🥩Staking
Stake $BITU to receive $sBITU and earn real yield.
Last updated
Stake $BITU to receive $sBITU and earn real yield.
Last updated
Users who hold $BITU can stake their tokens and earn real yield. By depositing $BITU into the staking contract, users receive $sBITU, which they can later use to redeem their $BITU at any time.
The amount of $BITU in the staking contract gradually increases as the yield generated by ALMM are stored in the contract in the form of $BITU. As a result, the same amount of $sBITU can be exchanged for a greater quantity of $BITU after a certain period of time.
Once users deposit $BITU into the staking contract, they receive $sBITU and can passively earn yield generated by the ALMM without having to take any further action.
Users can also transfer $sBITU to other addresses, and the final rewards will be distributed to the address that redeems $sBITU for $BITU.
The reward module is accessible to all users and does not require whitelist verification. Both minted $BITU and $BITU purchased from the secondary market can be staked to earn yield.
Yield come from the earnings generated by the ALMM, and are generally distributed once a month, with the ALMM depositing the monthly yield into the staking contract. However, the distribution of yield is not done all at once. This is primarily to avoid "sandwich attacks" on the yield.
For example:
Currently, the perpetual contract has 100 $BITU, and there are 100 $sBITU held by users corresponding to those $BITU. The exchange ratio between sBITU and BITU is 1:1.
ALMM needs to deposit 10 $BITU as earnings into the staking contract, which would change the ratio between $BITU and $sBITU to 1.1:1.
If all of the earnings were deposited at once, there could be users who can deposit $BITU just before the distribution to claim the yield. They could then immediately redeem their $BITU after the yield is distributed. This behavior would disadvantage long-term $sBITU holders.
To mitigate the sandwich attacks on yield distribution, the transfer of yield into the staking contract is divided into a number of transactions, completed within a total of one week.
By implementing this approach, it effectively alleviates the impact of sandwich attacks on the earnings pool.
The ALMM manages a mirrored version of the users' collateral on exchanges, while the actual collateral assets are always securely stored with trusted and licensed custody institutions. Apart from users themselves, no one else can withdraw or misappropriate the collateral assets.
The ALMM uses mirrored assets for two purposes:
Lending
Market-neutral investment strategies
Regarding asset management, the ALMM initially engages in lending activities by mirroring assets to exchanges and lending funds to qualified market makers and hedge funds. These institutions that require funds will pay interest for the use of the assets. This interest payment is one of the sources of income for the staking.
After depositing $BITU into the staking contract, users will receive staked BITU ($sBITU). To reclaim their staked $BITU, users only need to burn $sBITU within the staking contract and wait a 7-day cooldown period.
The ALMM is responsible for the following:
Ensuring the security of user collateral assets are safely held in trusted and licensed custodial institutions.
Collecting yield generated from mirrored assets on exchanges and converting all income into USDT, which is then stored in the custodial address. The USDT is then used as collateral to mint new $BITU tokens and distributed to $sBITU holders.
Providing initial liquidity for $BITU within the ecosystem.
Risk management and portfolio liquidation: the ALMM monitors user positions and ensures that the overall leverage ratio of the protocol remains above the safety threshold.
Redemption of $BITU and collateral assets: the ALMM handles the redemption of $BITU and the release of collateral assets.
You might wonder what happens if a borrowing institution loses the money or decides to withdraw and disappear. The ALMM has a robust risk control mechanism in place to prevent such scenarios, ensuring the security and sufficiency of $BITU's collateral assets at all times.
To address potential concerns:
Lending Thresholds: Funds lent to market makers or hedge funds have specific conditions. These funds are designated strictly for trading activities within the LTP system, one of the world's largest digital asset brokers, and cannot be withdrawn. LTP's risk control system monitors and restricts withdrawal actions by all institutions using these funds.
Collateral Requirements and Loss Management: Borrowing isn't limitless and requires sufficient collateral. For example, a market maker wishing to borrow 1 million USDT must provide at least 300,000 USDT (30%) as collateral. If the market maker incurs a trading loss of 100,000 USDT, their collateral decreases accordingly, ensuring they cover any losses with their own capital, not affecting the collateralized assets mirrored to the exchange.
Enforced Trading Cessation: Continuous losses that threaten to deplete the collateral will trigger the termination of the market maker’s trading activities. All trading takes place within LTP's system, allowing LTP to monitor and enforce the cessation in real-time, safeguarding the funds and trading system integrity.
One of the primary reasons for utilizing centralized exchanges is their ability to offer higher liquidity and more efficient capital utilization, which often translates into higher returns. However, a significant risk involves the security of the exchanges themselves. Purely on-chain activities typically cannot support sufficiently large volumes or generate comparable returns.
To mitigate the risks associated with exchanges, the BitU Protocol incorporates third-party custodial companies. These companies ensure that all collateral assets remain secure and are not transferred elsewhere, maintaining both transparency and security at all times. This approach guarantees that, regardless of external circumstances, the security of the collateral assets is maintained, providing sufficient backing for the issued stablecoin.
