Request for Feedback: Proposed yoUSD / RLP Plan

[r0m0x]

TL;DR

As Resolv’s resolution timeline remains uncertain and may take several months, the proposal is to carve out the RLP position from the yoUSD vault and record each affected user’s allocation in an onchain claim contract to preserve future recovery rights. yoUSD would realize a one-time price impairment equal to the RLP exposure, and the temporary 2.95% withdrawal fee would be removed.

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Update (April 14 18:33 UTC)

Thank you for your thoughtful comments on the forum. Following community feedback, the proposal has been updated to include a Merkle-based distribution mechanism to keep users in control of their assets. This updated proposal will be implemented within 48 hours.

• A Merkle tree claim contract will be created to record each affected user’s RLP balance on Ethereum.

• RLP stays in the claim contract.

• Users have 2 options:

  • Option 1: Claim their underlying RLP at any time. Once a user claims their RLP, YO can no longer manage recovery for that position.

  • Option 2: Not claim their RLP allocation and leave it in the Merkle tree. If and when RLP is redeemed or value is recovered, proceeds can be distributed back to users according to that allocation.

This solution will be faster to implement than a token representing the RLP position.

The following proposals are valid and were considered, but are not advisable:

• Using treasury capital or external insurance was evaluated, but is not feasible because the loss was caused by an external party. YO previously chose to cover a $3.7M shortfall when the issue was caused by an internal YO issue, but it cannot absorb losses tied to underlying vault positions. Doing so would shift the exposure from affected holders to the protocol treasury, setting an unsustainable precedent.

• Creating a separate new yoUSD vault would leave the existing vault in a degraded state, subject to an indefinite withdrawal fee, while fragmenting liquidity, integrations, and markets. This would materially harm the yoUSD ecosystem. The practical outcome for depositors is the same either way: new deposits flow into a clean vault, while the legacy RLP exposure remains with affected holders, whether through a price adjustment or a withdrawal fee. This updated proposal achieves that outcome without the downsides of splitting yoUSD into two separate vaults.

Context

The protocol is currently relying on a temporary 2.95% withdrawal fee to account for uncertainty around the recovery of assets from the RLP exposure. This mechanism was introduced as an interim measure while the situation remains unresolved.

However, this approach presents two structural issues:

First, the withdrawal fee is not a viable long-term mechanism. It creates ongoing friction for users, distorts normal vault behavior, and is misaligned with the intended design of yoUSD as a simple, yield-bearing product.

Second, there is no clear timeline or certainty around the recovery of RLP assets. The outcome, timing, and potential recovery amount remain unknown, making it impractical to anchor the vault’s operation to an external resolution process.

As a result, the protocol is in a state where it cannot fully operate as intended. Yield accrual, user experience, and capital efficiency are all impaired by the need to maintain this temporary safeguard.

To restore normal function and allow yoUSD to move forward with a clean asset base, the protocol needs to move away from this interim structure and formally recognize the impairment associated with the RLP exposure.

Proposed plan

• Transfer yoUSD’s RLP position to a YO Foundation multisig to fully remove RLP from yoUSD’s assets and backing. The RLP position will be held by the multisig while the Resolv team provides clarity on its value. Once RLP can be redeemed, the redemption value will be returned to the yoUSD holders who were exposed to RLP at the time of the impairment.

• Carve out yoUSD’s RLP position to remove RLP from yoUSD’s assets and backing. A Merkle tree will be created to record each user’s claim on the underlying RLP assets.

• Users may choose to claim their underlying RLP at any time from the Merkle tree contract.

• If RLP is claimed, YO can no longer manage the recovery process for that position.

• Users who do not claim will continue to have their allocation preserved in the Merkle tree.

• If and when RLP is redeemed or value is recovered, proceeds can be distributed back to users according to that allocation.

• Realize an impairment in price for yoUSD equal to the RLP position of 1,214,131.87 USDC and remove the temporary 2.95% withdrawal fee

• Technical details:

  • A public snapshot is taken of all affected yoUSD holders at the moment of impairment. The snapshot includes direct yoUSD holders as well as users holding exposure through integrations and strategies, including Pendle LP, Pendle PT, Morpho/Euler borrowers, ShinjoUSD depositors, Fusion Looper vault depositors, and partner wallets

  • If and when Resolv reopens RLP redemptions and communicates an official remediation plan, YO Foundation would redeem the RLP position on behalf of affected yoUSD holders

  • Any recovered assets would be distributed back to the snapshotted addresses, and both the snapshot and recovery amounts will be made public users based on the Merkle tree allocation.

YO remains fully committed to maximizing recovery for yoUSD holders and will continue pushing Resolv until there is a clear and final resolution.

This proposal is intended to provide clarity now, remove uncertainty from yoUSD going forward, and ensure that any future recovery flows back to the affected users.

Rationale

This proposal is intended to:

• Ensure any future recovery is directed to the set of affected holders

• Make the snapshot and recovery amounts public

• Remove the RLP position from yoUSD so the vault can move forward with a clear asset base, and new depositors can enter without exposure to an asset with uncertain value

FAQs

How much value does the impairment represent?

The net asset value of the yoUSD vault will be impaired by the value of 1,214,131.87 USDC, representing the RLP position. For example, if the impairment were applied today, yoUSD’s price would move from ~1.0722 at the time of the exploit to ~1.0447, a 2.56% decline relative to yoUSD’s price at the time of the exploit.

Why realize the loss now instead of waiting?
Keeping the position inside yoUSD for an unknown period would prolong uncertainty around backing, pricing, and withdrawals. Realizing the impairment now gives users clarity, while preserving the right to any future recovery through the snapshot.

Who would be included in the snapshot?
Everyone with yoUSD exposure at the time of impairment, including direct holders and users with indirect exposure through supported integrations and partner products.

How will recovery be distributed?
If assets are recovered from the RLP position, YO would distribute them pro rata to the snapshotted addresses. The methodology, snapshot, and recovered amounts will be made public.

What if recovery takes a long time or is partial?
The timing and outcome remain uncertain and depend on Resolv. This proposal only ensures that if/when recovery happens, it goes to the right holders.

Does this mean YO is stepping away from recovery efforts?
No. YO Foundation will continue engaging with Resolv and pushing for the best possible outcome. The transfer only removes the position from yoUSD. YO is fully committed to pushing for recovery.

What about users who already withdrew and paid the 2.95% fee?
Users who withdrew have already incurred the 2.95% withdrawal fee. As previously communicated, that fee was returned to the vault for the benefit of remaining depositors. This proposal would not change this treatment.

How do I know if my position was impacted?
All users with direct or indirect yoUSD exposure, including through DeFi activities, are impacted and included in the snapshot. This includes users participating in the following activities:

• Holding yoUSD or yoUSDT on any chain

• Borrowing against or looping yoUSD or PT-yoUSD collateral in Morpho, Euler or ExtraFi

• Depositing in IPOR Fusion yoUSD Loooper vault

• Providing liquidity in yoUSD’s Pendle markets (26MAR2026 or 24SEP2026)

• Holding PT-yoUSD 24SEP2026

• Depositing in Shinjo’s USD vault

• Providing Liquidity in the Balancer yoUSD-USDC boosted pool

How will recovery work for users in DeFi activities?

1. For Morpho, Euler and ExtraFi borrowers, YO will snapshot the value of their yoUSD collateral.

2. For Morpho, Euler and ExtraFi loopers, YO will snapshot the value of their yoUSD and PT-yoUSD collateral. This means that the max amount these users will be reimbursed is proportional to the total exposure to yoUSD in their loop, not the margin only.

3. For Fusion yoUSD Loooper vault depositors, YO will snapshot the value of the yoUSD exposure inside the vault. This means that the max amount these users will be reimbursed is proportional to yoUSD looped exposure (~2x leverage).

4. For Pendle LP and PT holders, YO will snapshot the amount of LP and PT tokens and calculate their exposure to yoUSD. For this, we will use Pendle’s Oracle to calculate the exchange rate between LP to yoUSD and PT to yoUSD. For LP, this roughly equals to the amount of SY in the liquidity pool and for PT it applies the current market exchange rate. For users holding positions in expired markets, the exposure to yoUSD in LP is roughly equal to the amount of SY + PT in the liquidity pool and for PT it is 1:1.

5. For Balancer LPs, YO will snapshot the amount of LP tokens and calculate the exposure to yoUSD by querying the amount of yoUSD inside the pool (~80%).

[yieldy]

greetings YOverse!

thank you for taking the time to support YO and read through this plan.

the team welcomes any and all feedback, and we genuinely want to hear from you. community input is a core part of this process.

please take a moment to share your thoughts, questions, or concerns here.

[bitcrap]

Hi, I’m one of the old users of YO protocol. I like that team is trying to provide clarity. But i dont get the idea of asser transfer (even bad asset) outside of protocol without anything in return. It’s not a DeFi approach. If you want to get rid of the RLP in the vault, make a new token representing a share of possible RLP cashback, and send it to exposed users. If the token is tradable, people feel control and they will not blame you (well, most of them). It will be better then snapshot. And it can be a template solution for future cases - I hope we will not have them))

[TRTtheSalad]

This is actually a really smart and clean decision.

By realizing the impairment now and removing the RLP position, the vault becomes healthy again, the 2.95% withdrawal fee gets fully removed, and new users can enter without any hidden risk.

At the same time, they keep the snapshot so that if RLP ever pays back (even partially), the recovered funds go directly to the affected holders which is fair.

Well done, this feels like the right move to finally move yoUSD forward.

[mattdw]

Per @yieldy’s request, I’m bringing my comments here

There’s a lot about this that I like, and there’s a few issues I see that could be fairly significant. It makes sense to derisk the YO pool itself, to encourage people to deposit and grow the protocol. The RLP exposure and the withdrawal fee are counter to that.

However, this proposal would cause a 2.5% hit in a “stablecoin” in a single transaction. That would fundamentally wreck a lot of people with DeFi positions, say in LPs (e.g. USDC : yoUSD), or with leveraged looping on Morpho (yoUSD → USDC → yoUSD).

In both of those cases, the expectation is that yoUSD will (slowly) grow, and USDC will remain stable. Both are seen as fairly safe DeFi positions, since their values move essentially 1:1 with each other. There’s limited IL risk, and limited liquidation risk (still possible if borrow rates outpace capital value growth).

People that get impacted in the above situation will lose more than 2.5%, and may lose confidence in the protocol.

If possible, I’d strongly consider swapping the RLP debt with other USD to make the vault net-neutral, and then let the Treasury keep whatever the RLP solution is. Maybe reach out to an insurance provider like Nexus Mutual, and see what they’d be willing to offer to underwrite a situation where the RLP return is less than 100%. It might be too expensive, but it’d reduce the risk on the protocol by guaranteeing a smaller, determinable loss over a larger, unknown resolution.

I’m not saying that the protocol is responsible for the underlying RLP issue, but the question should really be what’s the best risk/reward for the protocol here. I’d argue that losing customer confidence is too high a risk for a product like this.

[koursk]

I like that idea. The yoUSD lose 2.95% (or the equivalent of bad debt) but users get in exchange a bad debt token that instead that they could exchange once resolv situation is solved.

[koursk]

What about yoUSD holder who lent their yoUSD into Euler vault? They are not borrowers, yet they are also affected.

Shouldn’t they be also included into the snapshot?

[0scaronchain]

Technically they are borrowers with 0 open borrows, so yes they would be counted in the snapshot.

[Dip_Thot]

seems fair, so that everyone can move on as they please

[0xtyo]

2.56% impairment still hurts. As a user, I’d prefer if the YO team could cover it from the Foundation treasury through some mechanism. This would help maintain trust. Hopefully this serves as a lesson to avoid junior tranches in the future

[i1t]

My proposal:

• if you want a clear vault free from withdrawal fee then open another USDC vault
• the participation in new vault should be an explicit voluntary individual decision of each investor, not posted on forum or anywhere else but expressed as transfer transaction signed with private key
• existing investors thus will be able to keep the funds in existing vault on current conditions (2.95% withdrawal fee) or move the funds to the new USDC vault by YO
• new investors will have a fresh vault to invest in

TL;DR:

• new vault—new rules
• existing vault—existing rules

[jizzmal]

This seems fine, but I would like to propose that YO use their foundation treasury to aid in the recovery. Transfer out the RLP tokens, sure, but use treasury funds to replace at least some of what’s taken out. Then, if/when the RLP position is recovered, some of that recovery can go back to the treasury.

This ensures a few things: depositors do not bear the full weight of the exploit and YO takes some responsibility; depositors are guaranteed at least some recovery; future potential depositors see that YO is willing and able to help cushion any future potential losses

I think that by using treasury funds, faith and confidence in YO will be raised, ensuring both that existing depositors remain with the platform, and that future depositors are comfortable enough to deposit in the first place. And, if RLP funds are recovered, the treasury may not even lose any money in doing this. If RLP funds are not recovered, the treasury can still fill that hole using funds from when $YO becomes transferrable. I would even support a small additional $YO allocation to the treasury itself to serve as an RLP reimbursement should RLP not be recoverable.

TLDR; Proceed with the proposed plan, but use treasury funds to at least partially cover the hole, reimburse this treasury payment with RLP recovery funds and potentially an additional $YO allocation.

[Artilugio]

It isn’t a ‘stablecoin’, it’s a vault token.

[Artilugio]

I support the overall proposal from YO but quite like this idea form bitcrap, at least if it isn’t too cumbersome to implement.

Think that having something in people’s wallets that represents the RLP haircut would just feel better than having to remember that they’ve been included in a database somewhere (as resolution may take a long time).

And if folk were able to trade it then even better. But again, no idea how difficult/time-consuming it would be to set this up.

[nikj.btc]

in the proposal it states 2.5% cut but this 2.5% is in the vault if resolve comes to a conclusion would the amount be directly deposited into our account in this case or do we have to do manual redemption like it says resolve can take months
doesnt the treasury have 1.2mil to cover this fiasco ? like there would be funding right ?

[upsidan]

dan here, one of the oldest and more dedicated community members from yo.

i get you need to move forward but the priority should be fixing existing holders first, not rebuilding TVL. snapshot + maybe recovery someday isn’t a solution, it’s just a delay.
I don’t undestand the need to reopen the vault before affected users are made whole. There is a big stain right now. Across the board people are less excited to join YO and De-Fi

The team needs to see how crucial this is for users, better crisis management is needed. As i said, i’m here from the start and i’ve never seen everything so disconnected. This is a bigger problem than anticipated.

If there’s any deal we could take to minimize those 2.9% i’d be happier, even if we didnt got it all back at once. I’d like to see the same positioning from the team on the other 4mi problem that happened earlier in the year, from my perspective everyone deposited way much more money after seeing you guys handle that like champs. Now, we aren’t seeing this time.

[Artilugio]

The two situations mentioned are very different: the Resolv situation was caused by - and is the responsibility of - Resolv. The earlier incident was the responsibility of YO, and they fixed it.

Waiting until everyone is “made whole” isn’t really a plan, as the hard truth is people may never be made whole. It really depends on Resolv.

[100kEURC]

Thanks for the comprehensive plan. I have three remarks:

• There is a Yo market on Extra Finance, and several liquidity pools on Balancer. It would be fair to include them too.
• Can you give the amount of fees paid since the withdrawal fee was activated?
• Last but not least, the plan addresses only the current issue. A more general approach would be nice if/when that kind of incident occurs again.

[morellostorment]

Agree that the foundation treasury should be used to cover some if not all of the losses. A 2.95% universal withdrawal fee with no clear end date just inhibits platform growth and hurts all users in the long term. For a growing protocol like YO rebuilding trust and goodwill of the users early on is absolutely imperative, and the current bandaid fix of the 2.95% withdrawal fee only serves to frustrate existing users as well as turn away new potential users.