Curve Finance founder raises $5 million to launch new project Yield Basis to address Impermanent Loss

The Block exclusively reported that Michael Egorov, the founder of Decentralization exchange Curve Finance on the Ether network, is developing a project called Yield Basis in the Decentralized Finance space, aiming to address the industry's headache of Impermanent Loss. Currently, it has successfully raised $5 million with a valuation of up to $50 million.

Yield Basis, a Curve subproject, overraised 15 times and is valued at $50 million

According to the fundraising report of Curve's sub-project Yield Basis on January 11 this year, the project raised 5 million dollars through the sale of '$YB' tokens, with a valuation of 50 million dollars:

The project plans to sell 10% of the total supply of YB tokens to investors, which is 100 million tokens out of 1 billion. Investor tokens will have a lock-up period of six months, followed by linear unlocking over the next two years.

According to people familiar with the matter, Yield Basis's fundraising process began last month and was completed in just two weeks, with "strong demand" from investors, more than 15 times overfunded. Egorov also confirmed the details of the news and the briefing.

YB token distribution plan: Integrate the Curve ecosystem to create a flywheel effect

Wherein, the YB token of Yield Basis will be allocated as follows:

30% is used for community incentives, distributed through liquidity mining

25% allocated to the team

15% allocated as development reserve

10% for Curve technology licensing

10% for cooperation projects

Egorov said that part of the Curve technology authorization may be used to purchase voting rights for the crvUSD stable pool of Decentralization stablecoins in the Curve ecosystem, which will help integrate with the Curve ecosystem and enhance the value of the YB token.

How does Yield Basis solve Impermanent Loss?

Impermanent Loss (impermanent loss) has always been a major challenge in the Decentralized Finance field. When liquidity providers (LP) deposit assets, market price fluctuations may cause a decrease in the value of their assets, and even trading fee revenue may not be able to offset the loss.

Here, Yield Basis improves the automated market maker (AMM) mechanism to provide more stable and sustainable liquidity:

Yield Basis adopts a double leverage liquidity strategy, allowing LP to borrow crvUSD to double its liquidity position, thereby adjusting the liquidity ratio to reduce Impermanent Loss.

At the same time, this leverage mechanism triples LP's trading fee income. However, leveraged trading involves borrowing and rebalancing costs, which can lead to unstable returns:

Yield Basis will leverage Curve's CryptoSwap AMM technology to centralize liquidity and allocate funds to the most actively traded areas to increase fee yields.

In addition, liquidity providers borrowing crvUSD will pay interest, and these interests, along with a portion of the AMM trading fees, will be used to subsidize the rebalancing costs to ensure system stability.

(Curve founder: Geopolitics and regulation remain the biggest issues for over-collateralized stablecoins, algorithmic stablecoins are the way forward)

Focused on BTC and ETH investors

In addition, Yield Basis will primarily focus on providing higher-yield liquidity strategies for Bitcoin and Ether holders. The investment presentation reveals that the backtesting of this model shows:

From January 2019 to November 2024, the average APR was around 20.5%

From January 2023 to November 2024, the average APR is about 9%

During the bull market in 2021, the APR reached as high as 60%

These yield performances rely on Curve's CryptoSwap AMM technology, where liquidity positions will be tokenized into ybBTC and ybETH, allowing holders to automatically receive trading fee income through these tokens and further stake for additional rewards.

Egorov emphasized that if Yield Basis operates smoothly, the project's scale is expected to expand to tens of billions of dollars, becoming an innovative high-yield solution in the crypto market:

However, the model is currently only applicable to low-volatility mainstream assets, such as BTC and ETH, and is not effective for high-volatility assets such as meme coins.

At present, Yield Basis is in the "test production (test-in-production)" stage, the complete system and token economy model still need more time to be officially launched, Egorov has indicated that there will be no further information updates before the mainnet launch.

The innovative liquidity management mechanism of Yield Basis brings new solutions to the Decentralized Finance market and may become an important additional service in the Curve ecosystem. With testing and auditing underway, the future development of this project is worth market attention.

The founder of Curve Finance raised $5 million to launch the new project Yield Basis to solve Impermanent Loss, which was first reported by ChainNews ABMedia.