Yield Sources

Kana aggregates yield from lending protocols on SEI. Both vaults share two common sources (Yei Finance and Takara), then each uses a vault-specific third source.

Yei Finance

Type: Aave V3 Fork Used by: USDC Vault, WSEI Vault

Yei Finance is a lending/borrowing protocol forked from Aave V3, the most battle-tested DeFi lending protocol.

How Yield Works

When you supply to Yei, you receive aTokens (e.g., aUSDC, aWEI). These tokens have a special property: their balance increases automatically every block as interest accrues from borrowers.

Day 0: 1,000 aUSDC
Day 30: 1,004.1 aUSDC (≈5% APY)

No claiming required — the yield is embedded in the token balance.

Key Properties

• Yield mechanism: aToken rebasing (balance growth)
• Liquidity: Pool-based, depends on utilization rate
• Risk: Smart contract risk, utilization risk
• Maturity: Aave V3 codebase — most audited DeFi protocol

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Takara

Type: Compound Fork Used by: USDC Vault, WSEI Vault

Takara is a lending protocol forked from Compound, the original DeFi lending protocol.

How Yield Works

When you supply to Takara, you receive cTokens (e.g., cUSDC, cWSEI). Unlike aTokens, cToken balances stay constant — instead, the exchange rate between cTokens and the underlying asset increases over time.

Day 0:  1 cUSDC = 0.0200 USDC
Day 30: 1 cUSDC = 0.0201 USDC

Additionally, Takara may distribute COMP-equivalent reward tokens to suppliers, providing extra yield on top of interest.

Key Properties

• Yield mechanism: cToken exchange rate appreciation + reward tokens
• Liquidity: Pool-based, depends on utilization rate
• Risk: Smart contract risk, reward token price risk
• Maturity: Compound codebase — second most audited DeFi protocol

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Morpho

Type: P2P Optimized Lending Used by: USDC Vault only

Morpho is a lending protocol optimizer that matches lenders and borrowers peer-to-peer when possible, falling back to the underlying pool when no match is available.

How Yield Works

Morpho improves on pool-based lending by directly matching suppliers with borrowers:

Pool lending:    Supplier → Pool → Borrower (spread lost to pool)
Morpho P2P:     Supplier ↔ Borrower (better rate for both)
Morpho fallback: Supplier → Underlying Pool → Borrower

When matched P2P, suppliers earn a higher rate than the pool supply rate (closer to the borrow rate), because the pool spread is eliminated.

Reward Distribution via Merkl

Morpho distributes protocol incentives through the Merkl Distributor system. The USDCStrategy automatically claims these rewards:

1. Keeper fetches merkle proofs from https://api.merkl.xyz/v4/claim?user={strategyAddress}&chainId=1329
2. Calls claimMorphoRewards() with tokens, amounts, proofs, and slippage limits
3. Claims rewards from Merkl distributor at 0x3Ef3D8bA38EBe18DB133cEc108f4D14CE00Dd9Ae
4. Swaps reward tokens to USDC via Sailor DEX
5. Re-deploys USDC to lending protocols

This process is fully automated by the keeper bot and happens during regular harvest cycles.

Key Properties

• Yield mechanism: P2P rate optimization + Merkl reward distributions
• Liquidity: Depends on P2P matching + underlying pool
• Risk: Smart contract risk, matching risk, reward token price risk
• Maturity: Morpho has been live on Ethereum, expanding to other chains

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Feather

Type: MetaMorpho ERC-4626 Vault Used by: WSEI Vault only

Feather is a MetaMorpho-based ERC-4626 vault that aggregates WSEI yield across multiple lending pools, automatically selecting the best allocation.

How Yield Works

Feather is itself an ERC-4626 vault, so depositing WSEI mints Feather vault shares. Feather manages allocation across underlying lending pools and compounds returns automatically. From Kana's perspective, Feather behaves like any other yield source: deposit assets, receive shares whose value grows over time.

WSEI Vault → Feather ERC-4626 → Underlying lending pools

Key Properties

• Yield mechanism: ERC-4626 share value appreciation (auto-compounding)
• Liquidity: Depends on Feather's underlying pools
• Risk: Smart contract risk (Feather + underlying protocols)
• Maturity: MetaMorpho framework (battle-tested on Ethereum)

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Comparison

Protocol	Mechanism	Reward Tokens	Rate Type	Codebase	Used By
Yei Finance	aToken rebase	No	Variable	Aave V3	Both vaults
Takara	cToken exchange rate	Yes (COMP-like)	Variable	Compound	Both vaults
Morpho	P2P matching	Possible	Optimized	Morpho	USDC vault only
Feather	ERC-4626 vault shares	No	Variable	MetaMorpho	WSEI vault only

Why These Protocols?

These protocols represent the major DeFi lending architectures available on SEI:

1. Aave model (Yei) — rebasing supply tokens
2. Compound model (Takara) — exchange rate + rewards
3. P2P optimization (Morpho) — rate improvement layer, used by the USDC vault
4. Aggregated vault (Feather) — ERC-4626 meta-vault, used by the WSEI vault

By diversifying across multiple architectures, Kana captures the best available yield regardless of which model is performing best at any given time.