FAQ

What is Navy?

A synthetic exchange for publicly traded, SEC reporting companies that have an audited NAV and pay regular dividends. BDCs, REITs, and CEFs paying 5 to 18% annually. Standardized balance sheets you can read. Go long, short, or use leverage up to 10x. Everything settles in USDC.

Where do profits come from?

Every trade has a counterparty. You go long, the pool (or another trader) is short. Price goes up, you profit, they lose. Price goes down, the opposite. Dividends are collateral transfers: shorts pay longs. Funding rates flow from the popular side to the unpopular side every 8 hours.

What are xTokens (like xARCC, xO)?

Synthetic tokens that track the price and dividends of a real company. xARCC tracks Ares Capital (lends to 500+ businesses, 9.6% yield). xO tracks Realty Income (owns 15,000+ properties, 5.6% yield). You buy and sell them with USDC. You never touch the actual stock.

How do dividends work?

A dividend is cash a company pays to shareholders. Navy mirrors this as a collateral transfer: longs receive USDC, shorts pay USDC. Nobody owns the real stock. The Navy price includes the dividend as it accrues (Market Price + Accrued Dividend). This means the Navy price is usually higher than what you see on Yahoo Finance because it includes yield already earned. On ex date, the accrual resets to zero, the price snaps back down, and longs receive the payout (via DRIP or USDC). On a leveraged position, dividends apply to the full position, not just your deposit.

Why is the Navy price higher than the stock price?

The Navy price is the "dirty price": Market Price + Accrued Dividend. If ARCC is $20.00 on the NYSE and has accrued $0.45 in dividends, the Navy price is $20.45. You are paying for the stock plus the cash already earned. On the ex date, the accrual resets and longs receive the dividend. The Navy price drops back to match the NYSE. Then it starts climbing again as the next dividend accrues. This is why the price chart looks like a sawtooth wave compared to the NYSE.

Do I need to use leverage?

No. Every trade defaults to 1x. Just buying and selling like a normal brokerage. Leverage is optional. At 1x there is no liquidation risk.

What happens if the price feed fails?

Navy tracks both the market price (NBBO midpoint from the NYSE) and the SEC filed NAV. If the price feed goes stale or returns data outside expected bounds, the system pauses new liquidations for that asset until the feed recovers. Trading continues using the last known good price.

What is the Health Factor?

A single number that shows how safe your leveraged position is. Above 1.5 is green (healthy). 1.0 to 1.5 is yellow (add collateral). Below 1.0 is red (eligible for liquidation). Cross margin means profitable positions offset losing ones across your whole account.

What happens if I get liquidated?

Liquidation is when your position is automatically closed because your collateral has dropped too low. Your position appears on the Liquidation Dashboard. Liquidators compete to close it using a Dutch Auction bounty. Remaining collateral minus losses and the bounty returns to your balance. At 1x there is no liquidation risk.

How does lending work?

Deposit USDC. Traders borrow it and pay interest. You earn APY. No exposure to asset prices. Withdraw anytime.

What are vaults?

Automated strategies that trade NAV discounts. Deposit USDC and the vault manages positions. If a discount closes, you earn the spread. Discounts can also widen. Past performance does not guarantee future results.

How does the pool not lose money?

The pool does not bet on prices going up or down. It makes money from the cost traders pay to take risk. When the market is skewed (eg 80% long), the pool quotes a worse price for the popular side and charges funding rates every 8 hours. Traders pay continuous rent to hold imbalanced positions. Liquidation penalties go to the pool. Accrued pricing means the pool is never surprised by dividend payouts. And open interest caps stop the pool from accepting more risk than the Junior tranche can cover.

What is the funding rate?

The cost of being on the popular side. Every 8 hours, the side with more open interest (total value of all open positions) pays the other. When the market is balanced, funding is cheap. When it is skewed (most traders on one side), funding gets expensive.

Why would anyone short a high yielding company?

Because the funding rate pays them to. When 90% of the market is long, longs pay a high funding rate to shorts. A trader can short an asset and receive funding while paying dividends. The net depends on how funding rates, dividend costs, and price movements play out. The funding rate creates the incentive for counterparties to show up.

Where do dividends come from if nobody owns the stock?

Collateral transfers between counterparties. When a dividend event is confirmed by the Dividend Oracle, short positions are debited and long positions are credited. The Junior pool ($nRISK) covers any imbalance. No cash flows from the actual company. It is a collateral settlement using USDC already in the protocol.

How does the protocol know when a dividend happens?

The Dividend Oracle. Ten validators (independent operators who verify data) independently monitor SEC EDGAR (the government's public database of company filings). When a company files an 8 K (a major event disclosure) declaring a dividend, validators extract the ex date, amount per share, and type. If 8 of 10 agree, the event is confirmed and settled atomically on the ex date block.

What are Navy Points?

Points you earn by using the protocol. Trade, lend, or deposit into vaults. Points give access to higher leverage, short selling, and governance voting.

How do Navy Points work?

Use the protocol, earn points. Trade, lend, or deposit into vaults. Points are non transferable. When Navy launches its token, points convert.

Will there be a token?

Yes. When Navy launches its token, your points convert. Points accumulated now carry over.

How do I get funds onto Navy?

Send USDC from Ethereum or Solana. Takes a few minutes. Your USDC is escrowed on the source chain and pUSDC is minted 1:1 on Navy L1. Withdrawals burn pUSDC and release your USDC.

What are the fees?

Trading: 0.10%. Lending: 10% of interest. Vaults: 0.10% withdrawal, 10% of profits.

Where do fees go?

40% to Navy points holders. 40% to protocol treasury. 10% to lending reserves. 10% to insurance fund.

Is Navy custodial?

No. Your USDC sits in smart contracts (programs that run on the blockchain and execute automatically). Only you can withdraw it.

Is the code public?

Smart contract interfaces and the risk methodology are public and auditable. The core L1 engine, matching system, and oracle infrastructure are proprietary to Navy Labs.

Is Navy live?

Early access. Request access.