# This Week at Royco #6 - Stress Tested *New markets, a live stress event, and the first real test of the protocol's design.* By [Royco](https://blog.royco.org) · 2026-06-05 royco, stress, test, apyx, strc, microstrategy, tranching --- TL:DR ===== * AA\_FalconXUSDC is live on Royco Dawn. * The apyUSD market entered Observation Period after a drawdown on the underlying asset. * Royco joined the first cohort of the Ethereum Security Subsidy Program. * Two editions of Royco Talks now live on Paragraph: with [Certora](https://x.com/Certora) and with [Portals](https://x.com/portals_fi). * Royco ETH Vault will go live soon, with looping features in development. * * * **AA\_FalconXUSDC is Live on Royco Dawn** ========================================= A new market is open for public access. AA\_FalconXUSDC is the structured credit position from [Pareto](https://x.com/paretocredit), sourced from prime brokerage lending through FalconX. Senior and Junior tranches are open for deposits. [![User Avatar](https://storage.googleapis.com/papyrus_images/f8bb26fec8b9f4e8e7d0d778b91ad4323d4c1e3754677c48798e2e15bb9080a1.jpg)](https://twitter.com/roycoprotocol) [Royco](https://twitter.com/roycoprotocol) [@roycoprotocol](https://twitter.com/roycoprotocol) [](https://twitter.com/roycoprotocol/status/2062540579041345976) AA\_FalconXUSDC is live on Royco Dawn. You can now deposit into Senior and Junior tranches of [@paretocredit](https://twitter.com/paretocredit) 's FalconX Credit Vault. Backed by [@FalconXGlobal](https://twitter.com/FalconXGlobal) , one of the most credible institutional borrowers in digital assets. ![](https://pbs.twimg.com/amplify_video_thumb/2062540505443926016/img/fKA8RQ2lUPU0fZVS.jpg) [23](https://twitter.com/roycoprotocol/status/2062540579041345976)[ 2:22 PM • Jun 4, 2026 ](https://twitter.com/roycoprotocol/status/2062540579041345976) * * * **A Real Stress Test** ====================== For the first time, the apyUSD market on Royco entered Observation Period after a drawdown on the underlying. Observation Period is the protocol's pause mechanism. When the underlying drops, the market pauses before booking any loss. The window length depends on the underlying; for apyUSD, it's 30 days. While it runs, no losses are realized on either side. [![User Avatar](https://storage.googleapis.com/papyrus_images/f8bb26fec8b9f4e8e7d0d778b91ad4323d4c1e3754677c48798e2e15bb9080a1.jpg)](https://twitter.com/roycoprotocol) [Royco](https://twitter.com/roycoprotocol) [@roycoprotocol](https://twitter.com/roycoprotocol) [](https://twitter.com/roycoprotocol/status/2062277311190192630) There's a depeg happening on apyUSD right now. In most DeFi protocols, users holding apxUSD would be facing losses. On Royco, it triggers an Observation Period. Meaning, apyUSD seniors, and apyUSD juniors are safe (for now). ![](https://pbs.twimg.com/amplify_video_thumb/2062274719882018817/img/2y_8DwQ7QfDQysN_.jpg) [49](https://twitter.com/roycoprotocol/status/2062277311190192630)[ 8:56 PM • Jun 3, 2026 ](https://twitter.com/roycoprotocol/status/2062277311190192630) While the window is open, all yield is redirected to Junior to rebuild the buffer. The window ends when the underlying recovers, when Junior fully covers the drawdown, or after the 30 days. This week, that's exactly what played out. Spot apxUSD dipped below par across exchanges, but the fundamental NAV barely moved. No losses have been booked on either side, and coverage is still well above the minimum. How Royco prices the underlying matters here. We broke it down in a recent thread: [![User Avatar](https://storage.googleapis.com/papyrus_images/f8bb26fec8b9f4e8e7d0d778b91ad4323d4c1e3754677c48798e2e15bb9080a1.jpg)](https://twitter.com/roycoprotocol) [Royco](https://twitter.com/roycoprotocol) [@roycoprotocol](https://twitter.com/roycoprotocol) [](https://twitter.com/roycoprotocol/status/2062617508029288503) apxUSD traded at $0.90 today, and lower on some exchanges. However, the fundamental NAV from [@chainlink](https://twitter.com/chainlink) says: $0.9828. Both are real but only one matters to Royco. ![](https://pbs.twimg.com/amplify_video_thumb/2062616795597488128/img/GSLjfeQk6USbLfS7.jpg) [16](https://twitter.com/roycoprotocol/status/2062617508029288503)[ 7:28 PM • Jun 4, 2026 ](https://twitter.com/roycoprotocol/status/2062617508029288503) * * * **Accepted into the Ethereum Security Subsidy Program** ======================================================= Royco has been selected for the first cohort of the Ethereum Security Subsidy Program, alongside other projects backing the security of Ethereum mainnet. Thanks to [Nethermind](https://x.com/Nethermind), [Chainlink](https://x.com/chainlink), and the [Ethereum Foundation](https://x.com/ethereumfndn) for the recognition. Security is, and will keep being, our paramount priority. [![User Avatar](https://storage.googleapis.com/papyrus_images/f8bb26fec8b9f4e8e7d0d778b91ad4323d4c1e3754677c48798e2e15bb9080a1.jpg)](https://twitter.com/roycoprotocol) [Royco](https://twitter.com/roycoprotocol) [@roycoprotocol](https://twitter.com/roycoprotocol) [](https://twitter.com/roycoprotocol/status/2062556598904492383) Honored to be part of the first cohort of the Ethereum Security Subsidy Program. Thanks to @nethermind, [@chainlinklabs](https://twitter.com/chainlinklabs), and the [@ethereumfndn](https://twitter.com/ethereumfndn) for backing the kind of work this industry needs right now. Security is, and will keep being, our paramount priority. [![User Avatar](https://storage.googleapis.com/papyrus_images/9bc3ed93f10583bc06d6618aea74c5e39b4727ab18b01bf53ffd55684d43b1ea.png)](https://twitter.com/0xboo) [Findlay](https://twitter.com/0xboo) [@0xboo](https://twitter.com/0xboo) [](https://twitter.com/0xboo/status/2062546689664430563) 1/ World, meet Cohort I of the Ethereum Security Subsidy Program. Out of 100+ applicants, here are the 30 projects selected for our first of many cohorts. Proudly securing [@ethereum](https://twitter.com/ethereum) mainnet together with [@ethereumfndn](https://twitter.com/ethereumfndn), @nethermind and [@chainlinklabs](https://twitter.com/chainlinklabs). ![](https://storage.googleapis.com/papyrus_images/6e747e4b978769eab01db020ddbc8b53968a7e7fa3e29081b0f3d1035e47049a.jpg) [14](https://twitter.com/roycoprotocol/status/2062556598904492383)[ 3:26 PM • Jun 4, 2026 ](https://twitter.com/roycoprotocol/status/2062556598904492383) * * * **Two Conversations Worth Reading** =================================== Two recent podcast conversations now have written versions on Paragraph. Useful if you'd rather get the takeaways without watching the full episode. * [**What Formal Verification Actually Means**](https://paragraph.com/@royco/royco-talks-1-what-formal-verification-actually-means)**,** with Armen from Certora. The conversation that turned a piece of security infrastructure into something anyone can understand. * [A Deep Dive on Dawn with Portals.fi](https://paragraph.com/@royco/royco-talks-extra-a-deep-dive-on-dawn-with-portals), where Shiv took the Portals team through the protocol from end to end. Both worth the read. * * * **Royco ETH Vault is Live** =========================== A hint for those who actually read this every week, and for those who've already noticed it on the site. Nothing officially announced yet. ETH holders will soon have a clean path into Royco's Senior layer. The vault borrows USDC at conservative ratios and routes it into srRoyUSDC, the curated portfolio of Senior tranches. A single deposit, full exposure to the Senior side, while keeping exposure to ETH's volatility. Looping features are already in development, designed to take the yields a step further. ![](https://storage.googleapis.com/papyrus_images/88a8f31ee2fbcb6c06bf7314a0ef16b394e0f3776427ff54f389a4400045587b.png) * * * **What's Next** =============== The apyUSD Observation Period still has weeks to run. We'll keep showing the view from inside as it evolves. More launches coming. The momentum is already building. --- *Originally published on [Royco](https://blog.royco.org/this-week-at-royco-6-stress-tested)*