positions, their liquidity must be deep enough to facilitate seamless liquidations.

Maximizing Supply Capacity with Supervaults

To address this challenge, Neutron has developed Supervaults, leveraging two exclusive features of our smart contract ecosystem: the enshrined oracle and the CRON module.

• Enshrined Oracle: Publishes CEX price feeds every block as part of consensus, ensuring real-time pricing accuracy.
• CRON Module: Allows whitelisted smart contracts to execute automated tasks at the beginning and end of every block, eliminating reliance on external keepers.

Supervaults utilize these built-in innovations to create an integrated market maker (IMM) that dynamically adjusts to CEX prices every block. This enables:

• Competitive, profitable market-making with low liquidity.
• Excess liquidity deployment at a 1.5–2% discount from the CEX price, ensuring liquidators have ample liquidity.
• Increased supply caps for credit protocols, benefiting all stakeholders:
  • Liquidity providers profit from well-executed trades.
  • Lenders ensure solvency while earning yield.
  • Borrowers access greater capital efficiency.
  • Liquidators secure deeper liquidity to offload collateral.
  • Token issuers (you) maximize the usability of your asset in yield-bearing strategies.

Perpetual Futures, Basis Trading, and Long-Short Strategies

Another major use case for tokenized assets is their use as collateral in perpetual futures markets. Two of the most popular trading strategies include: