Michael Egorov: Yield Basis - Bringing Real Yield to Bitcoin
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You're now plugged into the Delphi Podcast. Hi,
everyone, and welcome to another episode of the Delphi Podcast. I'll be guest hosting this today alongside Jan Lieberman, who is the managing partner of Delphi Ventures. And I'm Jose, head of Delphi Labs. So today with us, we have Michael Agorov, one of the DeFi OGs, co founder of Curve, one of the original DeFi summer protocols that has invented a lot of the primitives that we use today in DeFi, and he's here today to discuss his new invention, which is YieldBasis. YieldBasis has the ambitious vision of eliminating impermanent loss on LPing, which would basically allow you to have a natural y
Yeah, let's Well, as you explained very simply, yield basis is a product on top of curve crypto pools, and it essentially removes impermanent loss. You can LP just crypto single sided and turn it into essentially a yield bearing crypto.
Very cool. Jan, you want to go next on a follow-up of how it works?
Yeah, yeah. So I would love to maybe dive into how it works and I think part of that goes into addressing what the problem situation is right now and how you go about solving it.
Yes, absolutely. So I think, yes, this problem is not necessarily well known to those who are new to DeFi. And I would explain it this way. Imagine that you want to earn some money on crypto exchanges, And let's say on exchanges between WBTC and USDT, right? So you brought your WBTC and USDT and put into some protocol, whatever that is, be it Curve, be it Uniswap, doesn't matter, And you hope that these funds will just passively sit there and make you some fees. And indeed they do. But it appears that if Bitcoin goes up let's say Bitcoin goes up by a factor of four, for example, everything mov
Appreciate it. And so just before jumping into yield basis, it'd be I think just a brief summary, The idea is when you put money, when you put assets into an AMM, you're effectively buying when price goes down and selling when price goes up. So that's, you know, if you have a one stable one one you like a stable coin and a and a volatile asset, as the price of volatile asset goes up, you're selling it. And and so impermanent loss is basically your underperformance relative to a buy and hold. So these AMM when people are putting assets into an AMM, it's effectively a strategy where you think pr
Yes, that's a very good description, I think. But anyway, I guess it's probably time to explain how exactly I'm solving that in yield basis. And I think, well, the idea is this. Well, first of all, we work with Curve crypto pools, which, as I said, have impermanent loss similar to impermanent loss of Uniswap two. And that means that if you put, let's say, Bitcoin denominated and dollar denominated asset, then Malkurve pool will have pricing proportional to square root of Bitcoin price. And what really creates this impermanent loss is the square root function. So this nonlinearity, which we don
Right. So basically you know the way you're kind of addressing the impairment loss issue is you've designed a mechanism that's able to borrow the other side right? Instead of providing fiftyfifty you just provide 100% Bitcoin and then the mechanism borrows the cash component. And so what that means is as price goes up, you're not actually selling your Bitcoin, you're just borrowing more and kind of making sure you're still fiftyfifty. And so
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