> For the complete documentation index, see [llms.txt](https://docs.osero.com/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.osero.com/osero-app/yield+-vaults/how-the-strategy-works.md).

# How The Strategy Works

### Strategy overview

Gauntlet’s strategy uses leverage to target higher returns than the base sUSDS yield.

Instead of maintaining a fixed level of leverage, Gauntlet’s risk engine continuously adjusts the strategy based on current borrowing rates.

This allows the vault to seek the best available spread between the yield earned on sUSDS and the cost of borrowing.

Where beneficial, the strategy can also spread positions across multiple markets and debt assets to reduce concentration and improve the overall borrowing rate.

### The loop, step-by-step

{% stepper %}
{% step %}

#### The vault holds sUSDS

The vault holds a share of [sUSDS](https://docs.osero.org/osero-app/sky-foundations/what-are-susds-and-usds), the yield-bearing token that earns the Sky Savings Rate.
{% endstep %}

{% step %}

#### sUSDS is supplied as collateral

The strategy deposits its sUSDS into a Morpho lending market as collateral.
{% endstep %}

{% step %}

#### Stablecoins are borrowed

The strategy borrows stablecoins against the supplied sUSDS collateral.
{% endstep %}

{% step %}

#### The borrowed asset may be converted 

If needed, the borrowed stablecoin is swapped into the required input asset. For example, borrowed USDT may be swapped to USDC.
{% endstep %}

{% step %}

### More sUSDS is acquired

The borrowed stablecoins are used to mint or swap into additional sUSDS.
{% endstep %}

{% step %}

### The loop resupplies

The newly acquired sUSDS is deposited back as collateral, allowing the strategy to repeat the process.
{% endstep %}
{% endstepper %}

The complete process is automated. Gauntlet’s risk engine continuously monitors and rebalances the position, so users do not need to manage the strategy themselves.

### Entry routes

#### goUSDC

USDC is deposited directly into the strategy.

#### goUSDT

USDT is converted to USDC before entering the same underlying strategy.

### Dynamic leverage

Leverage is dynamic rather than fixed or guaranteed.

If the strategy cannot find a positive spread between the sUSDS yield and borrowing costs, it can reduce leverage toward 1x.

#### Leverage parameters

| Parameter     | Value        |
| ------------- | ------------ |
| Min leverage  | 1x           |
| Max leverage  | 6x (83% LTV) |
| Emergency LTV | 90%          |

**Minimum leverage (1x)** - the strategy’s floor. If borrowing costs exceed the yield, the vault can reduce leverage toward 1x rather than maintain an unprofitable position.

**Maximum leverage (6x / 83% LTV)** - the upper limit the strategy can reach when spreads are favorable, and market conditions support it.

**Emergency LTV (90%)** - the strategy’s hard risk boundary. Auto-deleveraging is designed to reduce the position before this level is reached, independently of the liquidation thresholds in the underlying Morpho market.

## Risk infrastructure

### Aera V3 - vault infrastructure

Yield+ vaults are built on [Aera V3](https://www.gauntlet.xyz/p/aera-vault-infrastructure), a noncustodial smart contract protocol for onchain asset management. Aera provides the vault infrastructure the strategy runs on, while Gauntlet handles strategy design, leverage, and risk management.

* **ERC-4626 vaults** - Yield+ vaults use the standard ERC-4626 interface for deposits and withdrawals.
* **Multi-depositor support** - goUSDC and goUSDT use Aera’s Provisioner contract to handle deposits, redemptions, and order fulfillment across multiple users.
* **Constrained strategy execution** - swaps, supplying, borrowing, and rebalancing can only be executed within predefined onchain permissions. This limits Gauntlet’s automation to approved actions and parameters.
* **Audited contracts** - Aera’s smart contracts have been independently audited, including reviews by [Spearbit](https://github.com/aera-finance/aera-contracts-public/blob/main/v2/audits/spearbit/2023-09-22.pdf) and [OpenZeppelin](https://github.com/aera-finance/aera-contracts-public/blob/main/v2/audits/openzeppelin/2024-05-15.pdf).

These audits cover Aera’s contracts. They do not cover Osero, Gauntlet’s strategy logic, or the Morpho markets used by the strategy. See [Security & Audits](/osero-app/safety-and-resources/security-and-audits.md) for how this fits into Osero's overall trust boundary.

### Morpho Blue - lending markets

The strategy borrows and lends through **Morpho Blue**, a permissionless lending protocol built around isolated markets. Each market has its own collateral, debt asset, oracle, and risk parameters, keeping risk separated between markets.

The Yield+ strategy currently allocates across two sUSDS/USDT markets:

* [sUSDS/USDT Market 1](https://app.morpho.org/ethereum/variable/0x3274643db77a064abd3bc851de77556a4ad2e2f502f4f0c80845fa8f909ecf0b/susds-usdt#market)
* [sUSDS/USDT Market 2](https://app.morpho.org/ethereum/variable/0x26b178d49895f80ca3c39b2745efc4cd9adcddfcc73dae93e531e86977ec4d96/susds-usdt#market)

Splitting the position across markets lets Gauntlet's engine balance borrow cost against available liquidity, rather than concentrating debt in a single market and pushing borrow rates up as the position grows.

### Gauntlet - curation and risk engine

Gauntlet’s risk engine continuously monitors borrowing rates, market liquidity, and the sUSDS/USDT LTV. Based on current conditions, it:

* Rebalances across Morpho markets to reduce overall borrowing costs.
* Increases leverage when the spread between the Sky Savings Rate and borrowing costs is favorable, and reduces it when the spread narrows.
* Automatically deleverages as LTV approaches the emergency threshold, before reaching Morpho’s liquidation threshold.
* Tracks key vault metrics, including LTV, leverage, health factor, and market allocation, which are displayed live in the Osero App.


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