Protocol Revenue Explanation

Sustainable & Transparent

The revenue generated by the protocol originates from three main sources:

1. Funding and Basis Spread from Delta Hedging Derivatives Positions

   • The protocol hedges backing assets by opening short derivatives positions, capturing funding rate and basis spread yields.

   • Historically, the imbalance in demand and supply for leverage has resulted in positive funding rates, benefiting delta-neutral strategies.

   • Approximately 70% of the protocol’s backing assets (including staked assets) will be allocated to this strategy.

2. Liquidity Provision in Decentralized Exchanges (DEXs)

   • A portion of the backing assets is allocated to liquidity pools in decentralized exchanges, generating yield through trading fees and incentives.

   • Providing liquidity to stablecoin pairs ensures efficient market operations and enhances the protocol’s revenue stream.

3. Staking Rewards from Backing Assets

   • The protocol stakes assets such as ETH or BTC to earn rewards at both the consensus and execution layers.

   • Staking income includes block rewards, transaction fees, and MEV revenue from network participation.