> For the complete documentation index, see [llms.txt](https://delpho.gitbook.io/delpho-docs/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://delpho.gitbook.io/delpho-docs/how-delpho-works/system-overview.md).

# System overview

Delpho is a CDP and yield engine in one system. A holder of eligible collateral mints USDV against it. The protocol constructs a continuously hedged position on Hyperliquid perpetuals against the deposited collateral. Funding income from that hedged position flows to sUSDV stakers.

<figure><img src="/files/Xl1WgNGfYpvcl5gxFm0H" alt=""><figcaption></figcaption></figure>

## The flow

**User-side:**

1. **Collateral deposit**: a user deposits HYPE, kHYPE, or stablecoins into Delpho.
2. **USDV mint**: The user mints USDV at the current maximum LTV for the selected collateral. At launch, USDC/USDT are capped at 80%; HYPE/kHYPE are capped at 65%.
3. **Optional stake**: USDV can be staked into sUSDV to receive yield.

**Protocol-side:**

4. **Hedge management**: the protocol uses the deposited collateral to maintain a hedged position on Hyperliquid perps via CoreWriter. For HYPE (and kHYPE) collateral, the hedge preserves the user's original directional exposure. For stablecoin collateral, the hedge runs closer to delta-neutral.
5. **Funding accrual**: when funding is positive, the short leg receives payments. The protocol nets gross funding against borrow costs and reserves, and routes the remainder to sUSDV.
6. **Rebalancing**: the hedge is rebalanced through internal margin movement on HyperCore rather than through closing and reopening positions across separate venues.

## Architecture

<table><thead><tr><th width="209">Layer</th><th width="148">Where it lives</th><th>What it does</th></tr></thead><tbody><tr><td>Smart contracts</td><td>HyperEVM</td><td>Issue USDV, manage staking, orchestrate the hedge</td></tr><tr><td>Perp positions &#x26; margin</td><td>HyperCore</td><td>Hold the live hedged position</td></tr><tr><td>Cross-layer link</td><td>CoreWriter precompile</td><td>Lets HyperEVM read and modify HyperCore state atomically</td></tr></tbody></table>

This removes the need for a bridge or a separate centralized exchange account in the rebalance loop.

For the architecture detail, see [CoreWriter and atomic hedge management](/delpho-docs/how-delpho-works/corewriter-and-atomic-hedge-management.md).