> ## Documentation Index
> Fetch the complete documentation index at: https://docs.ultramarkets.xyz/llms.txt
> Use this file to discover all available pages before exploring further.

# umUSD Token

> Learn about the umUSD vault token, how share prices work, and DeFi composability.

umUSD is an ERC-4626 compliant vault token representing your share of the lending pool. When you deposit USDC, you receive umUSD. When you withdraw, you burn umUSD and receive USDC.

## How the Share Price Works

The exchange rate between USDC and umUSD is determined by the vault's Net Asset Value (NAV):

```
umUSD Share Price = Total Vault Assets / Total umUSD Supply
```

At launch, the share price is **\$1.00**. Over time, as the vault earns fees and profit share, total assets grow faster than total shares. The share price rises.

### Example

| Timeline | Vault Assets | umUSD Supply | Share Price |
| :------- | :----------- | :----------- | :---------- |
| Day 1    | \$1,000,000  | 1,000,000    | \$1.00      |
| Day 30   | \$1,050,000  | 1,000,000    | \$1.05      |

Your 10,000 umUSD is now worth **\$10,500** instead of \$10,000.

<Info>
  You don't receive yield distributions. Your yield accrues as NAV appreciation. This is more tax-efficient and compounds automatically.
</Info>

## Depositing and Withdrawing

### To Deposit

1. Connect your wallet
2. Enter USDC amount
3. Receive umUSD at current share price

### To Withdraw

1. Enter umUSD amount to burn
2. Receive USDC = umUSD × current share price
3. Funds available immediately (if liquidity permits)

## The Liquidity Constraint

<Warning>
  Here's where Ultramarkets differs from typical DeFi vaults.
</Warning>

In protocols like Aave, borrowed capital stays in smart contracts. High utilization creates high rates, incentivizing repayment. In Ultramarkets, borrowed capital **leaves the protocol entirely**. When a trader borrows \$9,000, that USDC moves to Polymarket and becomes outcome tokens. It's locked until the position closes.

This creates a structural constraint: if 80% of vault capital is deployed to active positions, only 20% is available for withdrawals.

| Liquidity Type          | Description                                              |
| :---------------------- | :------------------------------------------------------- |
| **Available liquidity** | USDC sitting in the vault, ready to be lent or withdrawn |
| **Utilized liquidity**  | USDC deployed to active Polymarket positions             |

<Note>
  If you try to withdraw more than available liquidity, you'll need to wait for positions to close. This is the tradeoff for earning real yield from active capital deployment.
</Note>

## Committed Capital Rewards

Your effective yield increases the longer your capital stays in the vault. We track your weighted average deposit age and apply multipliers:

| Time in Vault | Multiplier |
| :------------ | :--------- |
| 0-30 days     | 1.0x       |
| 30-60 days    | 1.1x       |
| 60-90 days    | 1.2x       |
| 90+ days      | 1.3x       |

The vault distributes earnings based on effective balance (umUSD × multiplier), not raw balance. LPs who commit longer earn proportionally more.

<Info>
  **The key:** Withdraw instantly anytime. No lockups, no penalties. We reward commitment without punishing liquidity.
</Info>

## DeFi Composability

umUSD is a standard ERC-4626 token with a liquid secondary market. This makes it composable across DeFi:

<CardGroup cols={2}>
  <Card title="Lending Markets" icon="landmark">
    Use umUSD as collateral on Morpho or Aave to borrow USDC while maintaining vault exposure
  </Card>

  <Card title="Yield Trading" icon="chart-mixed">
    Pendle can tokenize umUSD yield into principal (PT) and yield (YT) tokens
  </Card>

  <Card title="Liquidity Pools" icon="droplet">
    umUSD/USDC pools on AMMs provide instant exit liquidity
  </Card>

  <Card title="Yield Aggregators" icon="layer-group">
    Yearn or Beefy can include umUSD in vault strategies
  </Card>
</CardGroup>