Technical Overview
Last updated
Last updated
Basix vaults are designed in accordance with EIP4626, facilitating a seamless process for users to mint and redeem USDx. This is achieved through staking and unstaking USDC, respectively.
The Basix protocol operates through a multi-step mechanism, ensuring efficient yield generation and risk mitigation:
USDC Staking and USDx Allocation
Staking Process: When users stake USDC, they receive USDx. The amount of USDx received is determined by the ratio of the Total USDx Supply to the Basix Portfolio Value minus the Insurance Fund. For each USDC deposited, USDx is credited.
Example Calculation: For a stake of 10,000 USDC, with a Total USDx Supply of 1,000,000, a Basix Portfolio Value of 1,100,000 USD, and an Insurance Fund of 50,000 USD, the user would receive approximately 9,523.81 USDx.
USDx Characteristics: USDx is a non-rebasing token, designed to gradually increase in value against USDC, reflecting the accrued yield.
Crypto Asset Acquisition and Hedging
Asset Purchase: The staked USDC is utilized to acquire crypto assets (e.g., ETH) on decentralized exchanges such as Uniswap.
Delta-Neutral Hedging: Concurrently, Basix engages in hedging by shorting equivalent perpetual futures (e.g., ETH-USD) on platforms like Hyperliquid. This strategy is crucial for maintaining a delta-neutral position, thus reducing the risks linked to price fluctuations.
USDC Unstaking Process
Redemption: Users can redeem their USDx for USDC. The unstaked USDC is withdrawn from yield-generating activities and becomes available within a 2-day unstaking period. An unstaking fee of 0.1% is applied. For each USDx redeemed, USDC is credited.
Example Calculation: Redeeming 10,000 USDx (given the same Total USDx Supply, Basix Portfolio Value, and Insurance Fund as above) would yield approximately 10,489.5 USDC.
Yield within the Basix protocol is generated primarily through funding payments and basis trading:
Funding Payments: The protocol's automated asset management system collects funding payments by shorting perpetual futures, particularly in markets exhibiting a default contango structure.
Basis Delta Trading: Basix strategically enters positions when the basis (the disparity between spot and futures prices) is high, typical in contango situations. Positions are exited as the basis lowers in backwardation phases, leveraging these movements to generate profits.
Portfolio Value Updates: The Basix Portfolio Value is updated daily at 0 UTC, using oracle pricing to assess the aggregate value of assets across various DEXs.
Insurance Fund Contributions: The Insurance Fund, also updated daily at 0 UTC, accumulates 10% of the daily returns. This fund plays a critical role in mitigating potential losses and ensuring the stability of the protocol.
This structured approach enables Basix to provide a stable and efficient yield generation mechanism, effectively minimizing the typical risks associated with cryptocurrency yield strategies.