# 💱 Flow of Funds

This diagram illustrates the complete lifecycle of user funds inside RWAlpha vaults and highlights every participant involved—from the user to vault contracts, custodians, asset managers, and tokenization partners.

### Lifecycle Overview

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### **Step-by-Step Breakdown**

#### **1. Vault mints tokens when users deposit stablecoins**

Users deposit pUSD and receive ERC-20 vault tokens that represent their share of the vault.\
These tokens appreciate in value as yield is accrued.

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#### **2. Vault allocates capital into tokenized assets**

The vault deploys funds into regulated, tokenized RWAs such as:

* U.S. Treasuries
* ETF-based yield products
* Credit or debt instruments

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#### **3. Custodians safeguard underlying assets**

All underlying cash and securities are held by **independent, institution-grade custodians**, not RWAlpha.\
These custodians maintain regulatory oversight and ensure proper asset handling for yield generation.

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#### **4. Asset managers execute yield strategies**

Regulated asset managers allocate the capital into strategies that may include:

* Short-duration U.S. Treasuries
* Public-market ETFs
* High-quality debt instruments
* Other yield-bearing financial products

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#### **5. Tokenization partner returns yield to the vault**

The tokenization provider collects yield or dividends from the asset manager's positions and streams those payments back into the vault.

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#### **6. Vault token value increases as yield accumulates**

When income flows back into the vault, the total asset value rises—causing each vault token to appreciate proportionally.

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#### **7. Users redeem whenever they choose**

Users can redeem their vault tokens for the underlying stablecoins, receiving both their principal and the yield that has accrued.
