> For the complete documentation index, see [llms.txt](https://aruna-1.gitbook.io/aruna-docs/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://aruna-1.gitbook.io/aruna-docs/using-aruna/how-it-works.md).

# How It Works

## For Investors (The Main Flow)

### Step 1: Connect & Deposit

1. **Visit Aruna App**
   * Connect your Web3 wallet (MetaMask, Coinbase Wallet, etc.)
   * Ensure you're on Base Sepolia network
2. **Choose Your Vault**
   * **Aave Vault**: 6.5% APY (stable, battle-tested)
   * **Morpho Vault**: 8.2% APY (optimized yields)
3. **Deposit USDC**
   * Enter amount (e.g., $5,000 USDC)
   * Approve transaction in wallet
   * Receive vault shares immediately

**What Happens Behind the Scenes:**

* Your USDC is deposited to Aave/Morpho
* You receive ERC-4626 vault shares
* Yield starts accruing automatically

***

### Step 2: Yield Accumulation (Automatic)

Your deposit earns yield every second:

* **Aave**: Interest accrues in aUSDC tokens
* **Morpho**: Share value increases automatically
* **No action needed**: Just wait

After 30 days on $5,000 deposit at 8.2% APY:

* **Yield earned**: \~$34
* **Your 70% share**: \~$24
* **Public goods (25%)**: \~$8.50
* **Protocol (5%)**: \~$1.70

***

### Step 3: Harvest Yield (Monthly)

Click the **"Harvest Yield"** button in investor dashboard:

[**View Harvest Flow Diagram →**](https://mermaid.live/edit#pako:eNpNjstqwzAQRX9lmFUDNl6kmy4KhZKS0kWhm2KYaCxZWPJDGpsQQv69smMaWg_MnHuZw4xar0iGVEhpBl_QDj6h6_wH-sHvkU_hCL7TGwRf0A0-o-v9J_rB75FP4Qi-0xtsuATb6Q16v0c-hSP4Tm8w4hLsoHfoA7pOb9AHdJ3eoA94DzbgfV_gYl6h7fQGY0DX6Q3GgK7TG4wBXac3mAK6Tm8wB3Sd3mAJ6Dq9wRzQdXqDJaDr9AZLQNfpDZaArtMbLAFdpzdYArpObwDANH8B5gBU)

Click the link above to see the interactive diagram showing how yield flows from investors through the vault to public goods funding.

<details>

<summary>📊 Click to see diagram code</summary>

**Requirements:**

* Must wait 24 hours between harvests
* Anyone can trigger (permissionless)
* Automatic 70/25/5 split

</details>

***

### Step 4: Claim Your Rewards

After harvest completes:

1. Navigate to "Claimable Rewards" section
2. Click "Claim" button
3. Approve transaction
4. USDC appears in your wallet

**You can also:**

* Withdraw principal anytime (no lock-up)
* Reinvest rewards to compound
* Continue earning indefinitely

***

## For Businesses

### Submit Invoice Commitment

1. **Navigate to Business Dashboard**
   * Connect wallet
   * Click "Submit New Invoice"
2. **Enter Invoice Details**
   * Customer name
   * Invoice amount (e.g., $10,000)
   * Due date (e.g., 90 days)
3. **Lock Collateral**
   * Approve 10% USDC transfer ($1,000)
   * Contract automatically sends 3% grant ($300)
   * Net: $700 locked, $300 earned instantly
4. **Receive Invoice NFT**
   * ERC-721 token representing your commitment
   * Can't be transferred until settled
   * Tracks in your dashboard

***

### Settle Invoice

When customer pays you:

1. Navigate to your pending invoices
2. Click "Settle" on paid invoice
3. Approve transaction
4. **Results:**
   * $700 collateral unlocked
   * +1 reputation point earned
   * NFT ownership maintained

***

## The 70/25/5 Distribution Explained

Every harvest triggers automatic distribution:

**Example: $100 Yield Harvested**

{% @mermaid/diagram content="graph TD
A\[Harvest 100 USD Yield] --> B\[YieldRouter Splits]
B --> C\[70 USD to Investors]
B --> D\[25 USD to Public Goods]
B --> E\[5 USD to Protocol]

```
C --> C1[Claimable in Your Wallet]
D --> D1[Sent to Octant v2]
E --> E1[Protocol Treasury]

D1 --> D2[Distributed to Projects]
D2 --> P1[Ethereum Foundation]
D2 --> P2[Protocol Guild]
D2 --> P3[Gitcoin]
D2 --> P4[OpenZeppelin]" %}
```

**This happens automatically. You can't skip it. No governance can change it.**

***

## Public Goods Tracking

The system tracks all donations transparently:

**Global Metrics:**

* Total donated to public goods (all-time)
* Current epoch donations
* Monthly donation trends

**Per-Business Attribution:**

* Each business can see their contribution
* Tracked by wallet address
* Visible in business dashboard

**Per-Epoch Tracking:**

* Donations grouped by Octant epochs
* Historical data preserved on-chain
* Auditable by anyone

***

## Key Features

### No Lock-up Period

* Withdraw principal anytime
* Only yield distribution has 24h interval
* Full liquidity maintained

### Permissionless Harvesting

* Anyone can call harvest function
* Gas paid by caller
* Rewards distributed to rightful owners

### On-Chain Verification

* Every transaction public
* Verify 70/25/5 split yourself
* Check donation history anytime

### Automatic Compounding (Optional)

* Reinvest claimed rewards
* Earn yield on yield
* Maximize returns over time

***

## Security Model

**Your Funds Are:**

* Held in battle-tested protocols (Aave v3, Morpho)
* Protected by ReentrancyGuard
* Withdrawable at any time
* Never custodied by Aruna directly

**Smart Contracts Are:**

* Verified on BaseScan
* Non-upgradeable (immutable)
* Pausable for emergencies only
* Open-source and auditable

***

## What's Next?

After understanding the flow:

1. Read [Key Concepts](/aruna-docs/using-aruna/concepts.md) for deeper understanding
2. Explore [Use Cases](/aruna-docs/using-aruna/use-cases.md) for real examples
3. Check [Smart Contracts](/aruna-docs/the-solution/contracts.md) for addresses
4. Try the app on Base Sepolia testnet