YieldBasis: Building the Next Profitable Frontier for Liquidity Providers.
Every once in a while, a new product reshapes how DeFi operates.
Pumpfun made token launches effortlessly and Kaito transformed content distribution.
Now, YieldBasis is setting out to redefine how liquidity providers earn—by turning volatility into yield and neutralizing impermanent loss.
In this post, we’ll explore the basics, unpack how YieldBasis works, and highlight the opportunities around it.
An Overview
If you’ve ever provided liquidity to a dual-asset pool, you’ve likely experienced impermanent loss firsthand.
But for those new to the concept, here’s a quick recap:
Impermanent loss is a temporary loss of value that occurs when you provide liquidity to a pool containing two assets.
As users trade between those assets, the pool automatically rebalances, often leaving liquidity providers holding more of the asset that’s being sold.
For example, in a BTC/USDT pool, if BTC’s price rises, traders will sell BTC into the pool to capture profit, and you—the liquidity provider—end up with more USDT and less BTC.
When you later withdraw, the total value of your position is often lower than if you had simply held BTC.
Back in 2021, high APYs and liquidity incentives were enough to offset this.
But as DeFi matured, impermanent loss became a real drawback.
Various protocols introduced fixes like concentrated liquidity, delta-neutral LPs, and single-sided pools—but each came with its own trade-offs.
YieldBasis takes a new approach, aiming to make liquidity provision profitable again by capturing yield from volatility while eliminating impermanent loss altogether.
What Is YieldBasis?
In simple terms, @yieldbasis is a platform built on top of Curve that uses Curve pools to generate yield from price volatility while keeping LP positions protected from impermanent loss.
At launch, it focuses on Bitcoin as the primary asset. Users deposit BTC into YieldBasis, which allocates it into Curve’s BTC pools and applies leverage using a unique on-chain structure that neutralizes impermanent loss.
Founded by the same team behind Curve, including @newmichwill, YieldBasis has already achieved significant milestones:
• Raised over $50M from top founders and investors
• Recorded more than $150M committed on the Legion sale
• Filled its BTC pools within minutes of launch
So how does this mechanism actually work?
Understanding the YieldBasis Workflow
YieldBasis operates through a three-step process designed to maintain a 2× leveraged position while protecting LPs from downside risk.
1. Deposit
The first step for users is to deposit BTC into YieldBasis to mint ybBTC, a receipt token representing their share of the pool. Current supported assets include cbBTC, tBTC, and WBTC.
2. Flashloan and Leverage Setup
The protocol flash-borrows crvUSD equal to the USD value of your BTC deposit.
Your BTC and the borrowed crvUSD are then paired and supplied as liquidity to the BTC/crvUSD Curve pool.
The resulting LP token is posted as collateral in a Curve CDP (collateralized debt position) to take another crvUSD loan—repaying the flash loan and leaving your position fully leveraged.
This creates a 2× leveraged position with a constant 50% debt ratio.
3. Leverage Rebalancing
As BTC’s price moves, the system automatically rebalances to maintain this 50% debt-to-equity ratio:
- If BTC rises: LP value increases → the protocol borrows more crvUSD → exposure resets to 2×
- If BTC falls: LP value drops → some LP is redeemed → debt repaid → ratio returns to 50%
This keeps your BTC exposure constant, and you don’t lose BTC even when the price fluctuates.
Rebalancing is handled through two key components: the Rebalancing-AMM and the VirtualPool.
The Rebalancing-AMM tracks both LP tokens and crvUSD debt, adjusting prices to encourage arbitrageurs to restore balance.
Meanwhile, the VirtualPool wraps all steps—flashloans, LP minting/burning, and CDP repayment—into a single atomic transaction.
This mechanism prevents liquidation events by keeping leverage stable while giving arbitrageurs small profit incentives to maintain equilibrium.
The result is a self-balancing system that continuously hedges impermanent loss.
Fees and Token Distribution
YieldBasis has four main tokens that define its incentive system:
ybBTC— claim on the 2× leveraged BTC/crvUSD LP
Staked ybBTC— staked version earning token emissions
YB— the native protocol token
veYB— vote-locked YB, granting governance and enhanced rewards
All the trading fees generated from the BTC/crvUSD pool are split evenly:
• 50% goes to users (shared between unstaked ybBTC and veYB holders)
• 50% goes back into the protocol to fund the rebalancing mechanism
The 50% going back to the rebalancing pool ensures that there is no liquidation call coming from a lack of arbitrageurs to balance the pool; thus, the protocol does it itself using 50% of protocol fees.
The remaining 50% going to users is shared between unstaked ybBTC and veYB governance, following a dynamic distribution.
Simply put, the protocol tracks the amount of ybBTC staked and adjusts the potential fees each holder earns (unstaked ybBTC and veYB) using the formula:
When nobody stakes (s = 0)
Thus, 𝑓ₐ =𝑓𝑚𝑖𝑛 = 10% and veYB holders get only a small slice (10%), unstaked ybBTC holders get the rest (90%).
When everyone stakes (s = T)
Thus, 𝑓ₐ =100% and veYB holders get all the user-side fees, because no one is left to earn trading fees.
When half the supply is staked (s = 0.5T), admin fee rises (≈ 36.4%) and veYB gets 36.4%, unstaked holders share 63.6%.
Staked ybBTC holders receive YB emissions, which can be locked as veYB for a minimum of 1 week and a maximum of 4 years.
Skaked ybBTC holders can lock their received emission to enjoy both fees as veYB holders and emissions, creating a flywheel effect that allows them to earn maximum fees from the protocol, as shown below.
Since launch, yieldbasis has had interesting statistics:
- Total volume at $28.9m
- Over $6M used to rebalance
- More than $200K generated in fees.
And the coverage by @vasily_sumanov and @in_pangea shows how far it has even grown.
Personal Thoughts
YieldBasis represents one of the most innovative designs in liquidity provision since Curve’s original stableswap model.
It combines proven mechanisms; vote-escrow tokenomics, automated rebalancing, and leveraged LPing into a new framework that could set the next standard for capital-efficient yield strategies.
Given that it’s built by the same minds behind Curve, the market’s optimism isn’t surprising. With over $50M raised and pools filling instantly, investors are clearly betting on its future token launch.
Still, the product is early. BTC’s relatively stable nature makes it an ideal test asset, but higher-volatility pairs could challenge the rebalancing mechanics if introduced too soon.
That said, the foundations look solid—and if the model scales safely, it could unlock an entirely new yield frontier for DeFi liquidity providers.