- Yield Basis activated a fee switch, directing revenue to token holders.
- Users have four weeks to claim over 17 Bitcoin worth about $1.6 million since the protocol’s launch.
- The protocol addresses impermanent loss through a leveraged trading strategy.
- Increasing pressure exists on crypto protocols to deliver token value beyond governance rights.
- Creator Michael Egorov emphasizes the necessity of fee distribution for sustainable token economics.
Yield Basis, a three-month-old protocol created by Curve Finance founder Michael Egorov, activated its fee switch on Thursday. This change directs part of its revenue to token holders, making it the latest crypto protocol to share earnings with its community. Selected users now have four weeks to claim more than 17 Bitcoin, valued at nearly $1.6 million as of Friday, accumulated since the protocol started in September.
The decision to activate the fee switch was unanimously approved by Yield Basis token holders via a proposal on Wednesday. Developers often launch tokens to reward investors and transfer governance, but user participation in decentralized autonomous organization (DAO) votes tends to be low. Protocols have faced growing expectations to prove token utility beyond voting rights, a trend gaining momentum this year with major DAOs like Uniswap, Ethena, Aave, and Jito implementing fee switches or token buybacks.
Yield Basis has attracted deposits of Bitcoin worth more than $130 million. The protocol aims to tackle impermanent loss, which is the reduced profits liquidity providers face compared to simply holding tokens when crypto prices rise. This loss happens because decentralized exchanges enable token swaps in liquidity pools where providers earn fees but risk opportunity costs.
The protocol uses a leveraged trading strategy within Curve’s Bitcoin-crvUSD pool. Token holders of YB can lock their tokens to receive part of the protocol’s revenue. According to Egorov, investors have gained from trading fees while avoiding impermanent loss. The project plans to expand this model to other cryptocurrencies, starting with Ethereum.
The approach to boost token value through fee distribution has met criticism. Market maker Keyrock has noted that many buyback programs are ineffective, often misallocating funds. Some argue that high-growth startups generally reinvest earnings rather than distributing them to shareholders. Egorov refutes this, stating that reinvestment often occurs through token incentives which are ineffective if tokens only hold voting power. He said, “You will inevitably have the token performing very badly if you don’t have closed-loop economics,” adding that fee distribution is necessary to maintain token incentives.
Disclaimer: The two co-founders of DL News previously contributed to the Curve protocol. For more details, contact correspondent Aleks Gilbert at aleks@dlnews.com.
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