Long Yield Carry

Long Yield Carry tokens let you hold a risk asset — like SOL or BTC — while earning a yield that is generated somewhere delta-neutral. You keep your exposure to the asset you deposited; the yield comes from a carry trade the protocol runs against it.

The idea

"Carry" is earning more from a position than it costs to hold. "Delta-neutral" means a position whose value doesn't move with the price of any one asset.

A Long Yield Carry token combines the two. You want to stay long a risk asset (say SOL) — you believe in it and want the upside. On its own, simply holding SOL earns nothing. Long Yield Carry puts that idle SOL to work without giving up your SOL exposure: it borrows against the SOL and routes the borrowed capital into a delta-neutral, stable-yielding venue, then hands the resulting yield back to you as a steadily rising token price.

You are still long SOL. You have simply attached a yield engine to it.

The three moving parts

When you deposit, the protocol assembles the position from three pieces. You can see the live split for any token in the Strategy panel on its detail page.

1. Collateral — your risk asset. Your deposit is supplied to a lending market as collateral. This is what keeps your exposure: the position is still backed by the asset you deposited, and it may earn a small supply yield while it sits there.
2. Debt — borrowed against the collateral. The protocol borrows a debt asset against that collateral, up to a conservative loan-to-value (LTV) target. This borrowing has an ongoing cost (the borrow rate).
3. The carry — a delta-neutral yield venue. The borrowed capital is deployed into a delta-neutral, stable-yield venue. This leg is where the "long yield" comes from, and because it is delta-neutral its value doesn't rise or fall with SOL.

The specific lending market and yield venue a token uses are shown, live, in the Strategy panel on its detail page.

No liquidation risk to your deposit

Because the strategy borrows against your collateral, it's fair to ask whether a price move could get the position liquidated. It doesn't put your deposit at risk. The position is monitored and rebalanced automatically and continuously as prices move: if the collateral or debt price shifts, the protocol deleverages the position to keep it comfortably away from any liquidation threshold, rather than waiting and being forced out.

This rebalancing is non-custodial — your assets stay in the protocol's on-chain smart contracts the whole time. No one takes custody of them, and the strategy is designed so that ordinary price swings do not trigger a liquidation of your position.

How value accrues

Long Yield Carry tokens do not pay out separate rewards, and the number of tokens you hold does not increase. Instead, the carry the strategy earns is folded back into the position, so each token becomes redeemable for more of the underlying asset over time. That is why the token's price (its redemption price) drifts upward when the strategy is performing.

To exit, you sell the token back for the underlying asset at the current price. See How It Works and Redemptions.

Where the yield comes from

Your net yield is the carry spread — what the yielding venue pays minus what the borrowing costs — plus any yield the collateral earns while supplied, net of fees:

net yield  ≈  collateral supply yield
            +  yield on capital deployed into the delta-neutral venue
            −  cost of borrowing the debt
            −  protocol performance fee

The APY shown on a token page is an estimate built from this on a trailing basis and net of the performance fee. Because two of these legs are floating rates, the APY moves over time and is never a fixed or promised rate.

A worked example

These numbers are illustrative only — real rates float and differ per token.

Suppose you deposit 10 SOL into a Long Yield Carry SOL token priced at 1.00 SOL per token, and receive about 10 tokens. Behind the token:

• Your 10 SOL is supplied as collateral and earns a small supply yield.
• The protocol borrows a stable debt asset against it and deploys that capital into a delta-neutral venue paying, say, 12%.
• The borrow costs, say, 6%.

The strategy keeps the ~6% carry spread on the borrowed capital (scaled by how much is borrowed against your collateral), plus the collateral's supply yield, net of the performance fee. As that carry accrues, the token's price climbs — for example from 1.00 to 1.03 SOL over some months — so your 10 tokens become redeemable for about 10.3 SOL. Throughout, you stayed long SOL: if SOL's dollar price moved, your position moved with it, because the collateral is still SOL.

Risks specific to this strategy

Read the general Risks page first. The rebalancing described above removes liquidation as a concern, but Long Yield Carry still carries these risks:

• Smart-contract risk. The strategy runs entirely on-chain — across Kestrel's own contracts and the third-party lending market and yield venue it uses. A bug or exploit in any of those contracts could lead to loss of funds.
• Depeg risk of the yielding assets. The delta-neutral yield leg typically holds stable or pegged assets. If one of those assets loses its peg, the value of the carry leg falls, which reduces the token price.

Tokens running this strategy

Some of the Long Yield Carry tokens currently live. Open one to see its current price, net APY, allocation, LTV, and fees.