Yield base, a protocol developed by the finance of the decentralized finance platform (DEFI), reduces impermanent loss for suppliers of liquidity (BTC) and suppliers of ether (ETH) liquidity (LPS), while creating an approach based on the inflation market and tokens emissions, according to the founder of Curve, Dr. Michael Egorov.
The impermanent crypto loss occurs when the price of assets deposited in a liquidity pool plunges or deviates in a way that leaves the user with less funds than if he had simply held his crypto and not engaged in the liquidity supply.
Dr. Egorov told Cintelegraph that when the funds deposited in a liquidity pool are proportional to the square root of the Bitcoin price, this creates an impermanent loss. The founder of Curve Finance said:
“The impermanent losses occur because of this square dependence.
The yield base operates thanks to the combination lever effect, which maintains an overcrowded position exactly at any time by completing the positions with borrowed CRVUSD, the decentralized stablecoin of the DEFI platform.
This maintains the price of the position to exactly double the guarantees deposited, eliminating the problem of the square root in the heart of the waterproof loss, said Egorov.
The impermanent loss has tormented liquidity providers for years and also pushes the potential LPs to enter the game.
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Bifurcated yield options help set inflation rates and reduce chip emissions
Users have the possibility of receiving a return on Bitcoin in Tokenized or the yield base token, which creates a market -oriented solution to fix inflation rates and control the token emissions, said the founder of the curve.
“In different market conditions, you have to do different things,” he added. Egorov told Cintelegraph that in the speculative bull markets, many users would probably choose to keep and put the YB token for the assessment of prices, allowing a real yield to accumulate at the platform.
On the other hand, during the prolonged bear markets, users will probably choose to play safely and receive their yield in Bitcoin, to counter the inflation of YB tokens created during the phases of the speculative market and to provide an accumulation of “optimal” value to the YB token.
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