# Reserve Fund

The **Reserve Fund** is designed to buffer short-term negative reward periods and mitigate the impact of adverse market conditions. It serves as a risk management mechanism rather than a guarantee against loss.

#### Capitalization

A defined portion of daily rewards (the reserve rate) is allocated to the Reserve Fund.

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The current reserve rate is **5% of daily rewards**.
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The protocol targets a **minimum reserve capitalization of 10 basis points (bps) of net assets**.

If reserve capitalization falls below the minimum threshold, strategy exposure is reduced or positions are closed in a systematic manner. Strategy deployment resumes only after predefined redeploy criteria are met, ensuring disciplined re-entry following adverse conditions.

#### Accounting Treatment

Assets held in the Reserve Fund are **not included as vault assets for NAV purposes**; as a result, reserve balances effectively provide **overcollateralization** relative to hBTC liabilities.

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#### Transparency and Verification

The Reserve Fund is implemented as a dedicated on-chain contract and can be independently verified using the [**Stacks block explorer**](https://explorer.hiro.so/txid/SP1S1HSFH0SQQGWKB69EYFNY0B1MHRMGXR3J1FH4D.reserve-fund-hbtc-v1?chain=mainnet).
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