Chainfeeds Introduction:
BTC earnings might sound appealing, but they could be just an illusion built on "castles in the air". Once multi-layered Altcoin incentives collapse, the entire system will be on the verge of falling apart. So we need to ask several key questions: Are earnings denominated in BTC or Altcoin? What risks do we face? How much principal might be lost? Is the earnings mechanism sustainable? Will TVL growth dilute returns?
Article Source:
https://x.com/ruiixyz/status/1904637841608409095
Article Author:
Rui
Perspective:
Rui: We can categorize the current BTC earnings sources into five main types: 1) Quantitative trading strategies: Including arbitrage (funding rates, spot-futures basis, cross-exchange) and event-driven trading. The annual yield target is 4%-8% (in BTC terms), with top teams even reaching 200%-300% APR. Risks include model failure, execution risks, and black swan events, requiring real-time monitoring, robust infrastructure, and insurance mechanisms. 2) DEX Market Making (LP): Currently, only about 3% of wBTC is in DEX. Uniswap APR is currently around 6.88%, reaching double digits during high demand. The risk lies in Impermanent Loss, and holding BTC is usually better than LP in the long term. 3) Lending Markets: Current BTC lending demand is low. In DeFi, lending BTC APR is only about 0.02%-0.5%. LTV ratios and loan rates vary across TradFi, CeFi, and DeFi platforms, with overall low capital efficiency and liquidation risks. 4) Staking Mining: Projects like Babylon participate in PoS security construction using BTC, with rewards paid in Altcoins. High risks depend on token issuance success and ecosystem sustainability. 5) BTC as Collateral for Liquidity Mining: Using BTC in BTC L2 or cross-chain protocols to earn Altcoin rewards. Yields fluctuate, generally 5-7%, with better treatment for large players. Protocol risks, lock-up requirements, and liquidation conditions vary. Two new earning strategies: 6) Liquid Staking Token (LST): BTC-based LSTs are emerging, now developed into cross-chain BTC assets with earning capabilities, combining complex earning strategies. Diverse earning methods may include Babylon's staking rewards, chain-specific point incentives, Pendle yield distribution, and external yields from third-party quantitative strategies. Projects might also issue their own tokens as incentives. However, LST liquidity is generally low, potentially triggering Cascading Liquidations during market volatility. Multiple centralized single points of failure exist in minting, redemption, staking, and cross-chain bridging processes. Heavily dependent on native and external Altcoin rewards, overall earnings show high volatility and are difficult to predict or stabilize. 7) Yield Tokenization Platforms: Pendle is the current mainstream LST yield tokenization platform, with $444 million BTC TVL. Earnings types (mainly Altcoins) include LST base yields, trading fees, fixed income, and $Pendle token incentives. Future BTC yield products will focus more on risk management, native BTC yield structures, and innovations under compliant frameworks. True winners will be protocols or platforms providing deep liquidity and sustainable yields without excessive risk. Small errors can lead to catastrophic consequences. BTC participants face multi-layered risk attacks, including trust delegation risks from centralized exchanges, phishing attacks on self-custody wallets, contract permission settings, protocol mechanism risks like logical or mathematical vulnerabilities, and principal loss mechanisms. Earnings denominated in BTC are more attractive to users. While DEX LP market is still in early stages, quantitative trading remains the dominant force. Finally, as BTC on-chain liquidity deepens, we're witnessing the gradual fusion of TradFi's stability and conservatism, CeFi's user-friendliness, and DeFi's mechanism innovations. These three are progressively converging. [Original text was in English]
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