> For the complete documentation index, see [llms.txt](https://docs.keystonefi.xyz/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.keystonefi.xyz/how-it-works/strategy-and-modes.md). # Strategy & Modes ksUSD runs a single delta-neutral carry strategy through three internal modes, picked automatically by the smoothed funding signal — no discretion, no manual switching. Gross SOL exposure stays ≈ 0 in every mode.
Net carry yield versus perp funding rate: reverse basis (go long) on the deeply-negative left, a USDC lending floor through the middle dead zone, and normal basis (go short) on the positive right.

The three modes mapped onto the funding rate — reverse basis below −12%, USDC lending in the dead zone, normal basis above +2%. Carry is captured on both sides; lending holds the floor.

*** ## The three modes ### 1. Normal basis — funding positive (default ≥ +2% APR smoothed) ``` Long jitoSOL on Drift Perps as cross-margin collateral Short SOL-PERP at 1× notional vs. the jitoSOL deposit ``` * Net SOL delta: **zero** * Earns jitoSOL staking yield (collateral leg) + Drift funding (perp leg) * Activates when `funding_apr_smoothed_bps ≥ funding_threshold_normal_bps` **and** the dwell timer has elapsed ### 2. Reverse basis — funding deeply negative (default ≤ −12% APR smoothed) ``` Post USDC as Kamino collateral Borrow jitoSOL against it (LTV ~45%) Sell the borrowed jitoSOL to USDC via Jupiter Long SOL-PERP on Drift at 1× notional of the borrowed jitoSOL ``` * Same delta-neutral shape, opposite trade * Earns the negative funding paid by the crowded short side, less the Kamino borrow-vs-lend spread * Real-data reverse-mode share: **2–4% of days** — the regime that bleeds one-way products by design ### 3. Idle — funding dead zone * Funding signal sits between the two thresholds → neither active mode produces positive net carry * Vault closes any open position; parks the entire NAV in USDC lending on Kamino * Liquidity buffer fraction always stays in the vault's USDC ATA so `withdraw_instant` keeps working > **Wind-down** is a terminal admin escape hatch (`init_wind_down`), not a normal operating mode. It blocks new deposits and routes shareholders to pro-rata redemption via `claim_wind_down`. Documented under [Admin operations](/for-operators/admin-ops.md). *** ## Mode-switch guardrails | Guard | Default | Effect | | --------------------------------- | -------------------- | ------------------------------------------------------------- | | Funding smoothed EMA threshold | ±200 bps / −1200 bps | Single-tick noise can't flip modes | | `min_dwell_seconds` | 12 h | Minimum time the vault stays in a mode before switching | | `funding_max_staleness_seconds` | 6 h | Opens revert with `FundingSignalStale` if `settle` is overdue | | `consecutive_dd_settles_required` | 2 | Drawdown trip needs two consecutive bad settles | | `lst_depeg_bps` | 5% | `settle` auto-pauses the vault on jitoSOL depeg | | `max_swap_slippage_bps` | 0.5% | Jupiter swaps revert past this realized slippage | *** ## Why this composes only on Solana Three primitives must co-locate on one chain: * **High-yield borrowable LST** — jitoSOL on Kamino (45% LTV at scale) * **On-chain perp DEX with real two-sided funding** — Drift Perps (not the borrow-fee-to-LP model on most EVM perp venues) * **Sub-cent composability** — Solana's fee model lets the vault switch modes hourly without bleeding gas Doesn't exist on Ethereum (stETH borrow is capped on Aave) or on EVM L2s (GMX V2 uses borrow-fee, not funding). **ksUSD is mechanically Solana-only.** *** ## Related * [What is ksUSD?](/keystone-finance/reserve-asset.md) — overview and yield sources * [Risk management](/how-it-works/volatility-risk-management.md) — drawdown guard, slippage bounds, dwell timers, depeg / staleness guards * [Whitepaper](/reference/whitepaper.md) — full design, NAV math, security, risk disclosures --- # Agent Instructions This documentation is published with GitBook. GitBook is the documentation platform designed so that both humans and AI agents can read, navigate, and reason over technical content effectively. Learn more at gitbook.com. ## Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. Perform an HTTP GET request on the current page URL with the `ask` query parameter, and the optional `goal` query parameter: ``` GET https://docs.keystonefi.xyz/how-it-works/strategy-and-modes.md?ask=&goal= ``` `ask` is the immediate question: it should be specific, self-contained, and written in natural language. `goal` is optional and describes the broader end goal you are ultimately trying to accomplish on behalf of the user. GitBook uses it to tailor the answer towards what is most useful for that goal. The response will contain a direct answer to the question and relevant excerpts and sources from the documentation. Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.