Risk Tranching
Many risk-aware Defi services adopt “tranching” model to stratify risk. In this model, Senior Tranches bear losses last, while Junior Tranches absorb losses first. The challenge is that few users want to provide junior (first-loss) capital. Huam addresses this by institutionalizing the Junior Tranche at the protocol level. Instead of relying on external first-loss providers, the protocol maintains its own buffers funded by retained earnings.Protection Hierarchy
When the strategy incurs losses, capital is consumed in a defined order—each layer absorbs impact before passing to the next.- Reward Manager: Accumulated yield in the Reward Manager acts as first-loss capital. This buffer absorbs operational costs, hedging slippage, and temporary drawdowns before they reach stakers.
- Protocol Reserves: If the Reward Buffer is depleted, protocol reserves are consumed to absorb further losses. This provides an additional cushion before user funds are affected.
- Staked Assets: User principal in sUSDhm is the senior tranche—exposed to loss only after Layer 1 and Layer 2 are exhausted. Stakers accept this tail risk in exchange for yield.
Structural Isolation
The protocol enforces strict separation between stable money and yield-generating capital.- USDhm: Unstaked USDhm is backed 1:1 by USDC held in the Minter contract. This collateral is never deployed to strategies—it sits idle, ensuring USDhm holders can always redeem regardless of strategy performance.
- sUSDhm: By staking, users convert risk-free USDhm into a yield-bearing asset. They gain exposure to protocol revenue but accept the risk that severe, sustained losses could impair principal after buffers are exhausted.