Arrakis Launches Liquidity Orchestration for Yield-Bearing Stablecoins: SyrupUSDC Case Study

@dreamsofdefi

TL;DR Stablecoins are widely recognized as one of crypto’s killer apps and institutional adoption is growing. There are many yield-bearing stablecoins on the market in 2025, but managing them onchain is inefficient. Arrakis is launching a new liquidity orchestration strategy for yield-bearing assets to solve this problem, with Maple the first project to leverage it to make SyrupUSDC’s pools more capital efficient.

Key Takeaways:

The stablecoin market is expanding and many new yield-bearing assets are launching onchain.
Providing liquidity onchain between a stablecoin and its yield-bearing corollary is capital inefficient and complex today.
Arrakis has developed an automated liquidity strategy for yield-bearing stablecoin issuers that can provide tight spreads by natively utilizing the ERC‑4626 compliant minting functionality on the vault smart contract during rebalances.
This strategy makes yield-bearing stablecoin pools more capital efficient, improving their composability across the DeFi ecosystem.
Maple is the first project to deploy this strategy for its yield-bearing stablecoin, SyrupUSDC.

The Stablecoin Supercycle

The rise of stablecoins has been one of crypto’s biggest success stories. In a space that’s characterized by volatility, the stablecoin market has defied multiple boom-and-bust cycles, steadily growing as other verticals explode only to fade as quickly as they appeared.

While many novel applications have struggled to find PMF, the stablecoin market tells a different story about crypto’s potential. Since Ethereum and other L1s emerged, the total stablecoin supply has soared to $250 billion. Legacy finance companies like Visa, Mastercard, and PayPal are either integrating stablecoins on their payment rails or looking to launch their own. And Tether has become one of the world’s most profitable financial institutions ever. Add in the highly anticipated US stablecoin bill and it’s easy to see why some believe that we are in a “stablecoin supercycle.”

The total stablecoin supply is over $250 billion today (Source: DeFi Llama)

There are several different types of stablecoin on the market today. In a recent report, a16z crypto classified current stablecoin models into three categories:

Fiat-backed stablecoins - These work like bank notes and can be redeemed for fiat. Users must trust the issuer and rely on a redemption service such as a CEX or DEX. Fiat-backed stablecoins account for over 90% of the total stabecoin supply, used for payments, DeFi activities, and more.
Asset-backed stablecoins - These are minted when users take out Collateralized Debt Positions through venues like Sky (formerly MakerDAO) and Syrup. Users mint new stablecoins when they provide tokens as collateral.
Strategy-backed synthetic dollars/SBSDs - These are dollar-pegged synthetic assets that use a combination of collateral and investment strategies to generate yield. Though SBSDs are denominated in dollars, they differ from fiat-backed stablecoins and asset-backed stablecoins in that they are more akin to shares than a store-of-value or medium of exchange. SBSDs aim to maintain a dollar peg and generate yield through strategies like tokenizing cash and carry trades and T-bills.

As the stablecoin supply has expanded, the number of new stablecoins on the market has exploded. While most are still footnotes to USDT and USDC, the market for asset-backed stablecoins and SBSDs is growing particularly fast. With RWAs and institutional adoption as central themes to crypto’s current expansion cycle, projects like Ethena and Ondo have had huge success with their own SBSDs, USDe and USDY. BlackRock and VanEck have also entered this space with the BUIDL and VBILL funds, which aim to offer a stable yield through tokenized T-bills.

These projects have grown substantially over the past year because there is significant demand for yield on dollars or dollar equivalents. With the stablecoin supply growing, and more products tailored at institutions launching, it’s easy to imagine a future where many new yield-bearing assets launch. This highlights the need for smart LPing solutions.

Arrakis has been paying close attention to this space for some time. As talk of the stablecoin supercycle intensifies, we’ve recently been exploring how we can support the incoming wave of projects that want to launch stablecoins onchain.

As we explain below, we’ve developed a liquidity strategy for issuers of stablecoins and other yield-bearing assets. Many teams have recently launched yield-bearing stablecoins but deploying to stablecoin markets is inefficient today. Arrakis hopes to solve this problem by helping yield-bearing stablecoin issuers capture the drift.

Capturing the Drift: A Key Challenge for Yield-Bearing Stablecoin Issuers

Many users are drawn to newer flavors of stablecoins that accrue yield. Many users opt to hold yield-bearing LSTs like wstETH over ETH for similar reasons. Doing so helps them improve their returns.

With yield-bearing assets such as Maple’s SyrupUSDC (SYRUPUSDC), there is a price drift wherein the derivative (or yield-bearing version of the token) carries a small premium relative to the underlying asset as it accrues interest over time. Maple’s SyrupUSDC is a receipt token for users who deposit or lend their USDC into Syrup’s lending markets. SyrupUSDC’s value relative to USDC increases (drifts) over time as the receipt token accrues interest (yield) from lending.

When a stablecoin LP deposits two correlated assets to a pool and there is a price drift between them, their ideal strategy should be to capture the delta before it closes. If the LP does not capture the drift, arbitrageurs can extract the value for themselves, thereby making LPing inefficient.

Capturing the drift is difficult for the LP because they usually need to manually rebalance the pool, there are gas costs to consider, and the drift decays quickly.

How Arrakis Pro Orchestrates Liquidity for Yield-Bearing Stablecoins

To address the inherent complexities associated with yield-bearing stablecoins, Arrakis Pro has created a customized Yield-Bearing Stablecoin Strategy on Uniswap V4.

As mentioned above, when managing a pair that contains a yield-bearing token and its non-yield-bearing counterpart, the LP ideally wants to capture the delta when the price drifts. To effectively capture this drift and create deep liquidity, the Arrakis Pro strategy works as follows:

Our strategy starts by depositing the underlying token (stablecoin) and its yield-bearing derivative in a pool at a 80:20 ratio.
The positions are set within a highly concentrated range, with a total width spanning between 10 and 50 ticks depending on the yield-bearing asset’s APR.
As the price drifts and the yield-bearing derivative’s price increases, the LP sells the derivative to pocket the spread. But this also temporarily causes their inventory ratio to become imbalanced up to a 90:10 ratio.
The strategy automatically withdraws liquidity from the underlying asset and natively mints the yield-bearing derivative on the issuer’s platform. This token is typically an ERC-4626 vault token. This asset gets added to the LP position, rebalancing the ratio back to 80:20 and allowing the position to rest around the new price.

This liquidity orchestration strategy gives stablecoin LPs maximal capital efficiency by maintaining tight ranges and executing rebalances (with mints of the yield-bearing stablecoin) on a tight cadence to capture the drift.

Traditional LPs generally can’t profit from strategies that rely on frequent rebalancing due to the operational requirements and the erosion of profits from the price impact associated with frequent swaps. With this strategy, the contract offers a way to mint the yield-bearing asset at the correct price and with near infinite deep liquidity, which minimizes price impact.

This approach requires setting highly concentrated positions with regular rebalances (if the wait is too long, the LP loses money because the price continues to drift over time and they must still buy back their position to rebalance their inventory). But as the rebalances happen at a regular cadence, they do not negatively impact the token issuer.

This strategy is effective for pools with derivatives that have a predictable price drift from their underlying asset. It works because there is a tangible redemption price for the derivative based on the underlying asset.

It’s worth noting that the strategy would be ineffective in cases where the derivative carries a theta rather than a delta (i.e. if it does not bear yield but rather has an inverse yield). This is because the strategy requires fast execution. While minting derivatives is fast, withdrawing them (i.e. through unwrapping) has a time delay. When the LP makes a withdrawal, their capital is held in limbo and they cannot make the market.

Moreover, the strategy must factor for depegging risk. If the derivative loses its peg, the strategy no longer makes sense. The LPing strategy can take account of the depeg risk by spreading liquidity wider.

Maple Becomes First Stablecoin Issuer to Leverage Arrakis Pro’s Liquidity Orchestration Strategy for SyrupUSDC

Maple is the first project to leverage the new Arrakis Pro liquidity orchestration strategy for its yield-bearing stablecoin, SyrupUSDC.

Prior to our pool deployment, Maple’s SyrupUSDC had UniV3 and UniV4 pools with medium to wide ranges ranging from 30 to 90 ticks. While this approach reduced the manual overhead for the team, it minimized volume and fee capture. With liquidity occasionally sitting out of range, the pools were not optimized for capital efficiency. This approach also created gas expenditure.

On Balancer’s Boosted Pool, the team had less concentrated positions with dynamic fees optimized for the LP’s performance. Unlike the Uniswap pools, this pool did not require any burn and mint function to adjust LP positions.

Arrakis has since launched SyrupUSDC/USDC pools on UniV4 and Aerodrome for Maple, leveraging our new strategy to drive better outcomes for the team. In these pools, positions have a width of up to 10 ticks, meaning they are narrower and the team can capture more volume and revenue. Rebalances occur automatically via the ERC-4626 vault (i.e. Maple’s SyrupUSDC vault) whenever the position moves by one tick spacing, removing all operational overheads the team faced when manually adjusting positions.

Tight positions and frequent rebalances are the key to this strategy. We’ve already achieved results for SyrupUSDC by using narrow ranges and automated rebalances and we’re ready to roll it out to the next wave of stablecoin issuers. If you’re planning to deploy your own stablecoin or another yield-bearing asset onchain, fill out our contact form to learn more about how we can support you.