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Rewards

Many yield-generating strategies provide additional rewards tokens beyond base yield. The protocol has a dedicated system for handling these rewards.

Reward Sources

Rewards are generated by the collateral strategies deployed in vaults. These serve as additional incentives on top of the base yield earned from lending or staking activities.

Common reward tokens:
  • MORPHO (from Morpho protocol)
  • COMP (from Compound)
  • CRV (from Curve)
  • Protocol-specific governance tokens

Rewards can be any ERC20 token depending on the underlying strategy.

Reward Configuration

The Config Manager role sets which reward assets are acceptable for claiming and selling. This whitelist approach limits the trust required in the Rewards Manager by restricting operations to pre-approved tokens only.

Benefits:
  • Prevents malicious token claims
  • Ensures only legitimate reward tokens are processed
  • Reduces operational risk

Reward Management

The Rewards Manager role has two options for handling rewards:

Option 1: Sell Rewards

  • Converts reward tokens into protocol collateral assets (USDC, USDT, USDS)
  • Executes swaps via integrated DEXes
  • Deposits converted assets back into vaults
  • Increases total collateral value, boosting yield for distribution
Example: 
1. Morpho vault earns 1,000 MORPHO tokens
2. Rewards Manager sells MORPHO for 5,000 USDC
3. 5,000 USDC is deposited back into vaults
4. Increased collateral creates additional yield

Option 2: Claim Rewards

  • Claims reward tokens from underlying protocols
  • Transfers tokens to a designated address
  • Rewards are distributed to chains and dapps
  • Chains/dapps use rewards as additional incentives for their users

Use Case: When reward tokens have value beyond their market price (e.g., governance rights, ecosystem benefits), claiming and distributing them directly can provide more value than selling.

Example: 
1. Morpho vault earns 1,000 MORPHO tokens
2. Rewards Manager claims the MORPHO tokens
3. Tokens distributed: Chain A (600 MORPHO), Chain B (400 MORPHO)
4. Chains distribute MORPHO to their users as bonus incentives