Providing liquidity in DeFi has always involved a trade-off. While automated market makers (AMMs) offer fee income, they often expose liquidity providers to impermanent loss, especially when pairing volatile assets like Bitcoin with stablecoins. YieldBasis takes a different path, introducing a structure that allows BTC holders to earn trading fees while maintaining full exposure to Bitcoin’s price movements.
This approach has positioned YieldBasis as a notable innovation for users who want yield without the familiar drawbacks of traditional AMM participation.
A New Way to Think About BTC Liquidity
Impermanent loss occurs because AMMs continuously rebalance asset ratios as prices change. In practice, this means that even if BTC rises sharply, a BTC–stablecoin liquidity position can end up underperforming simple holding. YieldBasis was designed to address this exact problem, not by masking it with incentives, but by restructuring how liquidity is provided in the first place.
Instead of a standard pool, YieldBasis uses a leveraged model built around the BTC/crvUSD market on Curve. By maintaining a constant 2x leveraged position, the protocol ensures that the value of a user’s position moves in line with BTC itself, effectively neutralizing impermanent loss.
How the YieldBasis Mechanism Works
When users deposit BTC into YieldBasis, they receive ybBTC, a token that represents ownership in a leveraged BTC/crvUSD liquidity position. Behind the scenes, the protocol borrows crvUSD equal to the USD value of the deposited BTC and supplies both assets to Curve as liquidity. The resulting LP tokens are then used as collateral for the borrowed crvUSD.
What makes this structure distinctive is its constant leverage. The system targets a 50 percent debt-to-value ratio, which corresponds to 2x exposure. As BTC’s price moves, an automated rebalancing mechanism kicks in. Arbitrageurs are economically incentivized to interact with YieldBasis contracts, adjusting debt and liquidity so the leverage ratio remains intact. The result is a position that mirrors BTC’s price on a one-to-one basis, while still generating trading fees from the underlying pool.
Why Impermanent Loss Disappears
In a conventional AMM, price appreciation leads to a gradual shift toward the weaker asset, creating a drag on performance. YieldBasis sidesteps this mathematical limitation. Because the liquidity position is leveraged and continuously rebalanced, the value of the position scales proportionally with BTC’s price.
If Bitcoin doubles, the YieldBasis position reflects that move directly, rather than lagging behind as it would in a standard BTC–stablecoin pool. This design removes the sublinear growth effect that defines impermanent loss, allowing liquidity providers to capture the full upside of BTC while still benefiting from swap fees.
Fees, Staking, and Governance
ybBTC holders earn trading fees generated by the BTC/crvUSD pool, typically denominated in BTC. Those seeking additional rewards can stake ybBTC to receive YB token emissions. The YB token also plays a role in governance. Users who choose to lock their YB gain voting rights and may share in protocol-level fee distributions, aligning long-term participants with the growth of the ecosystem.
Understanding the Risks
While YieldBasis removes impermanent loss by design, it does not eliminate risk entirely. Like all DeFi protocols, it depends on smart contracts that could be vulnerable to bugs or exploits. The system also relies on active arbitrage to keep leverage in balance; disruptions in market efficiency could temporarily affect tracking accuracy. Broader market volatility, liquidity conditions, and the stability of crvUSD as a borrowed asset are additional factors users should consider before participating.
YieldBasis and Binance HODLer Airdrops
In October 2025, YieldBasis gained wider attention when Binance announced YB as the 53rd project featured in its HODLer Airdrops program. Users who committed BNB to eligible earning products during the snapshot period received YB tokens as rewards. Ten million YB, representing one percent of the maximum supply, were distributed, and the token launched with a Seed Tag across multiple trading pairs.
Final Perspective
YieldBasis introduces a thoughtful redesign of BTC liquidity provision. By combining leverage, automated rebalancing, and Curve’s AMM mechanics, it allows users to earn fees without sacrificing exposure to Bitcoin’s price performance. For BTC holders who have long avoided liquidity pools due to impermanent loss, YieldBasis presents a compelling alternative that aligns yield generation with long-term conviction.
