> ## Documentation Index
> Fetch the complete documentation index at: https://docs.tori.finance/llms.txt
> Use this file to discover all available pages before exploring further.

# Backing & Reserves

> How trUSD is backed

## Overview

trUSD is fully backed by the protocol's reserve assets. The backing model is designed to maintain stability while enabling yield generation for strUSD holders through market-neutral trading strategies.

Every trUSD in circulation is backed by real assets held in secure custody, verified in real-time by independent third parties.

## How Backing Works

### The Backing Model

Unlike fiat-backed stablecoins that hold dollars in bank accounts, Tori's backing consists of assets deployed across various hedged positions and instruments:

| Aspect                | Description                                         |
| --------------------- | --------------------------------------------------- |
| **Full Backing**      | Every trUSD is backed by underlying assets          |
| **Hedged Positions**  | Positions designed for minimal directional exposure |
| **Active Management** | Professional management with continuous monitoring  |
| **Yield Generation**  | Returns from strategies flow to strUSD stakers      |

### How It Compares

| Model                   | Backing Type             | Yield Potential          |
| ----------------------- | ------------------------ | ------------------------ |
| **Fiat Stablecoins**    | Cash & T-bills in banks  | Low (none for holders)   |
| **Algorithmic Stables** | Algorithmic mechanisms   | Variable                 |
| **Tori (trUSD)**        | Hedged trading positions | Passed to strUSD stakers |

## Real-Time Transparency

All backing is independently verified and publicly accessible:

### Proof of Reserves

<Card title="Accountable" icon="check-double">
  Independent, real-time attestations of all protocol reserves. Accountable provides cryptographic proofs that anyone can verify at any time.
</Card>

**What's included in the attestation:**

* Total assets under management
* Asset composition and allocation
* Liability coverage ratio
* Reserve fund status

### On-Chain Verification

All on-chain components are publicly verifiable:

* Smart contract balances
* Token supply
* Transaction history
* Staking contract state

## Custody Architecture

All assets are held in institutional-grade secure custody across two layers:

### On-Chain Assets

| Security Layer            | Provider                | Description                                           |
| ------------------------- | ----------------------- | ----------------------------------------------------- |
| **Smart Contract Audits** | Sherlock and Nethermind | Comprehensive security audits with ongoing bug bounty |
| **Real-Time Monitoring**  | Hypernative + Internal  | AI-powered 24/7 threat detection                      |
| **Multi-Signature**       | Internal                | Critical operations require multiple approvals        |

### Off-Chain Assets

| Security Layer               | Description                                        |
| ---------------------------- | -------------------------------------------------- |
| **Institutional Custodians** | Qualified custodians with segregated accounts      |
| **Counterparty Standards**   | Only established, reputable counterparties         |
| **Segregation**              | Protocol reserves never commingled with operations |

## Risk Management Framework

The backing model incorporates multiple layers of risk management:

### Position-Level Controls

| Control                  | Purpose                                   |
| ------------------------ | ----------------------------------------- |
| **Position Limits**      | Cap exposure to any single position       |
| **Concentration Limits** | Ensure diversification across assets      |
| **Stop-Loss Rules**      | Automatic risk reduction on adverse moves |

### Portfolio-Level Controls

| Control                    | Purpose                                          |
| -------------------------- | ------------------------------------------------ |
| **VaR Limits**             | Value-at-Risk constraints on total portfolio     |
| **Stress Testing**         | Regular scenario analysis for extreme conditions |
| **Correlation Monitoring** | Ensure true diversification                      |
| **Liquidity Requirements** | Maintain sufficient liquidity for redemptions    |

### Reserve Fund

A portion of protocol revenue is allocated to a [Reserve Fund](/solution/reserve-fund) that serves as an additional buffer against adverse conditions.

## Verification

Anyone can verify the protocol's backing:

<Steps>
  <Step title="View Proof of Reserves">
    Access real-time attestations from Accountable showing total assets and liabilities.
  </Step>

  <Step title="Check On-Chain Data">
    Verify smart contract balances and token supply directly on the blockchain.
  </Step>

  <Step title="Review Attestation Reports">
    Access detailed attestation reports for comprehensive backing information.
  </Step>
</Steps>

## Next Steps

<CardGroup cols={2}>
  <Card title="Peg Mechanism" icon="scale-balanced" href="/solution/peg-mechanism">
    How trUSD maintains its dollar peg
  </Card>

  <Card title="Reserve Fund" icon="piggy-bank" href="/solution/reserve-fund">
    Additional protection layer
  </Card>

  <Card title="Strategy" icon="brain" href="/strategy/overview">
    How yield is generated
  </Card>

  <Card title="Risks" icon="triangle-exclamation" href="/resources/risks">
    Understand all the risks
  </Card>
</CardGroup>