# Protocol yield generation

## Overview

This document describes how the protocol generates yield from user deposits, how that yield is handled based on strategy type, and under what conditions it is sent to the `L1SenderV2` contract for cross-chain reward minting.

## Yield generation overview

When users stake tokens into deposit pools, those tokens may be used in different yield strategies, depending on the pool configuration. The protocol currently supports the following strategies:

* `AAVE` - token is deposited into Aave to generate yield.
* `NO_YIELD` - token is not used in any external protocol. This is typically used for `stETH`.
* `NONE` - no yield logic is applied (only for private buckets without real stake).

## Strategy-Specific Deposit Behavior

When a user calls `supply()`

#### For AAVE Strategy:

* The user transfers the underlying `token` to the `Distributor`.
* The `Distributor` supplies the token to the Aave protocol via `AaveIPool.supply()`.
* Yield is later measured by checking the `aToken` balance of the `Distributor`.

#### For NO\_YIELD Strategy (e.g., `stETH`):

* The user transfers `stETH` to the `Distributor`.
* It is **not** deposited anywhere; yield is not actively generated.
* Instead, the `stETH` is held and passively earns staking rewards (as per Lido).

## Reward Distribution Timing and Constraints

Rewards are distributed using `distributeRewards()` which performs the following:

1. **Fetch emitted MOR -** calls `RewardPool.getPeriodRewards()` using the last distribution timestamp.
2. **Check if distribution is due**: public pools must respect `minRewardsDistributePeriod` (e.g., once per day).
   * This is enforced **because `stETH` yield is not readable on-chain** per second or block. It's accrued slowly, and daily intervals allow consistent accounting.
3. **Update Prices**:
   * For each deposit pool in the reward pool, the price of the deposit token is fetched from Chainlink (via `ChainLinkDataConsumer`).
   * This allows yield across tokens (USDC, WETH, etc.) to be normalized to a dollar value.
4. **Calculate Yield Per Pool.** See [MOR distribution. Step #1](/smart-contracts/documentation/distribution-protocol/v7-protocol/guides/mor-distribution.-step-1.md)
5. **Calculate Pool Shares.** See [MOR distribution. Step #1](/smart-contracts/documentation/distribution-protocol/v7-protocol/guides/mor-distribution.-step-1.md)
6. **Update State.** See [MOR distribution. Step #1](/smart-contracts/documentation/distribution-protocol/v7-protocol/guides/mor-distribution.-step-1.md)

## Transferring Yield to L1SenderV2

The protocol does not retain accrued yield within the `Distributor` contract. Instead, yield is extracted and forwarded to `L1SenderV2` selectively — only for the specific `DepositPool` that triggers the operation.

At the end of a yield cycle (e.g., daily), when any function (e.g., `supply`, `withdraw`, or `withdrawYield`) is called on a given deposit pool, the `Distributor` contract:

* Calls `distributeRewards` to calculate and assign MOR rewards based on relative yield of all deposit pools in the same reward pool.
* Then calls `_withdrawYield` only for the `DepositPool` involved in the transaction, transferring its actual yield to `L1SenderV2`.

Yield is transferred using the following logic:

* For `AAVE`:
  * Calls `AaveIPool.withdraw()` to redeem `aTokens`.
  * Transfers the withdrawn tokens to `L1SenderV2`.
* For `NO_YIELD`:
  * Transfers the excess tokens directly (if any) to `l1SeL1SenderV2nder`.

Once the tokens are with `L1SenderV2`, they can be:

* Bridged to Arbitrum.
* Used for minting MOR rewards for users via `sendMintMessage()`.

## Notes

* `stETH` pools use `NO_YIELD` because stETH natively accrues rewards via rebasing.
* The yield on `stETH` cannot be measured at each block — hence daily distribution is preferred.
* Price-based yield normalization ensures fair distribution even when token values vary.


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