Yield-bearing stablecoin

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Assets

BTC Long Perpetual Contract: Kwenta

BTC Short Perpetual Contract: Kwenta

BTC Long SPOT: Uniswap

BTC Short SPOT: Uniswap

Motivation

Stablecoins are the reference against what everyone perceives as a loss or a win.

They’re purchasing power is not stable, but our perception on their volatility is.

DeFi lacks a yield-bearing stablecoin backed by endogenous assets without counterparty risk.

Most stablecoins issuers act like traditional banks, printing money out of thin air, and investing your real dollars into Treasury Bills.

They hedge against inflation, but you do not.

New competitors like Ondo Finance are surging, which share their generating yield, but do require KYC/AML procedures and have high operation costs and counterparty risk.

We offer a synthetic stablecoin with rebasing yield, backed by the most endogenous, demanded and liquid asset in the space, BTC, that because of their automated transparent operations and guidance, have NO counterparty risk.

Rationale

Our solution maintains peg with a market neutral strategy, and generates yield in an agnostic funding rates

Put simple, funding rates are mechanism used by exchanges to drive the price of a perpetual contract (called the “mark price”) towards the spot price of the underlying asset (the “index price”).

We’ll use GMX, the deepest liquidity perpetual protocol on DeFi

To ensure market neutral hedging at the same time we have a recurrent positive APY, we’ll rebalance the perpetual and spot positions:

$$\text{Positive funding rate} \rightarrow (\text{SPOT BTC LONG} + \text{PERP BTC SHORT})$$

$$\text{Negative funding rate} \rightarrow (\text{SPOT BTC SHORT} + \text{PERP BTC LONG})$$

Technical

Overview

When Positive Funding rates:

• To adquire SPOT LONG → Buy BTC through Uniswap with USDC

• To adquire PERP SHORT → Open a BTC SHORT position in Synthetix through Kwenta

When Negative Funding rates:

• To adquire SPOT SHORT → Sell through UNISWAP, borrow BTC, swap it to USDC (using it as margin)

• To adquire PERP LONG → Withdraw BTC-SHORT position and open a BTC-LONG through Kwenta

Note: Many spot swaps can lead to sufficient slippage that vastly decreases APY, that is why rebalancing will only done once the new funding rate direction has consolidated.

Detailed

Upcoming...