YieldBasis is a DeFi protocol designed to let users supply liquidity to automated market maker (AMM) pools while avoiding impermanent loss. It accomplishes this by using a 2× compounding leverage system built on Curve Finance’s infrastructure. Users deposit crypto assets and are issued YieldBasis LP tokens that reflect their portion of the liquidity pool.

To keep the leverage ratio steady at 2×, the protocol borrows crvUSD against LP positions via a specific collateralized debt position (CDP). A unique Rebalancing-AMM and VirtualPool setup allows arbitrageurs to automatically correct the leverage ratio when prices shift. This process ensures YieldBasis LP tokens mirror the price action of the underlying crypto assets 1:1, all while earning trading fees from the connected Curve pool.

Liquidity providers have two ways to earn: those holding unstaked YieldBasis LP tokens collect trading fees directly, whereas those who stake their YieldBasis LP tokens receive YB token emissions. The protocol uses a dynamic admin fee formula that changes based on staking levels, dividing trading fees between unstaked LP holders and veYB governance participants.

The native utility token, YB, serves several functions:

• Governance and Voting Rights: Users can lock YB tokens for up to 4 years to form veYB (vote-escrowed YB) positions. These positions grant voting power for governance matters, such as parameter changes, new features, and upgrades. Voting power is weighted by time and decreases linearly over the lock period unless the tokens are locked for the full 4 years.
• Gauge Voting for Emissions: Holders of veYB vote on gauge weights to decide how YB token emissions are allocated among various liquidity pools. The share of emissions for each gauge matches the votes it gets, with weights updating immediately. This lets the community steer incentives to favored pools, subject to a 10-day cooldown between vote adjustments.
• Protocol Revenue Sharing: veYB holders get a share of protocol revenue via the dynamic admin fee system. As more YieldBasis LPs are staked, the admin fee rises non-linearly, directing more trading fees to veYB holders. This offers revenue-sharing chances for long-term holders engaged in governance.
• Liquidity Mining Incentives: YB tokens are emitted to users staking their YieldBasis LP tokens. The emission schedule follows an exponential decay curve, with the maximum rate managed by the GaugeController contract. The total token supply is limited to 1 billion.