Key Takeaways
- Yield Basis leverages Curve Finance’s proven mechanics to unlock sustainable yield from Bitcoin’s volatility without impermanent loss.
- Founded by Michael Egorov, creator of Curve Finance, the protocol creates a self-balancing 2x BTC / crvUSD structure.
- Deposits quickly hit TVL caps, and the native $YB token saw early success on Kraken Launch.
- Users can earn by keeping their ybBTC unstaked to collect trading fees or by staking ybBTC for $YB emissions.
- The $YB token governs the protocol, allowing holders to influence emission distribution and earn a share of admin fees.
Introducing Yield Basis: Bitcoin’s DeFi Evolution
Bitcoin has long been recognized as a crypto powerhouse, boasting trillions in value. However, its integration into on-chain DeFi markets was hindered by the risk of impermanent loss for liquidity providers. Yield Basis emerges with a groundbreaking mathematical solution, transforming Bitcoin’s inherent volatility into a source of sustainable yield while preserving full BTC exposure. This innovation eliminates volatility traps, trade-offs, and impermanent loss, offering transparent incentives amplified by Curve’s deep liquidity.
The Vision Behind Yield Basis
The architect of this sophisticated system is Michael Egorov, the innovator behind Curve Finance, whose ve-token model revolutionized stablecoin markets. With Yield Basis, Egorov applies his precision engineering to Bitcoin itself. The protocol features a self-balancing 2× BTC / crvUSD structure designed to mirror BTC 1:1 and channel trading activity into yield generation.
Early Success and Token Launch
Upon its launch, Yield Basis saw immediate user adoption, with deposits rapidly reaching the initial Total Value Locked (TVL) cap. This cap was divided across three tokenized BTC markets: tBTC, cbBTC, and WBTC, each with a $50 million limit. Concurrently, the Yield Basis native token, $YB, achieved a historic milestone, becoming the first token ever to be sold on Kraken Launch, with an initial price of $0.20.
How Yield Basis Works: Unlocking Sustainable Yield
When tokenized Bitcoin is deposited into the Yield Basis protocol, an equivalent amount of crvUSD is borrowed. This creates a constant 2× leveraged position within the BTC / crvUSD pool on Curve Finance. In a standard Automated Market Maker (AMM), price fluctuations would typically lead to the pool rebalancing by selling BTC when its price rises and buying it when it falls. This mechanic often results in impermanent loss, diminishing position value as the protocol sells exposure during Bitcoin’s upward price movements.
Eliminating Impermanent Loss
Yield Basis ingeniously circumvents this issue. Its sophisticated internal rebalancing mechanism ensures continuous full BTC exposure for users. Simultaneously, it consistently accrues trading fees generated by the pool. The leverage is sustained through a combination of arbitrage mechanisms and the inherent logic of AMMs, effectively converting Bitcoin’s volatility from a risk factor into a direct source of income.
Earning Opportunities with ybBTC
Each deposit into Yield Basis mints a new token, known as ybBTC. This token represents a user’s leveraged BTC position within the protocol. Holders of ybBTC have two primary avenues for earning:
- Trading Yield: By keeping ybBTC unstaked, users can directly collect BTC-denominated fees generated from trading activity on Curve.
- Token Yield: Users can choose to stake their ybBTC. This action allows them to earn $YB emissions, which are distributed according to the governance decisions made by veYB holders.
This innovative structure represents a significant upgrade, applying the highly successful mechanics that established Curve’s dominance in stablecoins to the dynamic Bitcoin market.
The Role of the $YB Token
The $YB token is the engine that drives both incentives and governance within the Yield Basis ecosystem. With a total supply of 1 billion YB, the token empowers its holders. By locking YB for periods of up to four years, users can mint veYB (vote-escrowed YB). This veYB token grants several key privileges:
- Governance Rights: Holders gain voting power to direct the distribution of $YB emissions across the protocol.
- Protocol Fees: A share of the protocol’s administrative fees is distributed to veYB holders, paid in BTC once this feature is activated.
- Increased Influence: The longer participants lock their YB tokens, the greater their influence within the governance structure becomes.
This integrated model creates a powerful loop connecting liquidity provision, governance participation, and incentive alignment. The longer users commit to the protocol, the more they stand to benefit.
Incentive Structure and Emission Distribution
The emission structure for $YB is designed to foster long-term participation and reward early contributors. A total of 300 million $YB tokens (30% of the total supply) are allocated for ongoing emissions, following a dynamic schedule. Additionally, early liquidity providers (LPs) are set to receive 11.25 million YB, divided across two distinct seasons:
- Season 1: This season allocates 5.625 million $YB, with a 12-month linear vesting schedule commencing immediately after the Token Generation Event (TGE).
- Season 2: A further 5.625 million $YB is designated for Season 2, featuring a 12-month vesting period that begins three months after the TGE.
This carefully crafted structure ensures that incentives are aligned with the protocol’s long-term growth. Both liquidity providers and veYB holders share in the same emission stream, promoting a cohesive ecosystem where rewards evolve in tandem with network activity.
Final Thoughts
Yield Basis introduces a novel approach to Bitcoin DeFi, effectively transforming its volatility into a sustainable yield source without the risks of impermanent loss. By leveraging the proven architecture of Curve Finance and led by its visionary creator, the protocol offers compelling earning opportunities and a robust governance model.