> For the complete documentation index, see [llms.txt](https://docs.jewelswap.io/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.jewelswap.io/sui/scallop-yield-farming.md).

# Scallop Yield Farming

Jewel Scallop Yield Farm is a pioneering leveraged yield farming protocol built on the Sui blockchain that integrates with the Scallop lending protocol.

### What is Jewel Scallop Yield Farm?

Jewel Scallop Yield Farm is a pioneering **leveraged yield farming protocol** built on the Sui blockchain that integrates with the Scallop lending protocol to provide users with sophisticated DeFi farming opportunities. It's the first protocol to combine leveraged yield farming with VeSCA token boosting on the Sui ecosystem.

#### Key Innovation: Deposit + Borrow + Lend Strategy Backed By VeSCA Boosting

Jewel Scallop Yield Farm implements a unique **four-step yield farming mechanism**:

1. **Deposit**: Users deposit collateral tokens (e.g., SUI USDT)
2. **Borrow**: The protocol automatically borrows debt tokens (e.g., USDC) against the collateral
3. **Lend**: Borrowed tokens are supplied to lending markets to earn yield
4. **Boost**: the protocol's veSCA, funded by JWLSCA stakers, boosts each farm's borrow incentive rewards, up to Scallop's 4x maximum

This creates a **leveraged yield amplification** effect where users can earn significantly higher returns than traditional farming methods.

### How It Works

#### The Farming Cycle

```
User Deposits Collateral (i.e, USDT)
           ↓
Protocol Calculates Borrow Capacity
           ↓
Protocol Borrows Debt (i.e, USDC)
           ↓
Protocol Supplies Debt to Lending Market (i.e, USDC)
           ↓
Protocol Earns Lending Yield + Borrow Incentives
           ↓
User Receives Position NFT + Yield Rewards
```

#### Leverage Mechanics

* **Collateral Weight**: Typically 65% (borrow 65% of deposited value)
* **Effective Leverage**: 2.86x (1 / (1 - 0.65))
* **Safety Margin**: 35% buffer against liquidation
* **Risk Management**: Built-in liquidation protection through Scallop's obligation system

### Key Features

#### 🚀 Leveraged Yield Farming

* **Higher Returns**: Earn significantly more than traditional farming
* **Capital Efficiency**: Maximize yield on your deposited assets
* **Automated Strategy**: Protocol handles the complex borrowing and lending logic

#### 🎯 VeSCA Integration

* **Boosted Rewards**: Up to Scallop's 4x maximum on borrow incentive rewards
* **Protocol veSCA**: The boost comes from JewelSwap's own veSCA, funded by JWLSCA stakers. You don't need to hold or lock veSCA yourself
* **Grows over time**: The boost a farm gets depends on how much veSCA the protocol holds compared with the farm's debt, and it grows as more SCA is staked as JWLSCA

See [veSCA boost and key custody](#vesca-boost-and-key-custody) below.

#### 🔄 Automated Compounding

* **Reward Harvesting**: Automatic collection of earned rewards
* **Reinvestment**: Automatic reinvestment of rewards for compound growth
* **Gas Optimization**: Efficient transaction batching

#### 🛡️ Risk Management

* **Liquidation Protection**: Built-in safeguards against liquidation
* **Oracle Integration**: Real-time price feeds for accurate valuations
* **Position Tracking**: NFT-based position ownership and management

#### 💰 Multi-Layer Yield Generation

* **Lending Yield**: Interest from supplying tokens to lending markets
* **Borrow Incentives**: Rewards for participating in Scallop's incentive program
* **VeSCA Boosting**: Enhanced rewards through VeSCA token staking
* **Protocol Fees**: Share of fees collected from other users

### Yield Sources

#### 1. Base Lending Yield

* **Supply APR**: Earn interest by supplying tokens to lending markets
* **Market Rates**: Dynamic rates based on supply and demand
* **Compound Interest**: Automatic reinvestment for exponential growth

#### 2. Borrow Incentive Rewards

* **SUI Rewards**: Earn SUI tokens for borrowing activities
* **SCA Rewards**: Earn SCA tokens for borrowing activities
* **VeSCA Boosting**: Up to 4x multiplier on incentive rewards

#### 3. Protocol Fee Sharing

* **User Distribution**: 70% of yield distributed to position holders
* **JWLSCA Stakers' Share**: 15% of total yield distributed to JWLSCA stakers, whose SCA funds the protocol's veSCA
* **Fee Collection**: 15% of total yield collected as protocol fees

### APR Calculation

#### Total APR Formula

```
Total APR = (Supply APR - Borrow APR) × Leverage + 
            (Base Incentive APR × VeSCA Boost Multiplier)
```

#### Example Calculation

* **Supply APR**: 9.38%
* **Borrow APR**: 13.43%
* **Net Supply Yield**: -4.05%
* **Leverage**: 2.86x
* **Base Incentive APR**: 10%
* **VeSCA Multiplier**: 4x (Scallop's maximum; the real multiplier depends on how much veSCA the farm has compared with its debt)

**Total APR**: (-4.05% × 2.86) + (10% × 4x) = -11.58% + 40% = **28.42%**

### Integration with Scallop

#### Scallop Protocol Integration

* **Obligation System**: Leverages Scallop's collateral and debt management
* **Lending Markets**: Uses Scallop's lending infrastructure
* **Borrow Incentives**: Participates in Scallop's incentive programs
* **Oracle System**: Integrates with Scallop's price feed system

#### VeSCA Protocol Integration

* **Subscription System**: Enables boosted rewards through VeSCA staking
* **Reward Distribution**: Enhanced yield distribution to subscribers
* **Governance**: Community-driven protocol management

### veSCA boost and key custody

JewelSwap holds one protocol veSCA position: the SCA that JWLSCA stakers deposit, locked on Scallop. It boosts every Scallop farm, today's and future ones. Scallop binds each veSCA key to one borrowing account (obligation), and each farm has its own, so the position is split into one veSCA key per farm. New SCA staked as JWLSCA is spread across those keys.

**Since 28 October 2026 the veSCA keys live inside the farm contracts:**

* Each farm's veSCA key is stored inside that farm's contract object.
* Only JewelSwap's **3-of-5 multisig** can take a key out of a farm.
* The compounding bot can only **borrow** a key for the length of one transaction, to re-apply the boost when it compounds, and the contract makes it return the same key to the same farm before that transaction can finish. The contract also checks that the key comes back with at least as much locked SCA and the same unlock date, so a borrowed key can't be emptied.
* **JWLSCA stakers keep their 15% share** of farm rewards.
* **Users had nothing to do.** Positions, deposits and withdrawals work as before.

Before this change, the operations wallet that runs the compounding bot could take a key out of a farm. Now it can't.

### Community & Support

#### Getting Help

* **Documentation**: Comprehensive guides and tutorials
* **Discord Community**: Real-time support and discussions
* **GitHub Issues**: Technical support and bug reports
* **FAQ Section**: Answers to common questions

#### Contributing

* **Community Governance**: Participate in protocol decisions
* **Bug Reports**: Help improve the protocol security
* **Feature Requests**: Suggest new features and improvements

***

**Jewel Scallop Yield Farm** represents the next generation of DeFi farming, combining the power of leveraged yield farming with the innovative VeSCA boosting system on the Sui blockchain. Whether you're a DeFi veteran or new to yield farming, Jewel Scallop **Yield** Farm provides the tools and opportunities to maximize your returns in the Sui ecosystem.

*Ready to start farming? Check out our How to Start Farming guide!*