Solvency
Why Spield can always pay everyone it owes — the solvency invariant, how it's enforced on every operation, and how you can verify it live on-chain.
"Solvent" means the protocol holds enough to pay back everyone it owes. Spield is designed so that this is always true, and so that anyone can verify it at any time.
The invariant
At every moment, Spield maintains a simple rule:
The solvency invariant
Backing ≥ everything owed. The live value of the protocol's yield position is always at least the total principal owed to PT holders plus the unclaimed yield owed to YT holders.
In plain terms: the money behind the tokens is never less than the money the tokens represent. Expressed as a picture:
Why it holds by construction
This isn't a promise that has to be monitored — it's a property of how Spield works:
- The backing only grows. The yield position's value rises automatically as interest accrues; it never silently shrinks.
- Yield payouts come from the growth, never the principal. When a YT holder claims, Spield withdraws exactly the earned yield, leaving principal backing intact.
- PT redemptions are 1:1. A PT redeems for the principal the position already holds for it.
Because new tokens are only ever minted against freshly-deposited USDC (which is immediately supplied to the yield source), there's never a moment where more is owed than is held.
Checked on every operation
On top of the design guarantee, the protocol re-checks the invariant after every state-changing action — every mint, claim, redemption, and recombine. If any operation would ever leave backing below obligations, that transaction is rejected automatically. There's no path that can quietly break solvency.
How you can verify it — live
You don't have to trust any of the above. Spield exposes a public solvency view that returns, in real time and directly from the chain:
| Figure | Meaning |
|---|---|
| Backing | The live value of the protocol's whole yield position. |
| Principal | Total principal owed to all PT holders. |
| Unclaimed yield | Yield earned but not yet claimed (≈ backing − principal). |
The app's Solvency page reads these and shows the surplus visually. Because it's a live on-chain read, what you see is the actual state of the protocol — not a cached or self-reported number.
An independent watchtower, too
Beyond the on-chain check, an off-chain monitor continuously polls the solvency view and raises an alert if backing ever approached obligations — a second, independent line of defense.
What solvency does not cover
Being solvent means the protocol holds what it owes. It does not eliminate every risk — for example, the yield source itself could have problems, or smart-contract risk always exists in DeFi. Spield is honest about these; see Understanding the risks.
Next: the full protocol lifecycle.