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# The 8% Stablecoin Yield No One Talks About (1-Page Breakdown) **TL;DR:** You can earn 8-9% on stablecoins by becoming a "digital warehouse lender" for US home equity loans. Here's exactly how it works, what can go wrong, and whether the math checks out. --- ## 1. The Business Model: Why Figure Needs Your Money **Figure Markets** is America's largest non-bank home equity lender ($19B+ originated). Their business model: - **Step 1:** Give a homeowner $50K for renovations (a HELOC loan) - **Step 2:** Bundle it with other loans and sell to Wall Street (~3-45 days) - **Step 3:** Repeat **The Problem:** They need cash to hold loans during that 3-45 day gap before the sale closes. **Your Opportunity:** You lend them money for that short window. They pay you **8-9% annual interest** because you're providing the working capital their factory needs to run. --- ## 2. The Complete Flow: Your Money's Journey ### **On Kamino (Solana)** **Step 1:** Deposit USDC into Kamino → You're starting with regular stablecoins on Solana **Step 2:** Kamino converts USDC → wYLDS (wrapped YLDS) → wYLDS is a tokenized US Treasury/repo fund paying ~3.5% base yield **Step 3:** Stake wYLDS on Hastra Protocol → You receive **PRIME tokens** (liquid staking receipt) **Step 4:** Lend PRIME on Kamino → Earn **8-9% APY** on your PRIME (or use leverage strategies for up to 24%+) ### **Behind the Scenes (What PRIME Actually Does)** **Step 5:** Your staked wYLDS enters Democratized Prime pools → Pools lend to Figure Lending LLC via hourly repurchase agreements (repos) **Step 6:** Figure pledges home equity loans (HELOCs) as collateral → Smart contracts on Provenance Blockchain hold first-priority liens **Step 7:** Figure uses your cash to fund homeowner HELOCs → Borrowers get USD for renovations/debt consolidation **Step 8:** ~3-45 days later, Figure sells loans to Wall Street → Cash returns to pool; you can withdraw or auto-roll into next hourly cycle --- ## 3. The Risks: What Can Actually Go Wrong ### **Risk A: The "Bank Run" (Liquidity Risk) – HIGH** **The Setup:** - You lend via **1-hour contracts** (withdraw anytime at top of the hour) - But you're funding **30-year home loans** **The Danger:** If everyone tries to withdraw at once, or Wall Street stops buying loans, Figure can't sell fast enough to pay you in 1 hour. **What Happens:** - Rates spike to 30% APR to attract new lenders - If that fails, a "Default Event" triggers - Your money gets stuck until loans can be sold (could be 6-12 months in a crisis) **Historical Reality:** Zero freezes since launch (June 2025), but the structural risk exists. ### **Risk B: The "Second Mortgage" Problem (Credit Risk) – MEDIUM** **The Setup:** Most loans (91%) are **second liens** behind a primary mortgage. **The Danger:** Homeowner defaults → house foreclosed → first mortgage bank gets paid first → you get whatever's left (might be $0). **Example Scenario:** - Home worth: $1,000,000 - First mortgage: $500,000 - Your HELOC: $150,000 - **If home sells for $600K:** First bank takes $500K, you get $100K (33% loss) - **If home sells for $450K:** First bank takes all, you get $0 (100% loss) --- ## 4. The Safety Net: Why Housing Would Need to Crash Hard **The Key Number:** Average Combined Loan-to-Value (CLTV) = **64.44%** **What This Means:** On a $1,000,000 home, total debt (first mortgage + HELOC) = $644,400 **Your Protection:** $355,600 (35.6%) equity cushion **The Math:** Housing prices would need to drop **>35%** before the collateral fails to cover your principal. **Historical Context:** - 2008 Financial Crisis: ~27-30% national drop (worst since Great Depression) - No US national crash >35% since the 1930s --- ## 5. The Math: Is 8% Worth the Risk? Let's compare investing **$100,000** for one year: ### **Option A: High-Yield Savings (4% APY)** - **Outcome:** 100% chance of earning $4,000 - **Risk:** Zero (FDIC insured) ### **Option B: Figure Warehouse via Kamino (8.5% APY)** | Scenario | Probability | Outcome | Return | |----------|-------------|---------|--------| | **Normal Market** | 93% | Full yield, easy withdrawals | +$8,500 | | **Liquidity Stress** | 5% | Partial yield, temporary lock | +$2,000 | | **Housing Crash >35%** | 2% | Elevated defaults | -$5,000 | **Expected Value:** (0.93 × $8,500) + (0.05 × $2,000) + (0.02 × -$5,000) = **$7,905** **vs. Savings:** $7,905 - $4,000 = **+$3,905 extra per year** (+98% outperformance) **What You're Paying For:** - Accepting theoretical liquidity-run risk (never happened) - Accepting second-lien credit risk (35.6% cushion) - Accepting Solana smart contract risk (Kamino/Hastra/Provenance) --- ## 6. Technical Details for Solana Degens **Kamino Leverage Strategies:** - Base yield: 8-9% APY on PRIME - With 7.7x leverage: Up to 24.75% APY (using PRIME as collateral to borrow more USDC) - Risk: Liquidation if PRIME depegs or rates spike **On-Chain Infrastructure:** - **Provenance Blockchain:** Tokenizes HELOCs via DART system - **Hastra Protocol:** Liquid staking for wYLDS → PRIME - **Kamino Finance:** Lending markets + auto-compounding vaults - **Chainlink Oracles:** Price feeds for PRIME/wYLDS **Smart Contract Risks:** - Provenance has operated since 2018 (Figure's parent company) - Kamino has $1.8B+ TVL (top Solana lending protocol) - Hastra launched December 2025 (newer, less battle-tested) --- ## The Bottom Line **Good For:** - Earning 8-9% on stablecoins backed by real US home equity loans - People who can handle 6-12 month illiquidity in a worst-case scenario - Understanding you're a secured lender (not a loan owner) **Bad For:** - Money you need next month - People allergic to "theoretical bank run" risk - Pure safety seekers (stick with FDIC savings) **The Real Trade:** You're accepting the same risks big banks handle every day (warehouse lending, second liens, housing exposure) in exchange for earning institutional returns (8-9%) instead of retail scraps (4%). --- **Disclaimers:** - Not financial advice - Do your own research - Only invest what you can afford to lock up - Past performance ≠ future results - Smart contract risk is real **Sources:** Figure Markets public disclosures, FIGRE Trust 2025-HE8 prospectus, Kamino Finance documentation, Hastra Protocol terms, Democratized Prime HELOC+ Addendum --- *Want to dive deeper? Check Figure's official docs, read the securitization prospectuses, and understand the legal repo structure before aping in.*