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

# How Huam Works

> Understanding the flow of funds through the protocol

<img src="https://mintcdn.com/peachtechnology/25l6XLa1tctzrWxs/images/flow.png?fit=max&auto=format&n=25l6XLa1tctzrWxs&q=85&s=c3a87c7fa9ef1a59ff870b8a2aa2aadf" alt="How Huam Works" width="3840" height="1800" data-path="images/flow.png" />

## Fund Flow

1. **Deposit**: User deposits USDC to mint USDhm 1:1. Collateral held in Minter contract.
2. **Stake**: User stakes USDhm into the Staking Vault, receiving sUSDhm. The corresponding USDC transfers from Minter to Collector.
3. **Deploy**: Collector allocates funds to hedged LP positions across DEXs (via Adaptors) and opens corresponding hedge positions on exchanges.
4. **Earn**: LP trading fees minus hedging costs flow to the Reward Manager, which releases yield to the Staking Vault—increasing the sUSDhm exchange rate.
5. **Withdraw**: User unstakes sUSDhm (7-day cooldown), receives USDhm plus accumulated yield, then redeems for USDC.

Unstaked USDhm remains fully backed by USDC in the Minter contract, ensuring 1:1 redemption at any time regardless of strategy performance.

## Hedging Mechanism

Huam's yield comes from DEX LP fees, but LP positions carry impermanent loss (IL) risk. The protocol hedges this using perpetual futures:

1. When capital enters an LP position (e.g., ETH-USDC), the protocol gains price exposure to ETH.
2. A short perpetual position offsets this delta, making the combined position market-neutral.
3. As prices move, the hedge is dynamically adjusted to maintain neutrality.

The result: trading fee yield flows to stakers while price movements are neutralized. See [Hedging Impermanent Loss](/protocol-mechanism/hedging-impermanent-loss) for full methodology.