Yield-Stripping Mechanism

The yield-stripping mechanism is the process that allows pstAVAX holders to exchange their ongoing staking yield for additional incentives and perks directly from Hypha. It's a deliberate choice for users who believe the value of these direct incentives will be greater than the accumulated staking yield over time.

Where Does the Yield Go?

The process is straightforward:

1. 100% of the yield generated by the AVAX that backs pstAVAX is periodically collected.

2. This collected yield is then donated directly into the stAVAX vault.

3. This action increases the total value of the assets in the stAVAX vault, providing a direct boost to the APY for all stAVAX holders.

How It Works?

1. Deposit and Stake: When you deposit AVAX for pstAVAX, your AVAX is sent to the stAVAX vault to begin generating yield, just like any other deposit.

• Yield Accrual: The pstAVAX contract holds stAVAX shares on behalf of its depositors. Over time, these shares increase in value as they accrue staking and MEV rewards.

• Identifying the Yield: The contract continuously tracks the difference between the initial principal deposited and the current, higher value of the stAVAX shares it holds. This difference is the excess value, which represents the yield.

• Stripping and Donating: Periodically, this excess value (the yield) is "stripped" from the contract and sent to the stAVAX vault, increasing its value for stAVAX holders. This leaves the pstAVAX contract with only the principal value required to back all pstAVAX tokens at their original 1:1 deposit rate.