Set Rehypothecation

Curators can change the rehypothecation setting of their markets via the Curator Dashboard.

Using the Curator App

Follow the steps below to change the rehypothecation settings:

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Step 1: Preparation

• Access the Curator Dashboard.

• If your account is not verified, complete verification under Verify Your Account.

• If you haven’t created a market yet, follow the steps in Create Market.

• If you haven’t assigned a Developer role yet, follow the steps in Role Allocation

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Step 2: Learn How it Works

• If you’re not yet familiar with how rehypothecation works, see How Rehypothecation Works.

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Step 3: Prepare supported vaults

• Before enabling rehypothecation, ensure that a vault is configured to receive both the PT and the underlying deposit.

• You may also create your own rehypothecation vault on supported platforms such as Morpho, Euler, or Gearbox.

• Curators can add rehypothecation vaults permissionlessly. However, the following constraints apply. Please note that this action may significantly alter the user’s risk profile.

For Curators: Rehypothecation Vault Criteria

The target vault must satisfy the following conditions:

• Compliant with the ERC4626 standard.

• Withdrawals must be permitted at any time (no lock-up mechanisms or pause functionality).

• No flat fees on deposits or withdrawals.

• Dynamic deposit or withdrawal fees are strongly discouraged.

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Step 4: Enable the Rehypothecation

Napier AMM consists of the underlying asset and its PT, so you must decide which vaults to allocate them to and how much percentage of each to allocate.

Set an allocation Ratio

• Use the “Allocate % of PT-cUSDO to a vault” slider to set what percentage of the pool’s total assets will be rehypothecated into an external vault.

  • Min (ϕmin) – The minimum percentage of total assets that must be rehypothecated.

  • Max (ϕmax) – The maximum percentage of total assets that can be rehypothecated.

  • Target (ϕtarget) – The desired percentage of total assets to be rehypothecated.

• If you are not using rehypothecation, you can simply set Min, Max, and Target all to 100%.

For Curators: Rehypothecation Behavior & Risks

When you assign tokens to rehypothecation, any trade that needs that liquidity will atomically withdraw → use → resupply those tokens.

What this means for you (and your users):

• Higher gas for traders/LPers due to the extra withdraw/resupply steps.

• Revert risk if tokens can’t be withdrawn at the moment of execution.

• Bad-debt/insolvency risk if withdrawals fail or liquidity is otherwise unavailable.

Operational guidance:

• Set prudent caps and maintain liquidity buffers.

• Monitor utilization and configure pause/guardrails for stress scenarios.

• Prefer reliable vaults for rehypothecation allocations.

• Communicate these trade-offs clearly to market participants.

Select a Vault

• Click Select a vault to choose the destination vault (e.g., MEV Capital USDC).

Lock Settings

• Enabling Lock rehypothecation settings prevents any further changes to vault selection or allocation ratios.

This lock can also be activated after the market has been deployed. This design ensures transparency for liquidity providers while improving operational efficiency for advanced use cases such as PT looping.