Sustainability

Katana is designed for sustainable yield generation that scales with usage and holds firm across market cycles.

Sustainability That Scales
As network activity and TVL increase, so do the yields across the Katana DeFi ecosystem:

  • Vault Bridge: More users bridging assets with Vault Bridge leads to more onchain yield collected on L1, which is redirected to boost liquidity pools on Katana.
  • AUSD: Increased usage of Katana’s native stablecoin channels leads to more offchain yield (from U.S. Treasury exposure) going back into AUSD-denominated pools.
  • Net Sequencer Fees → Chain-Owned Liquidity (CoL): More user transactions generate more sequencer fees, which are used to grow CoL. Yield earned through CoL deployment is either compounded or used to further boost pool incentives.
  • Core App Usage: Greater liquidity and usage in core apps (lending, swaps, etc) increases the protocol-native yield generated by using DeFi apps in general and a portion of core app fees then get redirected to boost certain liquidity pools on Katana, keeping the flywheel spinning.

Resilience Across Market Cycles
Katana’s architecture ensures yield and liquidity stability in bear markets and times of high volatility:

  • Persistent Liquidity via CoL: CoL remains deployed in DeFi pools regardless of market conditions, providing a base layer of liquidity that cushions against capital flight.
  • Shock Absorption: This permanent liquidity stabilizes borrowing rates and reduces DEX slippage during volatile periods.
  • Dynamic Reward Distribution: When others exit, remaining users benefit—yield generated by CoL can be redirected to boosted yields for LPs who stay, effectively raising their relative returns during downturns.
  • Diversified Yield Sources: AUSD introduces an offchain yield stream into the network, complementing the onchain revenues of Vault Bridge yield, sequencer fees, and earning from deployed CoL—adding stability and smoothing returns across different market regimes.

Together, these mechanisms create a resilient DeFi architecture where yields are scalable and built to last through any cycle.