sDOLA
sDOLA is a yield-bearing stablecoin that earns auto-compounding returns from FiRM's lending revenue. When you deposit DOLA, you receive sDOLA tokens that continuously appreciate as protocol revenue accrues — no staking required, no claiming necessary, no manual compounding. Your sDOLA grows in value automatically, and you can convert back to DOLA anytime with no lock-up period.
Unlike yield-bearing stablecoins that derive returns from centralized sources or rehypothecate user deposits, sDOLA generates yield entirely from decentralized fixed-rate lending on FiRM. This makes it one of DeFi's few truly decentralized yield-bearing stablecoins backed exclusively by on-chain revenue.
How sDOLA Works
sDOLA is structured as an ERC-4626 wrapper around the DOLA Savings Account (DSA) smart contract. When borrowers on FiRM spend DBR to service their loans, that DBR is recognized as protocol revenue and redistributed three ways: to INV stakers as DBR streaming rewards, to the DSA contract powering sDOLA, and to the DBR auction for liquidity depth.
The DBR allocated to the DSA is automatically converted to DOLA through the DAO's XY=K Auction contract — a virtual constant-function market maker that operates as a continuous Dutch auction. As DBR reserves increase in the auction, the price of DBR in DOLA terms decreases until an arbitrageur finds it profitable to buy DBR with DOLA. This trade deposits DOLA into the DSA, which is then distributed to sDOLA holders proportionally.
The beauty of this system is full automation. MEV bots monitor the auction continuously and execute trades when profitable, converting DBR yield into DOLA without requiring any DAO intervention or user action. The DOLA acquired through these swaps accrues to all sDOLA holders on a pro-rata basis, causing the DOLA:sDOLA exchange rate to grow continuously.
DOLA Savings Account (DSA)
The DSA is the underlying smart contract powering sDOLA. While most users interact with sDOLA through the ERC-4626 wrapper, the DSA can also be used directly by advanced users or integrators who want to stake DOLA for DBR rather than auto-compounding into more DOLA.
This is useful when you believe DBR is significantly underpriced relative to its fair value, as you can accumulate DBR directly rather than having it auto-sold through the auction. Third-party protocols may also integrate with the DSA to build custom yield strategies that utilize raw DBR rewards.
For most users, sDOLA provides a superior experience due to automatic compounding and simpler tax treatment (appreciation rather than regular reward claims), but the DSA remains available for those who prefer direct DBR exposure.
Minting sDOLA
To mint sDOLA, you deposit DOLA into the DSA contract, which wraps it into the ERC-4626 vault and issues sDOLA tokens representing your share. The process is straightforward and requires just a few clicks.
Step 1 — Navigate to the sDOLA interface
Visit inverse.finance/sDOLA and connect your wallet. Select "sDOLA" from the navigation menu.
Step 2 — Enter deposit amount
Specify how much DOLA you want to stake. There's no minimum or maximum — deposit whatever amount suits your strategy.
Step 3 — Approve and confirm
Approve the DOLA amount in your wallet (requires gas), then confirm the minting transaction (also requires gas). Once confirmed, you'll receive sDOLA at the current exchange rate.
Your sDOLA position will appear in the dashboard at inverse.finance/dashboard, where you can track your holdings, accumulated yield, and current exchange rate alongside your other Inverse Finance positions.
Important: DOLA staked as sDOLA is never rehypothecated or loaned to third parties. Your DOLA remains in the sDOLA smart contract until you choose to withdraw, maintaining full custody throughout.
Auto-Compounding Mechanism
sDOLA's defining feature is automatic yield compounding with zero user intervention. As DBR revenue accrues to the DSA, it's continuously swapped for DOLA through the auction mechanism and distributed to all sDOLA holders over the following week. This increases the amount of DOLA backing each sDOLA token, causing the exchange rate to rise steadily.
You never need to claim rewards, manually compound, or execute any transactions to benefit from yield. Simply hold sDOLA and watch its value grow relative to DOLA. The compounding happens on-chain, automatically, driven by arbitrageurs seeking profit from the auction rather than requiring any centralized operator or manual intervention.
Yield Distribution Schedule
Yield generated from the DBR-DOLA auction is distributed to sDOLA holders on a weekly cycle. Each week runs roughly from Thursday 00:00 UTC to the following Thursday, with the yield for any given week derived from auction activity in the previous week.
This creates an interesting dynamic: when sDOLA supply increases rapidly due to new deposits, the current yield temporarily appears lower than projected yield because the revenue earned last week is now being distributed across a larger holder base. Conversely, when sDOLA supply decreases due to withdrawals, remaining holders experience temporarily enhanced yield until current and projected yields converge.
This is a feature, not a bug — it ensures fair distribution based on actual time-weighted holdings while preventing gaming through last-minute deposits right before yield distribution. sDOLA has no predefined minimum or maximum APY; yield fluctuates based on FiRM borrowing demand and the resulting DBR revenue.
Withdrawing to DOLA
Unwrapping sDOLA back to DOLA is instant and permissionless. There's no maturity date, no waiting period, and no penalty for early withdrawal. Simply initiate an unwrap transaction and receive DOLA at the current exchange rate.
Navigate to the sDOLA interface, select the amount to unwrap, and confirm the transaction. Your DOLA will be returned immediately. You can re-stake into sDOLA anytime if you want to resume earning yield.
Cross-Chain Availability
sDOLA is available on multiple chains through Chainlink CCIP (Cross-Chain Interoperability Protocol), allowing you to hold and earn yield on lower-fee networks while maintaining the same exchange rate and yield accrual as Ethereum mainnet.
The exchange rate updates cross-chain automatically through CCIP's governance proxy infrastructure, ensuring your sDOLA appreciates at the same rate regardless of which chain you hold it on. This means you can bridge sDOLA to Base, benefit from lower transaction fees for other DeFi activities, and still earn the full yield generated on Ethereum mainnet.
Bridging sDOLA:
Use CCIP-compatible bridges to move sDOLA between chains:
Interport Finance
Other CCIP front-ends
The bridged sDOLA is fully fungible across chains and maintains the same appreciation rate everywhere.
What Makes sDOLA Unique
Decentralized Yield
sDOLA generates yield entirely from decentralized sources — specifically, fixed-rate borrowing revenue on FiRM. Unlike yield-bearing stablecoins that derive returns from centralized assets like US Treasury bills or depend on trusted custodians, sDOLA's yield comes from on-chain lending activity backed by decentralized collateral. DOLA itself is backed by debt positions on FiRM, not by centralized reserves, making the entire yield stack decentralized end-to-end.
Fixed-Rate Revenue Premium
FiRM's fixed-rate lending model generates higher revenue than variable-rate protocols because borrowers pay a premium for rate certainty. This premium flows to sDOLA holders as yield. Variable-rate protocols typically offer lower returns due to lower opportunity cost of capital — borrowers only pay what's necessary to attract lender supply. In contrast, FiRM borrowers pre-pay for the option to lock rates, even if those rates later become unfavorable, creating revenue surplus that accrues to sDOLA.
No Rehypothecation
Your DOLA staked as sDOLA never leaves the contract and is never loaned to third parties. This contrasts sharply with many yield-bearing stablecoins that lend your deposits to generate returns, introducing counterparty risk and potential insolvency scenarios. sDOLA's yield comes from protocol revenue sharing, not from putting your principal at risk through lending.
Non-Dilutive Revenue
sDOLA distributes actual protocol revenue, not inflationary governance token emissions. Many "yield-bearing" stablecoins achieve high APYs by issuing governance tokens, which dilutes existing token holders and creates unsustainable yield that collapses when emissions end. sDOLA's yield is entirely real — it comes from DBR burned by FiRM borrowers, which is captured protocol revenue, making yields sustainable over the long term.
Frequently Asked Questions
What is sDOLA?
sDOLA is a yield-bearing stablecoin structured as an ERC-4626 wrapper around the DOLA Savings Account (DSA) contract. It continuously streams DBR rewards to staked DOLA and auto-compounds them into more DOLA, causing the DOLA:sDOLA exchange rate to grow over time.
Where does sDOLA's yield come from?
sDOLA's yield comes from DBR revenue generated by borrowers on FiRM. When borrowers spend DBR to service their DOLA loans, that DBR is recognized as protocol revenue and partially allocated to sDOLA holders. The DBR is automatically swapped for DOLA through an on-chain auction and distributed to all sDOLA holders proportionally.
Is there a minimum holding period?
No. You can unwrap sDOLA back to DOLA anytime with no waiting period, lock-up, or penalty.
What are the risks?
sDOLA carries smart contract risk (despite audits, bugs could exist), DOLA peg risk (sDOLA's value depends on DOLA maintaining its $1 peg), and yield fluctuation risk (APY varies based on FiRM borrowing demand). Consider purchasing cover through OpenCover if you want additional protection.
How does sDOLA compare to other yield-bearing stablecoins?
Most yield-bearing stablecoins derive returns from centralized sources (US Treasuries, corporate bonds) or through rehypothecation (lending your deposits). sDOLA generates yield from decentralized fixed-rate lending revenue without rehypothecating user deposits, making it one of DeFi's few truly decentralized yield options. See stableyields.info for yield comparisons across protocols.
Can I use sDOLA as collateral on FiRM?
Not currently, though this may change through future governance proposals. For now, sDOLA is optimized as a yield-bearing asset rather than as borrowing collateral.
How is sDOLA taxed?
Tax treatment varies by jurisdiction. Consult a tax professional familiar with cryptocurrency taxation in your region. In many jurisdictions, sDOLA's appreciation may be treated more favorably than regular reward claims since you're not receiving periodic payouts.
Resources
Stake DOLA: inverse.finance/sDOLA
Dashboard: inverse.finance/dashboard
Yield Comparison: stableyields.info
Cover: OpenCover
Audit Reports: Security Documentation
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