Yieldbasis: Eliminating AMM Impermanent Loss - What You Need to Know
2× Leverage Engine, veYB Governance, Merit‑based Sale, and More
Yieldbasis was perhaps the most gossiped project during Token 2049 as one of the most anticipated DeFi launches in Q4.
The project was created by Curve Finance founder Michael Egorov and aims to turn constant‑product AMM pools into IL-resistant carry trades, starting with Bitcoin. Rather than accepting that LPs will eat IL, YieldBasis maintains a constant 2× leveraged position in a BTC/stablecoin pool to track BTC’s price 1:1 while still earning trading fees.
Curve offered a $60M crvUSD credit line to bootstrap three BTC pools, using the same dynamic fee splitting and governance mechanics inspired by Curve’s veCRV model.
In this edition, we’ll look into how YieldBasis removes impermanent loss, its leveraged liquidity engine and fee design, and the recent Legion sale that raised nearly at $200M FDV with a merit‑based allocation.
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Leveraged Liquidity to Eliminate IL
Impermanent loss has long been the tax on providing liquidity to DEXes. Projects like Uniswap v3 offer concentrated liquidity to mitigate IL, while others subsidize LPs with token emissions.
YieldBasis addresses IL by transforming a two‑asset AMM into a single‑asset carry trade by ensuring the pool always holds 100% net BTC exposure (via 2× leverage) while borrowing a stablecoin to fund the other side. This approach mirrors basis trading in TradFi where users borrow cash to buy futures or spot, profiting from the funding spread and price movement.
Key concepts:
Deposit & Borrow: When a user deposits BTC, the protocol flash‑borrows an equal USD value of crvUSD and adds both assets to the Curve BTC/crvUSD pool. The resulting LP token is used as collateral to borrow crvUSD and repay the flash loan, leaving a 50% debt/50% equity position (2× leverage).
Rebalancing‑AMM & VirtualPool: As BTC’s price moves, a Rebalancing‑AMM and VirtualPool expose tiny price differences that incentivize arbitrageurs to restore the 2× leverage ratio. When BTC rises, the system mints more crvUSD and LP, when it falls, debt is repaid and LP is burned. Arbitrageurs earn the spread, aligning their incentives with pool health.
Linear Exposure: By maintaining a constant 2× leverage, the LP position scales linearly with BTC’s price rather than with its square root. This means LPs’ exposure tracks BTC 1:1 while still capturing Curve trading fees.
Curve Flywheel
The design also taps into Curve’s ecosystem flywheel. YieldBasis borrows crvUSD directly from Curve’s credit line (if approved)
Trading fees from the BTC/crvUSD pool feed both YieldBasis LPs and veYB holders via a dynamic admin fee. 50% of fees go to rebalancing and the remaining 50% is split between unstaked LPs and veYB based on the share of ybBTC staked. If many LPs stake to earn YB emissions, the admin fee increases, sending more fees to veYB. But if few stake, LPs earn more BTC‑denominated fees.
This mechanism balances incentives and recreates Curve’s gauge system.
$5M Legion and Kraken Launch Raise
Yieldbasis recently concluded a $5M raise (2.5% of supply) through Kraken and Legion at a $200M FDV. $2.5M was allocated for the Legion merit-based raise, and $2.5M was allocated to Kraken Launch. These tokens are 100% unlocked on TGE.
The public sale ran in two phases:
Phase 1 reserved up to 20% of tokens for Legion users with high reputational scores (on‑chain activity, social and GitHub contributions).
Phase 2 opened the remainder simultaneously on Kraken and Legion on a first‑come, first‑served basis.
The Legion sale was wildly oversubscribed at 98x. The resolution saw the removal of sybils and bots and a barbell approach where:
Larger allocations to top contributors (those who can grow TVL, bring mindshare, contribute to the codebase, etc.)
Thousands of others receiving some allocation, combining the best of an angel round with broad distribution.
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