Yield Basis Protocol: Founders, Key Metrics and Long‑Term Perspectives

Context and Introduction

Yield Basis Protocol is a new DeFi platform built to fix a problem that has dogged AMM liquidity providers from the start: impermanent loss on volatile assets, with a clear focus on Bitcoin. It uses a mathematically defined 2x leverage structure on top of Curve Finance and crvUSD to offer sustainable, BTC‑denominated yield without the structural underperformance common in traditional AMM LP positions.

The founder is Michael Egorov, creator of Curve Finance and a long‑time DeFi architect. Yield Basis extends his work in AMM design and vote‑escrow tokenomics into a new area: leveraged, impermanent‑loss‑neutral liquidity for volatile assets. The system combines a collateralized debt position, a rebalancing AMM layer, and a fee‑sharing governance token (YB) to align liquidity providers, arbitrageurs, and long‑term governors.

Market‑wise, Yield Basis sits where Bitcoin DeFi, institutional yield demand, and capital‑efficient liquidity design intersect. It targets a specific gap: non‑custodial, on‑chain Bitcoin yield that is economically sustainable, not reliant on high token inflation or opaque off‑chain lending. Backtests and early on‑chain data point to competitive yields, and the first fee distributions and token launch suggest strong initial traction.

This analysis walks through four areas: the founder and origin of the protocol; its technical and economic design; core metrics; and its positioning, risks, and long‑term scenarios. It does not make price calls or investment recommendations.

Founder Profile and Protocol Genesis

Michael Egorov: Technical Background and DeFi Track Record

Michael Egorov is one of DeFi’s most established builders, with roots in physics, cryptography, and large‑scale software.

He studied Applied Mathematics and Physics at the Moscow Institute of Physics and Technology, graduating with a “Red” diploma for top academic performance, and did honors research in ultracold atoms at the Lebedev Institute. He won a bronze medal at the 2003 International Physics Olympiad, an early sign of strong mathematical ability.

From 2011 to 2014, he worked as a postdoctoral researcher at Monash University on quantum systems, then moved into industry, including software engineering at LinkedIn. That mix of theory and production engineering later fed into his protocol design style.

In 2015, he co‑founded NuCypher as CTO. NuCypher, a Y Combinator‑backed project, built cryptographic infrastructure for decentralized applications, focusing on proxy re‑encryption and privacy‑preserving access control. It pushed Egorov into secure smart contracts, governance, and token economics.

He entered crypto in late 2013, accumulating Bitcoin while still in physics. Over the next several years he developed a view of how crypto markets and protocols should function. By 2019 he saw a clear gap: AMMs were not tuned for low‑slippage trading of stablecoins and pegged assets. That observation led to Curve Finance, launched in early 2020.

Curve’s AMM design, optimized for assets with expected price convergence, plus its vote‑escrow (veToken) governance model, became core DeFi primitives. Curve’s TVL reached tens of billions of dollars at cycle peaks, and veCRV inspired a broad family of veToken systems. This record established Egorov as a builder able to translate mathematically involved designs into live systems at scale.

By 2024–2025, as Bitcoin’s role in DeFi expanded and institutional demand for on‑chain yield grew, Egorov turned to a new structural issue: the lack of sustainable on‑chain yield for volatile assets like Bitcoin. Stablecoin and staking yields were plentiful; Bitcoin yields were sparse, often 1–2 percent and compromised either by impermanent loss on AMMs or custody risk in centralized lending. Yield Basis is a direct response.

Motivation: Impermanent Loss and Bitcoin Liquidity

Impermanent loss is not a minor annoyance; it is built into constant‑product and related AMM designs.

In a standard two‑asset pool, an LP deposits equal value of each asset-for example, 1 BTC and the same USD value in stablecoins. As prices move, the pool adjusts asset balances along its pricing curve. In constant‑product AMMs, the LP’s combined position tracks roughly the geometric mean of the asset prices.

When Bitcoin rallies, the AMM automatically sells BTC for stablecoins to keep the pool balanced. The LP ends up with fewer BTC than if they had simply held. When Bitcoin falls, the LP collects more BTC but loses USD value. In both cases, the LP underperforms a basic buy‑and‑hold mix of the two assets. That underperformance is impermanent loss.

For Bitcoin this is particularly unattractive. Many holders think long term and dislike structures that systematically sell their BTC into stablecoins during rallies. To make LPing worthwhile, trading fees must consistently exceed expected impermanent loss, which is hard to achieve in volatile markets. On‑chain BTC liquidity has been correspondingly hard to attract, and much of the volume stays on centralized exchanges.

Egorov’s core idea, laid out in technical discussions and design notes, is that the square‑root‑like payoff of AMM LP positions can be reshaped into linear exposure by adding controlled leverage and continuous rebalancing. Instead of accepting the geometric‑mean payoff, one can build a leveraged liquidity position that tracks the underlying asset more directly while still earning fees. Yield Basis is that idea turned into a live protocol.

Core Architecture and Economic Design

2x Leverage Structure and Rebalancing AMM

Yield Basis centers on a 2x leverage mechanism built on Curve and crvUSD.

At a high level:

1. A user deposits BTC into a Yield Basis pool.
2. The protocol borrows an equal USD value of crvUSD from a dedicated collateralized debt position.
3. The user’s BTC and the borrowed crvUSD are paired 50/50 into a Curve BTC/crvUSD pool.
4. The resulting Curve LP tokens back the crvUSD debt. The protocol wraps this into a tokenized position (for example, ybBTC), which the user receives.

Because the LP position is worth roughly twice the initial BTC contribution, the user now has 2x notional exposure packaged into a single token representing the leveraged LP.

The key is keeping leverage around 2x. As BTC moves, LP value changes while the crvUSD debt remains nominally fixed. When BTC rises, collateral grows and effective leverage drops below 2x; when BTC falls, leverage rises above 2x. Yield Basis keeps leverage near 2x via continuous rebalancing.

Instead of centralized keepers, Yield Basis uses a Rebalancing‑AMM. When leverage drifts, the protocol creates arbitrage incentives.

• If BTC rises and leverage is below target, the protocol offers additional LP exposure at prices that make it profitable for arbitrageurs to buy. Arbitrage trades trigger a flow where the protocol flash‑borrows crvUSD, mints LP tokens, restores 2x leverage, repays the flash loan, and leaves a spread for the arbitrageur.
• If BTC falls and leverage is above target, the protocol bids for LP exposure at favorable terms. Arbitrageurs sell LP tokens in, the protocol unwinds part of the position, repays some crvUSD debt, and brings leverage back toward 2x-again leaving a profit margin for the trader.

The system needs rebalancing exactly when those trades are profitable, so external arbitrageurs naturally maintain the leverage. As long as markets are liquid enough and arbitrageurs are active, the protocol can hold leverage close to target without centralized intervention.

The user’s resulting BTC exposure is effectively linear, rather than following the square‑root payoff of a standard LP. That largely removes the classic impermanent loss profile.

Capital Efficiency and Yield Generation

Under this setup, a BTC holder can keep full BTC price exposure while earning trading fees from the underlying Curve pool.

If a user deposits 1 BTC and BTC rises 10 percent during the holding period, the position is designed to capture that full 10 percent gain in BTC terms instead of lagging due to impermanent loss. On top of that, the position collects fees from BTC/crvUSD swaps.

In a normal LP, a 10 percent BTC rally typically produces less total return than a simple hold, because the AMM has been gradually “selling the winner.” By contrast, Yield Basis’ 2x structure plus ongoing rebalancing is built to neutralize that effect.

Capital efficiency is higher because the borrowed crvUSD is fully deployed into the pool; no side of the trade sits idle. Debt management and collateral safety rely on Curve’s crvUSD infrastructure and Yield Basis’ own parameters, tying the protocol tightly into Curve’s stablecoin system. Yield Basis is thus a specialized leveraged layer on top of existing Curve pools, not a standalone AMM.

Fee Flows, veYB, and Token Emission Choices

Yield Basis splits rewards along two tracks and shares fees with governance token holders.

Liquidity providers can choose:

• direct trading fees from the underlying Curve pool, or
• YB token emissions instead of fees, effectively swapping cash flow for token exposure.

Each YB token distributed has an opportunity cost: it stands in for fees that could have gone directly to LPs. In Egorov’s framing, this links token emissions to real usage and helps avoid pure “empty” inflation.

On top of this, Yield Basis charges an admin fee on trading activity and directs that revenue to veYB holders. The vote‑escrow model, inherited from Curve, requires YB holders to lock tokens for fixed periods in exchange for veYB. veYB confers governance power and a share of protocol fees, with longer locks earning more veYB per YB.

In December 2025, Yield Basis turned on its fee switch and started distributing fees to veYB every four weeks. The first payout was 17.55 BTC, worth about $1.62 million at the time, to roughly 31 million veYB. That implies a high annualized return in BTC terms for veYB holders, estimated in the high‑teens to low‑twenties percent range based on then‑current BTC prices and volumes. Relative to many DeFi tokens, this makes Yield Basis unusually revenue‑dense per unit of governance token.

This setup creates a feedback loop:

• More BTC liquidity and trading volume → higher protocol revenue → higher veYB yields.
• Higher veYB yields → more YB locked → lower circulating supply and more concentrated, committed governance.
• Governance can then steer emissions, pool parameters, and incentives to reinforce growth.

Tokenomics and Key Metrics

Supply, Allocation, and Valuation

YB has a fixed supply of 1 billion tokens. At a presale price of $0.20, the launch implied a $200 million fully diluted valuation (FDV).

Allocation:

• 30% – Liquidity mining, distributed over time to LPs who opt into YB emissions.
• 25% – Core team, with a six‑month cliff and 24‑month linear vesting.
• 15% – Ecosystem reserve for grants, partnerships, and strategic growth.
• ~12% – Early venture/strategic investors, with vesting.
• 10% – Strategic investors.
• 8% – Advisors.

The protocol raised $5 million in early 2025 at a $50 million FDV, so the presale and public launch marked a valuation step‑up. The public sale offered 25 million YB (2.5 percent of supply) at $0.20 and was reportedly 97x oversubscribed, with $195 million in bids, signaling strong speculative and strategic interest at launch.

Market Performance and Liquidity

After the token generation event and listings, YB traded in a broad band. On major centralized exchanges like Binance, it reportedly opened around $0.74–$0.94, later consolidating near $0.50–$0.58. Early on, YB thus traded above presale levels but with notable volatility.

By late December 2025, market capitalization sat around $43–$50 million, with daily trading volume above $200 million. That combination-modest market cap and high volume-implies high turnover and active speculative flow, with the usual trade‑off: strong liquidity, elevated volatility.

Initial Yield Basis pools were capped at $1 million each for a total initial TVL of $3 million, later expanded to $10 million per pool as the system matured and risk tolerance rose. These caps reflect a cautious rollout given the leveraged and rebalancing mechanics.

Backtests indicate an average “fundamental APR” around 14.87 percent, with some analyses suggesting 20–60 percent yields under favorable conditions. Reported annual TVL turnover of ~23.57x means yearly trading volume is more than twenty times the average assets locked-good for fee generation and capital efficiency, but sensitive to shifts in volatility and activity.

On‑Chain Revenue and veYB Yields

The first 17.55 BTC fee distribution to veYB is the clearest early datapoint on revenue and governance token yield. At roughly $1.62 million over four weeks to about 31 million veYB, the payout represents a substantial per‑token revenue share.

Annualized yields in the 19–23 percent range for veYB have been cited based on this period. Unlike many governance tokens that share little direct cash flow, veYB receives BTC‑denominated revenue, tying returns to external fees rather than internal inflation.

The sustainability of this depends on the triangle of TVL, volume, and fees. With ~23.57x annual TVL turnover, even moderate TVL can produce strong fee flows if trading remains active. But a drop in BTC volatility or volume would quickly compress fee revenue and veYB yields.

Strategic Positioning and Use Cases

Target Users and Value Proposition

Yield Basis targets three overlapping groups:

1. Long‑term BTC holders who avoid traditional AMM LPing because of impermanent loss but still want yield without centralized custody. For them, near‑linear BTC exposure plus fee income is appealing if the leverage and rebalancing logic hold up.
2. Professional traders and DeFi power users looking for leveraged BTC exposure with yield. The 2x leveraged structure and tokenized positions such as ybBTC enable basis trades, hedged positions, and cross‑protocol arbitrage.
3. Institutional players-funds, treasuries, crypto‑native lenders-who need transparent, on‑chain structures with explicit risk parameters. Integration with Curve, use of crvUSD, and clear leverage and rebalancing rules can be easier to analyze than opaque off‑chain lending.

Across these segments, the pitch is consistent: earn BTC‑denominated yield without the structural drag of impermanent loss, through a non‑custodial protocol that shares real revenue with token‑locking governors.

Integration with Curve and crvUSD

Yield Basis is not a general‑purpose AMM. It’s a specialized layer built on Curve, especially around crvUSD and BTC/crvUSD pools.

This gives several advantages:

• Native USD liquidity: crvUSD offers a protocol‑aligned borrowing asset. Yield Basis uses a crvUSD credit line to build its leveraged positions, while Curve benefits from extra demand and volume in its stablecoin system.
• Proven AMM design: Curve’s model fits BTC/crvUSD well, with low slippage and efficient pricing. Yield Basis focuses on the leveraged overlay instead of reinventing the underlying AMM.
• Governance synergies: Curve and Yield Basis governance can coordinate on emissions, pool weights, and incentives. veCRV decisions can affect BTC/crvUSD pools, while veYB can steer Yield Basis’ own incentives in sync.

The flip side is concentration risk. Problems in crvUSD or Curve governance could spill into Yield Basis. Still, strategically, anchoring in a major liquidity hub gives more immediate depth and network effects than launching as an isolated protocol.

Competitive Landscape and Alternatives

Conceptual Competitors

Yield Basis overlaps with several existing DeFi categories, even if its mechanics differ.

• Conventional AMMs (e.g., Uniswap, generic Curve pools): They offer BTC liquidity with standard impermanent loss. Their main strengths are simplicity and ubiquity; users must weigh these against Yield Basis’ attempt to remove structural underperformance.
• Lending and borrowing markets: BTC yields via overcollateralized loans or rehypothecation compete for the same capital. Returns come from borrowers paying interest. The risk shifts from AMM impermanent loss to credit and counterparty risk.
• Options and structured products: Covered call/put vaults and structured notes generate yield by selling volatility on BTC. Payoffs can be complex and path‑dependent. Yield Basis, by contrast, earns fees and uses leverage dynamics, not option premia.
• Other IL‑mitigation or concentrated‑liquidity designs: Uniswap v3‑style ranges and explicit IL protection schemes improve LP outcomes but leave the core exposure profile intact. Yield Basis goes further by reshaping payoffs through leverage and rebalancing.

Comparative Positioning

Conceptually, the landscape looks like this:

Yield Basis’ advantage is the mix of non‑custodial design, near‑linear BTC exposure, and fee‑based yield. Its trade‑offs are complexity, use of leverage, and dependence on rebalancing mechanics and upstream protocols.

Risk Analysis and Negative Scenarios

Yield Basis concentrates several types of risk: technical, economic, and governance‑related.

Smart Contract and Mechanism Design Risk

The protocol spans multiple contract systems: crvUSD‑backed debt, Curve LP positions, the Rebalancing‑AMM, and veYB governance. Each adds potential bug surface.

Audits reduce but don’t remove risk, especially where flash loans, arbitrage, and cross‑protocol interactions are involved. Mis‑specified incentives, edge‑case failures, or integration errors could cause failed rebalancing, unexpected liquidations, or exploitable situations.

Because Yield Basis is layered on Curve and crvUSD, it also inherits their contract risks. A flaw in Curve pools or crvUSD could damage collateral values or destabilize the leveraged structure.

Leverage and Liquidation Risk

The 2x leverage is central to the design and a key risk.

In a sharp BTC crash, LP collateral value can drop faster than the system can rebalance or adjust debt. If collateralization ratios slip below safe thresholds before corrective actions complete, users can face forced unwinds or partial loss of principal.

Safety depends on parameters: allowed leverage ranges, rebalancing speed, slippage assumptions, and liquidation rules. If these are tuned for gentler markets than reality delivers, the system can prove fragile. During liquidity crunches in BTC/crvUSD, large rebalancing trades might face prohibitive slippage or fail outright.

Neutralizing impermanent loss does not remove market risk. Leverage still amplifies moves, and system‑wide shocks can stress even robust mechanisms.

Dependency on crvUSD and Curve

Yield Basis leans heavily on crvUSD for borrowing and Curve’s BTC/crvUSD pools for core liquidity.

If crvUSD loses its peg, faces liquidity stress, or runs into governance conflict, the value and safety of leveraged positions can be hit. A depegged or illiquid crvUSD directly undermines the protocol’s debt side.

Changes in Curve-governance, fee schedules, pool incentives-also flow through. Lower incentives or competing pools could drain liquidity from BTC/crvUSD, compressing volume and fee income for Yield Basis and making rebalancing harder.

The same deep integration that brings liquidity and infrastructure also creates upstream dependency risk.

Governance Concentration and Founder Risk

veYB encourages long‑term locking. Over time, power can concentrate in a small set of large holders, including the team and early investors. Given Egorov’s central role in Curve and Yield Basis, concerns can arise around governance centralization or founder dominance.

Concentrated governance can move quickly early on, but it can also tilt decisions-on emissions, fee parameters, treasury use-toward insiders.

Founder reputation also matters. Egorov’s actions and controversies, whether protocol‑related or external, can influence market confidence in Yield Basis, affecting token prices and user willingness to lock capital.

Market, Liquidity, and Adoption Risk

Yield Basis depends on active trading and arbitrage. Prolonged periods of low BTC volatility or migration of flow to other venues would cut fee income. Lower fees reduce LP and veYB yields, weakening the value proposition.

Thin liquidity is another issue. If TVL stays low or fragmented, rebalancing trades may face high slippage, degrading leverage control. In extreme cases, poor liquidity can block effective rebalancing and expose users to unintended risk levels.

Adoption also hinges on user understanding. The mechanism is more complex than a simple AMM or lending market. That complexity can slow uptake among less technical users and institutions unless supported by strong education, analytics, and integrations.

Scenario Analysis: Bull, Base, and Bear Paths

Given these dependencies and risks, several broad paths are plausible.

Bull Scenario: Core BTC DeFi Primitive

In the bullish case:

• Bitcoin’s role in DeFi grows strongly, with more on‑chain liquidity and institutional usage. Demand for non‑custodial BTC yield rises, and Yield Basis becomes a default option thanks to its impermanent‑loss‑neutral construction.
• The 2x leverage and rebalancing system performs well across multiple cycles, including crashes and volatility spikes. No major contract incidents occur; audits plus production history build trust.
• Curve and crvUSD remain healthy and expand. Governance coordination optimizes incentives for BTC/crvUSD pools and related products.

TVL scales significantly, TVL turnover stays high, and fee revenue grows with volume. veYB yields remain attractive and largely fee‑driven. The model extends from BTC to a broader set of volatile assets: ETH, major altcoins, and possibly cross‑chain or L2 deployments.

In this world, YB is a valuable governance and fee‑sharing asset, and Yield Basis sits among the core primitives of Bitcoin‑centric DeFi.

Base Scenario: Niche but Durable Protocol

In a more neutral case:

• Bitcoin DeFi grows, but competition is intense. Yield Basis secures a solid but not dominant share of BTC liquidity.
• The mechanism works as intended overall, with occasional stress events that are handled without catastrophic loss.
• TVL rises to levels that support ongoing fee income. As more capital arrives, veYB yields normalize, drifting toward mid‑teens or single digits depending on markets.

Support might expand to a small set of additional assets, but BTC remains the focus. Integrations with aggregators, vaults, and structured products bring in flows, yet Yield Basis is one of several viable BTC yield options, not the exclusive standard.

Here, YB holds value as a governance and fee‑sharing token, but reflects a specialized, mid‑tier DeFi protocol rather than a dominant blue chip.

Bear Scenario: Mechanism Stress, Low Adoption, or Ecosystem Shocks

In the bearish case, one or more negative drivers take over:

• A violent BTC crash plus BTC/crvUSD liquidity drying up could overwhelm the leverage and rebalancing system. Failed rebalancing or under‑collateralization leads to losses beyond user expectations, eroding trust.
• A smart contract exploit in Yield Basis, Curve, or crvUSD causes loss of funds or forced shutdowns. Even limited losses can have lasting reputational damage given the protocol’s complexity and leverage.
• Competing products-simpler AMMs, L2‑native protocols, or institutional custodial solutions with clearer risk-win the bulk of BTC yield demand. TVL and volume remain low, fee income is weak, and veYB yields fall below levels that justify locking.

In that environment, YB value erodes, governance activity thins out, and the protocol risks slipping into maintenance mode or being forked and redesigned under a different banner.

Key Metrics and Scenario Comparison

Qualitatively, key metrics might evolve as follows under the three scenarios:

Long‑Term Perspectives

Yield Basis sits at the junction of several long‑running DeFi trends: the move toward sustainable yield, the shift of institutional finance on‑chain, and the evolution of AMMs beyond simple constant‑product curves. Its 2x leveraged, continuously rebalanced design is a direct attempt to solve impermanent loss for volatile assets with a mathematically clean structure.

The protocol benefits from clear strengths:

• A founder with a strong record shipping and scaling complex DeFi systems.
• Deep integration with Curve, one of DeFi’s primary liquidity hubs.
• Use of crvUSD as a native borrowing asset.
• Early signs of market interest, including oversubscribed token sales, high volume relative to market cap, and notable BTC fee distributions to veYB.

It also carries real risks:

• Mechanism complexity and leverage introduce new failure modes compared with simple AMMs or lending markets.
• Dependence on crvUSD and Curve exposes it to upstream contract and governance risk.
• Governance may concentrate around a small group, with founder perception shaping institutional comfort.
• Success ultimately hinges on attracting and retaining sizable BTC liquidity in a crowded, fast‑moving DeFi landscape.

If the design holds up through multiple market cycles and BTC‑centric DeFi continues to grow, Yield Basis could become a central primitive for on‑chain Bitcoin yield and influence how future AMMs handle volatile assets. If mechanism flaws, ecosystem shocks, or better alternatives win out, it may remain a niche or transitional step in DeFi’s broader evolution.

Today, Yield Basis represents a sophisticated, high‑conviction bet on the future of on‑chain Bitcoin liquidity and on the idea that carefully engineered leverage can turn a long‑standing AMM weakness into a new category of yield‑bearing infrastructure. Its progress will be watched closely as a test of whether this style of design can deliver both theoretical elegance and practical resilience at scale.