> For the complete documentation index, see [llms.txt](https://tharwa.gitbook.io/tharwa/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://tharwa.gitbook.io/tharwa/yield-products/sthusd-yield-distribution.md).

# sthUSD Yield Distribution (Live)

**Status**: **Live and Audited** - Currently operational on Ethereum mainnet

Holding stablecoins has historically meant sacrificing yield in exchange for stability. With sthUSD, that tradeoff disappears.

**sthUSD** is a yield-bearing token that distributes returns from Tharwa’s real-world asset portfolio directly to users passively, transparently, and without the need to lock capital in high-risk strategies.

{% hint style="success" %}
**Now Live**: Stake thUSD to receive sthUSD and earn real yield backed by diversified real-world assets. Features instant withdrawals, zero entry/exit fees, and automatic compounding. Built on ERC-4626 standard with Tharwa optimizations.
{% endhint %}

### How sthUSD Works

1. **User stakes thUSD into the sthUSD vault**\
   This converts their stablecoins into a yield-bearing version of thUSD.
2. **thUSD is deployed into managed allocations and RWA strategies**\
   For early vaults, yield comes from managed allocations by Tharwa's investment partners and structured capital deployment into productive strategies.
3. **Yield is distributed to sthUSD holders**\
   Returns are calculated and distributed proportionally to sthUSD holders through automatic balance growth.
4. **Rewards are vested automatically**\
   Users see their balances grow over time - without needing to claim or manually restake.

### Where the Yield Comes From

sthUSD yield is **real and transparent**, sourced from the diversified portfolio backing thUSD:

**Current Sources:**

* **Sukuk instruments** - Faith-aligned fixed income structures
* **UAE real estate** - Regulated property investments with rental income
* **Gold holdings** - Inflation hedge and store of value
* **Managed allocations** - Professional investment strategies by Tharwa's partners

**Future Sources:**

* **Confluence Engine optimization** - AI-assisted portfolio rebalancing (in development)
* **Infrastructure assets** - Tokenized real-world infrastructure yields
* **Commodity exposure** - Capped allocations for uncorrelated returns
* Sukuk-style earnings in future faith-aligned vaults

Yield is realized off-chain, routed through the protocol treasury, and reallocated back to sthUSD holders on-chain.

### Transparency & Distribution

All yield is accounted for monthly and made visible through:

* On-chain metrics for sthUSD accrual
* Treasury dashboards
* Performance snapshots of the backing portfolio

To preserve fairness:

* 100% of the net thUSD yield (after deducting the risk-free baseline) is used to either reward sthUSD holders or strengthen protocol reserves
* The yield is distributed proportionally based on time-weighted stake
* Rewards are vested over time to reduce gaming or rapid unstaking

### Why sthUSD Beats Other Yield Wrappers

| Feature                     | sthUSD                  | aUSDC / cDAI / rTokens     |
| --------------------------- | ----------------------- | -------------------------- |
| Backed by Real-World Assets | Yes                     | Mostly crypto lending      |
| Passive Yield Distribution  | Auto-vested             | Requires manual harvesting |
| Tail-Risk Optimized Returns | CVaR + AI engine        | Fixed pool rates           |
| Institutional-Ready         | Transparent & auditable | Protocol-dependent risk    |

### Who Is sthUSD For?

* **Retail users** who want to earn passively while holding a stablecoin
* **DeFi protocols** looking to use sthUSD as yield-bearing collateral
* **DAOs and treasuries** seeking composable, low-risk yield strategies
* **Long-term holders** looking for risk-adjusted, real-world yield

{% hint style="warning" %}
**Important**: While Tharwa is building faith-aligned vaults for future phases, **sthUSD currently includes yield from interest-bearing global market strategies** and should not be considered Shariah-compliant.
{% endhint %}

For users seeking Shariah-compliant returns, Tharwa plans to introduce isolated sukuk-style vaults and segregated yield distribution options as part of its long-term roadmap.