How Does Cap Work?
Cap is a stablecoin protocol on MegaETH offering cUSD (backed by stablecoin basket) and stcUSD (yield-bearing version), with $211M TVL. Its C+ grade reflects the novel three-sided marketplace where operators borrow user capital for DeFi strategies backed by delegator-restaked assets — a design with no established track record, combined with centralized stablecoin counterparty risk.
TVL
$314M
Sector
Stablecoin
Risk Grade
C
Value Grade
D
Core Mechanisms
6.1.1
cUSD minted 1:1 against basket of stablecoins and MMFs
Standard collateralized stablecoin minting
6.1.2
NovelOperators borrow user capital for yield strategies (under-collateralized)
Novel: operators borrow deposited stablecoins backed by delegator-restaked assets
8.3.1
NovelDelegators restake assets to underwrite operator performance
Novel: restaking model for stablecoin yield guarantee rather than network security
2.2.1
NovelstcUSD yield distribution from operator strategy returns
Novel: yield-bearing stablecoin where returns depend on operator performance
5.4.1
Self-enforcing smart contract governance
Governance by smart contract guarantees rather than human committees
How the Pieces Interact
Operators deploying borrowed capital into external strategies expose cUSD holders to cascading risks from strategy failure
Correlated operator failures could exhaust delegator backstop creating systemic undercollateralization
cUSD backing depends on centralized stablecoins and MMFs; depeg or freeze of components impacts redemption
Self-enforcing guarantees depend on MegaETH L2 security and uptime
What Could Go Wrong
- cUSD is a synthetic dollar backed by a basket of centralized stablecoins and money market funds, introducing custodial counterparty risk — if underlying stablecoins or MMF providers face insolvency, cUSD backing is directly impacted.
- The three-sided marketplace (users, operators, delegators) introduces novel coordination risks: operators borrow user capital for yield strategies, and delegators underwrite operator performance via restaking.
- stcUSD yield depends on operator performance in external DeFi strategies, creating indirect exposure to every strategy operators deploy.
- As a new protocol on MegaETH (a new L2), Cap inherits the security assumptions and maturity risks of the underlying chain.
Correlated Operator Strategy Failures Draining Delegator Backstop
ModerateTrigger: DeFi market downturn causes 3+ operators to simultaneously incur losses exceeding 20% of borrowed capital, triggering delegator slashing that exceeds restaked capacity
- 1.DeFi market stress causes losses in external strategies where operators deployed borrowed capital — Multiple operators report negative returns simultaneously
- 2.Delegator restaked assets are slashed to cover operator losses — Delegator withdrawals spike as slashing erodes capital
- 3.Remaining delegator backstop becomes insufficient for ongoing operator obligations — stcUSD yield turns negative and cUSD redemption demand spikes
- 4.cUSD redemption pressure exceeds available liquid reserves — cUSD trades at discount as users race to redeem
- 5.Protocol halts new operator borrowing and enters recovery mode — TVL collapses as confidence in guarantee model breaks
Risk Profile at a Glance
Overall: C (43/100)
Lower score = safer