Announcing the Yield Dollar with UMA and renBTC
Permissionlessly Leverage or Yield Farm with Bitcoin
In partnership with UMA, we are introducing a BTC backed Yield Dollar (uUSD), along with a joint liquidity mining reward program.
What is uUSD from UMA?
uUSD is a “yield dollar.” The yield dollar model is described here and the first iteration UMA pursued was based on ETH, which resulted in over 10mm in minted yUSD. In partnership with UMA, we will be pursuing the same concept but with renBTC.
This is particularly valuable for the space because it is now possible to leverage Bitcoin permissionlessly on the Ethereum network. Traders can purchase renBTC, lock it as collateral with UMA, and mint uUSD tokens. These uUSD tokens can be used to purchase more renBTC or used in other parts of the DeFi ecosystem.
UMA & REN Liquidity Mining Incentives
To further jump-start liquidity for uUSD, Risk Labs (UMA) and Ren are partnering on liquidity incentives for those who mint and contribute uUSD (uUSDrBTC-OCT) and USDC to the balancer pool. This liquidity mining framework for uUSD is similar to the UMA’s liquidity mining pilot, which offered rewards to those who contributed liquidity to the yield dollar backed by ETH.
The pool is whitelisted by Balancer, so farmers will receive all three assets: $REN, $UMA, and $BAL.
The pool will receive 10,000 UMA tokens per week, 25,000 REN tokens per week, and BAL tokens per Balancer’s calculations. Snapshots are taken at 23:00 UTC every Monday. Rewards will be airdropped approximately 24 hours after. Rewards are calculated on a per-block basis, so providing liquidity for even just a few minutes will earn rewards. The APR depends on how much liquidity is provided over the entire week and is not possible to predict, only estimate. You can find the current APR for that moment by checking the uUSD Yield tab at tools.umaproject.org.
How to Begin | Yield Farming & Leveraging
- Wrap your BTC into renBTC so that it is usable on the Ethereum blockchain. To mint renBTC from native Bitcoin, go to RenBridge. Or, you can purchase renBTC on an exchange.
- Use renBTC to mint uUSD tokens on the UMA protocol. Use http://tools.umaproject.org.
- Deposit uUSD and USDC into the Balancer pool to earn BAL, REN, and UMA tokens
Process to Leverage
1) Follow steps above, then use uUSD to purchase USDC in the balancer pool.
2) You can then swap your USDC for more renBTC, which will increase your exposure to the underlying asset of Bitcoin.
- UMA’s Minting UI — Mint and manage your position
- UMA Protocol calendar
- Balancer Swap USDC <> uUSD
- Balancer Add / Manage Liquidity
Past Precedence | The Effect of Liquidity Mining on Yield Dollar Tokens
One curious result of the ETH-backed yUSD tokens has been that the price of yUSD tended to trade over $1. This is a “negative funding rate” for borrowing against ETH.
Buy pressure for the yUSD token would be a function of the APR for mining, the cost of yUSD, and the cost of stablecoin capital market-wide. The cost of yUSD determines the yield, either negative or positive, associated with purchasing yUSD in that moment.
if APR from LM + funding rate (+ or -) > cost of stablecoin capital then buy pressure on yUSD.
Sell pressure is the same formula, except it is a function of the demand to leverage long on ETH for a given funding rate. Farmers who minted yUSD with ETH collateral and provided liquidity to the pool created neither sell nor buy pressure, just deeper liquidity. Thus far, the yield dollar product backed by ETH has kept the funding rate negative, which means a price of yUSD over $1. We would expect the market to purchase yUSD up to the point that being a liquidity provider matches the cost of capital market-wide, the cost of stablecoin capital.
The market forces that will impact the uUSDrBTC-OCT remain to be seen. Will the demand to permissionlessly leverage long on Bitcoin be strong enough to keep the price of yUSD under $1? Or will the demand to farm using Bitcoin outweigh this? If you want to chat about the above or have questions be sure to join UMA’s Discord to discuss in more detail: discord.umaproject.org.
How it uUSD Works & Token Details | uUSDrBTC-OCT
- ERC20 Short name: uUSDrBTC-OCT
- ERC20 Long name: uUSDBTC Synthetic Token Expiring 1 October 2020
- Collateral: renBTC
- Collateral requirement: 125%
- Expiration: Oct 1, 2020
- Withdrawal liveness: 2 hrs
- Liquidation liveness: 2 hrs
- Price identifier: USD/BTC
- Note: this means 1 yUSDBTC is redeemable for $1 of BTC at expiry
- Dispute bond (% of sponsor collateral): 10%
- Dispute reward (% of TRV): 20%
- Sponsor reward (% of TRV): 5%
- Min sponsor tokens: 100
- Identifier definition: USD/BTC, as spec’ed by UMIP-7
- Final fee: 0.018 renBTC
We are thrilled with this collaboration and look forward to pioneering this advancement in cross-chain DeFi with UMA. It’s been a pleasure working with the team and we look forward to future collaborations.
Onwards and upwards,
— Taiyang Zhang, CEO
A decentralized financial contracts platform built to enable Universal Market Access.
Ren is an open protocol that enables the permissionless and private transfer of value between any blockchain.
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