How Coil works.
Why it works.

Coil splits one tokenized share of STRC preferred stock into two freely-tradeable tokens that together equal the original.

1 sSTRCx → 1 PT-sSTRCx + 1 YT-sSTRCx

PT (Principal Token) is the right to redeem one share of the underlying for $100 par at maturity (1 November 2026). It pays no dividend.

YT (Yield Token) is the right to every dividend that share pays from now until maturity. It returns nothing at maturity (the principal claim went to PT).

The mechanic is Pendle’s, invented on Ethereum in 2022, currently securing roughly $7B of TVL across LSTs, T-bills, and other yield-bearing assets. Coil applies it to a U.S.-listed preferred stock for the first time.

What you can do with each leg

The yield is not magic. There’s no farm token, no bootstrap emission. Every dollar of return traces to one of two sources.

Source 1, STRC’s board-set dividend

Strategy Inc (NASDAQ: MSTR) issued STRC, a $100-par perpetual preferred, to fund Bitcoin acquisition. The board sets the cash dividend rate monthly via 8-K filing. The current rate is 11.50% APR, paid bi-monthly on the 1st and 15th. STRCx is Backed Finance’s 1:1 tokenized wrapper of STRC; the dividend manifests on chain as an automatic rebase via Token-2022’s scaledUiAmount extension.

YT holders capture this dividend. PT holders give it up in exchange for a fixed redemption claim at maturity.

Source 2, PT discount-to-par

PT trades below par because future dollars are worth less than present dollars. Today PT-sSTRCx trades at $94.40 against a $100 par redemption. Holding PT to maturity captures the $5.60 gap.

PT yield = (par − entry) / entry × (365 / days_to_maturity)
= ($100 − $94.40) / $94.40 × (365 / 180) ≈ 12.4% APY

The leveraged loop math

Buy Leveraged combines both sources. With $E equity at L× leverage:

Total exposure = $E × L STRCx
Borrow = $E × (L − 1) USDC at 8% APR (coil_lending)

Net APY = (STRC dividend × L) − (borrow rate × (L − 1))
At L=3, 11.5% × 3 − 8% × 2 = 18.5% APY on equity

Capped at 3×: the lending pool enforces 75% LTV against PT collateral. Since PT trades below par, the effective LTV is ~70.8%, at 3.5× the borrow ratio (71.4%) breaches the cap. 3.0× leaves comfortable headroom for slippage.

Pendle’s PT-as-collateral loop runs $7B on Ethereum but only at institutional position sizes, Ethereum’s gas floor makes the same loop unprofitable for retail. A five-leg tx (flash-borrow → swap → wrap → split → deposit-collateral → borrow → repay) costs $25–$200 in ETH gas. On a $5,000 position, that’s 50–400 bps of friction before any yield compounds.

The same loop on Solana fits in a single signature for $0.009 all-in. The fee floor is the product thesis. 11.5% × 3× leverage compounds profitably for a $1k retail position; on Ethereum it requires $50k+.

Backed Finance shipping STRCx as a Token-2022 mint with auto-rebasing in April 2026 was the missing piece. Before that, STRC didn’t exist on Solana in a yield-bearing form. After that, the PT/YT split + loop became feasible.

The four layers and who’s responsible

What this means in practice

STRC itself is a regulated security. When you buy STRC on Robinhood, you’re buying SEC-registered preferred stock from Strategy. Standard rules apply: 1099-DIV for dividends, capital gains on disposal, etc.

STRCx is a Swiss-regulated wrapper. Backed issues STRCx under Liechtenstein’s TVTG (token economy act). They hold the underlying STRC at a custodian, mint STRCx 1:1 against it, and publish proof-of-reserves. Backed retains the on-chain power to clawback / freeze / pause STRCx for compliance compulsion (court order, sanctions, etc.), this is spelled out in their terms and the dapp surfaces it prominently. Backed’s terms restrict U.S. persons from holding STRCx, though enforcement is at the Backed/exchange layer, not at the chain layer.

Coil is open infrastructure. The six Anchor programs (wrapper, splitter, oracle, lending, vault, adapter) are deployed and accessible to any wallet. Coil holds no user funds, every position is a token balance under your own keys. Coil takes no fees. There is no Coil entity, no Coil token, no team treasury.

PT and YT classification is jurisdictional. In most jurisdictions, derivative claims on a regulated security inherit the underlying’s securities classification. PT is economically similar to a zero-coupon bond on STRC; YT is economically similar to a cash-flow strip. Both are likely securities under U.S. law. Coil does not opine on the classification, it’s software.

What Coil deliberately does not do

• No KYC. The protocol is permissionless. If local law requires KYC for derivative trading, that’s on you.
• No custody. Coil never holds user keys or user funds outside of explicit on-chain deposits to its wrapper / splitter / lending vaults, and even those are program-derived addresses with no human signer.
• No proprietary issuance. sSTRCx, PT, and YT are 1:1 derivatives of Backed’s STRCx. Coil mints them on demand; you can always merge PT + YT back to sSTRCx and redeem to STRCx via the wrapper + adapter.
• No price manipulation. The PT oracle is a deterministic linear walk from entry price to par at maturity, not market-tracking. This makes Coil’s lending pool cascade-resistant during liquidations.
• No upgrade keys for runtime authority after multisig migration completes (in progress, see the security page).

If you’re a U.S. person

Backed Finance’s terms restrict STRCx access to non-U.S. persons. Buying STRCx through their primary issuance flow requires accreditation checks that exclude U.S. residents. That said: STRCx trades freely on Solana DEXes (Raydium, Jupiter), and the smart-contract layer doesn’t check passports. If you’re in the U.S. and you acquire STRCx from a secondary venue, you may be in breach of Backed’s terms and exposed to U.S. securities law on the derivative positions you take. Talk to a securities lawyer.

Coil is a derivative on a tokenized derivative on a variable-rate corporate preferred funded by Bitcoin. The risk stack is real. We’ve commissioned an external code audit and applied every patch within scope; the full report and status are in the security page.

Counterparty risk, Strategy Inc

STRC is junior debt-equivalent. If Strategy defaults (BTC price collapse + inability to roll convert offerings + dividend suspension), STRC redemption value goes to zero. STRC holders rank ahead of common equity but behind senior debt. The bear case: BTC at $30k for two years + Strategy can’t service dividend = STRC trades at meaningful discount to $100 par. Backed Finance’s STRCx tracks STRC’s actual value.

Counterparty risk, Backed Finance

STRCx is a Backed-issued claim on real STRC held at a custodian. If Backed mismanages reserves, gets sanctioned, or the custodian fails, STRCx breaks the 1:1 peg. Backed retains permanent on-chain authority over STRCx via Token-2022 extensions: permanentDelegate (clawback any account), freezeAuthority (freeze transfers), pausableConfig (pause the entire mint), and scaledUiAmountConfig.authority (change the rebase multiplier). Backed says they’ll only use these for legal compulsion. The dapp surfaces this prominently on Buy Fixed when STRCx is selected.

Coil’s mitigation: the coil_strcon_adapter now refuses new deposits if strcon_vault.amount < wstrcon_mint.supply · i.e. if Backed’s clawback has rendered the adapter undercollateralized, no new user can compound the loss by depositing fresh STRCx. Existing deposits are still subject to the underlying clawback risk.

Smart-contract risk

Six Anchor programs, ~3000 lines of Rust between them. External audit identified 10 critical/high findings. As of 2026-05-10:

Liquidation risk (leveraged positions)

Buy Leveraged and Auto-loop deposit PT collateral and borrow USDC against it. The lending pool enforces 75% LTV; positions that breach LTV can be liquidated by anyone for a 5% liquidation bonus. Positions are at risk if (a) PT oracle price drops materially below entry, unlikely because PT walks toward par deterministically, OR (b) a borrower’s debt accrues past their PT collateral value at the next interest accrual.

Oracle risk

Coil uses Pyth’s Equity.US.STRC/USD feed for the spot price snapshot during dividend harvest. The wrapper validates feed ID + age (≤ 5 min) + verification level + confidence interval (≤ 1.00%) before accepting any update. PT pricing for the lending pool is deterministic (linear walk from entry to par) and does not depend on Pyth, making the lending pool cascade-resistant during oracle outages.

Liquidity risk

The dapp’s lending pool is currently bootstrap-sized ($100 USDC reserves, scales as governance seeds more). Per obligation borrow is capped at 50% of total reserves. AMM pools (Raydium PT/USDC, Meteora YT/USDC) are not yet seeded · Buy Fixed and Buy Leveraged work today; Sell Yield via the YT/USDC pool requires liquidity that will be seeded as the protocol matures.

Six Anchor programs deployed on Solana mainnet. All upgrade authorities are currently held by a single deployer keypair (5d17EC...); migration to a Squads multisig is the next operational step.

The atomic loop tx

Buy Leveraged composes 8 instructions across 5 programs in a single signature:

1. MarginFi flash-borrow USDC
2. Jupiter swap USDC → STRCx
3. coil_strcon_adapter.wrap (Token-2022 → legacy SPL)
4. coil_wrapper.deposit (mint sSTRCx)
5. coil_splitter.split (mint PT + YT)
6. coil_lending.deposit_collateral (PT)
7. coil_lending.borrow (USDC)
8. MarginFi flash-repay

All atomic, if any leg fails, the whole tx reverts and the user pays only the (sub-cent) tx fee. Tx size fits the 1232-byte v0 message cap by combining a coil-owned LUT (program IDs + market PDAs) with Jupiter’s per-route LUTs.