Each answer opens with the short version and links to a longer explainer. Words like NAV, LTV and health factor are defined in the glossary.
What is Recoup?
Recoup, a self-repaying loan protocol on Base, lets you borrow USDC (a dollar stablecoin) against DexFi Treasury Bonds and pays the loan down with the bonds' own weekly yield. There is no interest and no repayment schedule: 55% of each week's harvested yield is applied straight to your debt. It is pre-launch and runs on the Base Sepolia testnet only.
What is a self-repaying loan?
A self-repaying loan is one whose balance is paid down by the yield its collateral earns, rather than by payments you make. On Recoup the collateral is DexFi Treasury Bonds, which pay USDC most weeks, and part of each payment goes to your debt. Self-repaying does not mean risk-free: a Recoup position can still be liquidated if the bonds lose enough value.
How can a loan pay itself off?
Your collateral earns USDC most weeks, and Recoup applies 55% of that yield directly to your balance. The rest is split 25% to lenders, 10% to an insurance fund and 10% as a protocol fee. Because no interest is charged, the balance never grows on its own; only borrowing more adds to it. How fast depends on what the bonds actually pay, and that is not guaranteed.
What is DexFi?
DexFi is a third-party decentralised finance (DeFi) project that runs an on-chain treasury: a pool of crypto assets it invests to earn a return. It issues DexFi Treasury Bonds, which pay a share of that treasury's profits in USDC most weeks. DexFi is not part of Recoup; Recoup accepts its bonds as collateral.
What are DexFi Treasury Bonds?
A DexFi Treasury Bond is a token issued by DexFi, backed by its on-chain treasury, that pays USDC most weeks. DexFi says each bond is a share of that treasury and that profit is paid out in weekly epochs; the payout is not guaranteed. Getting out through DexFi is a manual redemption at 90% of NAV (net asset value, what one bond is worth), 48 hours or more after you ask.
Are DexFi Treasury Bonds the same as US Treasury bonds?
No. DexFi Treasury Bonds are shares in a DeFi fund's profits, not government debt, and no government issues or backs them. The word "Treasury" refers to DexFi's own treasury, the pool of crypto assets it invests.
Is DexFi safe?
DexFi is a third party, and holding its bonds carries risks that Recoup cannot remove. Its bond and farm contracts (the farm stakes bonds and pays their yield) are owned by a single externally owned account, one private key, with no multisig or timelock, and that key can pause minting, change the whitelist of who may transfer bonds and upgrade the farm; the bond contract is not covered by DexFi's published audits. A large part of its treasury has been a leveraged long-ETH position, so a sharp fall in ETH hits it directly. Recoup prices bonds with a 20% haircut on the part of the treasury it cannot value itself, and lends against only a fraction of that price.
Can I borrow against my DexFi bonds?
Yes, that is what Recoup is built for, though today only on testnet with test bonds. You deposit bonds into Recoup's vault, or deposit ETH that is minted into bonds for you, and borrow USDC against them. The bonds stay staked and keep earning, and their yield pays the loan down.
How much USDC can I borrow against my bonds?
You can borrow up to 25% of your bonds' value, a limit called the maximum loan-to-value (LTV), which is your debt as a share of what your collateral is worth. Bonds are valued at NAV, the protocol's own price per bond, which already takes a 20% haircut on the part of DexFi's treasury Recoup cannot price itself. At launch, borrowing is also capped at $5,000 per account and $25,000 across the whole protocol. The borrow that first takes your debt to $500 or more withholds a $25 liquidation deposit from what you receive; it is not added to your debt and is refunded when the debt reaches zero.
Do I have to make monthly payments?
No. There is no repayment schedule and no interest: the bonds' weekly yield pays the debt down on its own. You can repay part or all of the loan yourself whenever you like, but nothing requires it. If yield slows or stops, the debt shrinks more slowly or not at all; it never grows on its own, but the position can still be liquidated if the bonds' value falls far enough.
Can my Recoup loan be liquidated?
Yes. If your debt goes above 50% of your collateral's value, the position can be liquidated, and the whole position is sold as one lot in a Dutch auction, not just enough to clear the debt. The price starts at 100% of NAV and falls to 68% over 6 hours. The sale repays the debt first, a 5% penalty on the debt is then taken from what is left, and whatever remains comes back to you. A sale near the floor costs you far more than the penalty alone.
How is Recoup different from Alchemix?
Both are called self-repaying, both can liquidate a position, and they work differently. Alchemix lends synthetic tokens (alAssets) against deposits in its own yield strategies, and its docs say yield does not reduce debt directly: debt is cancelled through redemptions that also remove an equal amount of collateral. Recoup lends real USDC from a lender pool against DexFi Treasury Bonds only, and applies 55% of the bonds' weekly yield straight to your debt without selling any of your bonds. Recoup's maximum LTV is 25%; Alchemix's docs allow up to 90%.
What happens if the bonds' value falls?
Your LTV rises, and if it goes above 50% the position can be liquidated. Borrowing at the 25% maximum, NAV would have to fall by more than 50% before that happens, and further if you borrowed less or yield has already paid some debt down. A falling price does not add to your debt; it shrinks the value standing behind it.
How does a Dutch auction liquidation work?
A Dutch auction starts at a high price and lowers it over time until someone buys. On Recoup the whole position is offered as one lot, starting at 100% of NAV and falling to 68% over 6 hours; the proceeds repay the debt and a 5% penalty, and the surplus goes back to the borrower. If nobody bids, the lot can go to a workout: repaying in full there closes the loan, but the protocol owner decides where the bonds go once the workout closes, and they may never come back to you.
What happens to my weekly bond yield while I have a loan?
It is harvested once a week and split: 55% goes straight to your debt, 25% to lenders, 10% to the insurance fund and 10% as a protocol fee. The harvest runs on its own, so you do not need to do anything. The split applies from the moment your bonds are deposited, borrowing or not: once the debt is zero, your 55% arrives as USDC you can claim, and lenders, the insurance fund and the protocol fee still take theirs.
Can I repay early and get my bonds back?
Yes. You can repay part or all of the debt at any time, and once it reaches zero you can withdraw your bonds and the $25 liquidation deposit is refunded. One outside risk remains: bonds move only under DexFi's whitelist, so if DexFi removed Recoup's adapter (the contract that stakes deposited bonds with DexFi) from it, withdrawals would stop working even after you had repaid. The adapter's owner also holds an emergency unstake that can move every deposited bond in one transaction, with no timelock.
How do lenders earn on Recoup, and what can they lose?
Lenders supply the USDC that borrowers receive and earn 25% of every weekly harvest through a rising share price in the pool. No lender yield has been realised yet, because the public pool has not launched, so there is no track record to quote and no return is promised. Lenders carry the tail risk: if a liquidation leaves a shortfall bigger than the insurance fund, the loss is written down against every lender's share price. Withdrawals are instant only from idle cash, and a custody failure at DexFi or in Recoup's adapter would reach lenders too.
What is loan-to-value (LTV) and what counts as a safe position?
LTV is your debt as a share of what your collateral is worth. Recoup lets you borrow up to 25% and allows liquidation only above 50%, so the further your LTV sits below that line, the safer the position. The app also shows a health factor, the liquidation threshold divided by your LTV: below 1.00 it can be auctioned, and the closer it sits to 1.00 the less room it has. Weekly yield pays the debt down, so health rises on its own unless the bonds' value falls or you borrow more.
How do I check Recoup's numbers on-chain myself?
The numbers Recoup lends against live in public contracts on Base Sepolia, and you can check them with a block explorer. NAV is posted to the protocol's oracle contract about once a day. The risk parameters (maximum LTV, liquidation threshold and borrowing caps) can be read with a contract call; the yield split and the auction settings are fixed constants you can read in the verified source code. The verification guide lists each source and how to check it.
Is Recoup live on mainnet, and has it been audited?
Not on mainnet yet, and the lender pool's external audit is complete. Recoup runs on the Base Sepolia testnet only, with test bonds, and nothing is deployed on mainnet; the audit, by 33Labs, was completed in September 2026, and its report and scope are published on the security page. The public lender pool has not launched and stays closed until the remaining launch gates are met.