Binance says it will be employing two methods to generate BFUSD’s returns.
Popular crypto exchange Binance has come out with a new one after it unveiled a “reward-bearing margin asset” called BFUSD. According to the platform, the new asset will be live and available from Wednesday, November 26 (Asian time).
Binance noted that BFUSD has been designed to allow users to earn passive income either from holding it or trading futures with it. However, there will also be a promotional period of one month, during which users can purchase BFUSD without incurring any fees while still participating in earning 100,000 USDT USDT $1.00 24h volatility: 0.0% Market cap: $167.19 B Vol. 24h: $122.08 B in bonus APY and USDT vouchers. This period extends from November 27 to December 26.
More Details on Binance BFUSD
Based on Binance’s announcement, BFUSD is a margin asset that has been specifically targeted at Binance Futures users. Although it can’t be used outside Binance’s ecosystem, it has an interesting feature to it that makes it stand out. That is its ability to generate passive rewards, even for non-traders.
Perhaps what might be a major selling point of this new margin asset is that Binance also claims that BFUSD provides a Base Annual Percentage Yield (APY) that accrues daily. This is alongside the possibility of earning a “Boosted APY” when users engage in USDⓈ-Margined Futures trading, which uses stablecoins like USDT or USDC USDC $1.00 24h volatility: 0.0% Market cap: $68.06 B Vol. 24h: $23.66 B as collateral and settlement currency.
On top of the flexible rewards for qualified users, Binance has also issued an assurance that there will always be positive returns. That is, according to a Binance spokesperson who shared that “BFUSD holders will enjoy consistent APY, with rewards designed to never fall below zero”.
The spokesperson, as reported by The Block, explained why such promises are realistic. This assurance hinges on the fact that there is a Reserve Fund seeded with 1 million USDT. The purpose is to cushion users against negative funding rates during bearish markets.
How Rewards Are Generated
Binance says it will be employing two methods to generate BFUSD’s returns. First, there is Delta Hedging, a strategy that balances spot and futures market positions in order to minimize risks. Secondly, the platform will stake Ether to maximize returns.
Using these mechanisms, Binance is 100% positive of a steady flow of income that would be primarily distributed in USDT.
Binance remains entirely confident about its new launch. This is because, historically, the funding rates in crypto futures markets have been positive. So, BFUSD’s reward model should be no different.
It might be worth noting, however, that a standard 0.1% fee would apply to purchases and redemptions once the promotional period ends. Also, BFUSD is not a stablecoin and can not be withdrawn or traded in open markets. Therefore, it is strictly exclusive to Binance and redeemable only for USDT.
Lastly, access is limited to eligible Binance Futures users in supported regions, excluding the US.
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