Lending USDC on Recoup: how it pays and what can go wrong

How do lenders earn on Recoup?

Lenders earn 25% of every weekly harvest of bond yield, paid as a rising share price in the lender pool.

Borrowers on Recoup deposit DexFi Treasury Bonds and borrow USDC, a dollar stablecoin. They pay no interest. Instead, the bonds pay USDC yield most weeks, and a weekly job called the harvest collects it and splits it: 55% pays down the borrowers' debt, 25% goes to the lender pool, 10% to the insurance fund, and the rest to the protocol.

The lender pool is an ERC-4626 vault. ERC-4626 is a common standard for pooled deposits on Ethereum-style chains: you deposit USDC and receive shares, and each share is worth a slice of everything the pool holds. When the lender share of a harvest lands in the pool, the pool holds more and each share is worth more. That rising share price is how lenders are paid; there is no separate interest payment to claim.

What a lender earns therefore depends on two things outside the pool's control: how much yield DexFi's treasury pays on the bonds, and how much of the pool is actually lent out. USDC sitting idle earns nothing, and it spreads the yield across more shares.

Is there a fixed rate?

No. Lender yield is not fixed, not promised, and so far none has been realised, because the public pool has not launched.

Recoup does not project or promise a rate. The yield comes from a fund, and a fund's payouts go up and down; some weeks can pay nothing. Once the pool is live, the figure Recoup shows will be trailing realised yield: what lenders actually received over recent weeks. It is history, not a promise.

What can lenders lose?

Lenders can lose part or all of their deposit, and there are six specific ways it can happen.

1. DexFi custody risk sits with you, the lender. Every loan is backed by DexFi Treasury Bonds, a custodial product controlled by the DexFi team. If DexFi fails or refuses to redeem the bonds, the collateral behind the loans may be worth little or nothing. Borrowers already hold the USDC they borrowed and can walk away. Lenders are the ones who lose.
2. Losses are socialised. If a liquidation auction and the insurance fund together do not cover a bad loan, the shortfall is written down against the whole pool by lowering the share price. Every lender bears a slice, whether or not they chose that loan.
3. A larger withdrawal needs a request. Only the pool's idle cash can be withdrawn instantly. For more, you file a request and wait for cash to come back into the pool. There is no promised service time.
4. A liquidation marks the pool down straight away. In the pool as written for launch, when a loan goes to auction or into a workout, the pool immediately sets aside what it expects to lose, and the price you exit at carries that mark-down. You can still leave, but you cannot leave ahead of the loss. New deposits come in at the un-marked price, so nobody can buy the discount. The testnet pool deployed today is an older version.
5. Yield arrives gradually, not in a lump. In the pool as written for launch, each week's lender share is released into the share price over time. If you leave before it has finished releasing, you give up the part that has not arrived yet, and in some cases you can get back less than you put in. The testnet pool deployed today is an older version.
6. Yield is not fixed. There is no fixed or promised rate, and no lender yield has been realised yet. Once the pool is live, the only figure Recoup will show is the yield lenders actually received over the trailing weeks, and that can fall to zero.

How do withdrawals work?

You can withdraw instantly only from the pool's idle cash; anything larger needs a withdrawal request, and there is no promised service time.

Most of the pool is meant to be lent out, since idle cash earns nothing. The pool is designed to keep a float of about 15% of its book in cash for withdrawals, but that is a target, not a guarantee. The rest comes back only as borrowers repay and as weekly yield arrives.

Two withdrawal designs exist, and it matters which one is running. The testnet pool deployed on Base Sepolia today still runs the old first-in, first-out withdrawal queue. Its replacement is written but not yet deployed. In it:

• Each wallet can hold one request for more than the instant amount, with a receiver fixed when the request is filed.
• Each request is quoted a cash floor when it is filed, and earlier requests are served first, ahead of later ones and of instant withdrawals.
• The wallet, or an operator it approves, chooses when and how much to service, and the receiver then claims the USDC.
• A floor is not a guarantee. If USDC leaves the pool other than through its own payments, the floors can add up to more than the cash left, and that cash can stay locked for every queued lender until a borrower repays or a request is cancelled.

What happens to lenders when a borrower is liquidated?

The pool marks its share price down straight away by the loss it expects, and lenders absorb any part of the loss the auction and the insurance fund do not cover.

A borrower can be liquidated when their loan goes above 50% of their collateral's value. Their whole position is sold in a Dutch auction, and the proceeds repay the loan to the pool. A 5% penalty on the debt is split between whoever called the liquidation and the insurance fund.

If the sale does not cover the loan, the shortfall is met in order: first the auction proceeds, then the insurance fund, then every lender through a lower share price. If nobody bids at all, the bonds go to a workout, and after 14 days anyone can force whatever debt is still owed to be written down as a loss. If a recovery beats the pool's estimate, the difference goes back to whoever is still in the pool. The full mechanics are in how liquidation works.

Can I lend today?

No. Recoup runs on Base Sepolia testnet only, and the public lender pool has not launched.

Nothing on the testnet involves real funds. The 33Labs audit of the lender pool source finished in September 2026, and the report is on the security page. At launch, total deposits into the pool are capped at $25,000. Until then, the best way to judge the risks is to read them in full, and to read how liquidation works, because that is where a lender's losses would come from.