Sustainable Bitcoin Yield

The VMM allows liquidity providers to lock stablecoins, such as USDT and USDC, as well as Volatile Asset Collateral (VAC) like WBTC and WETH. Unlike other protocols, VAC is not swapped to stablecoins or a constant vault equity. Instead, as the value of the underlying assets change, the proportion of the vault owned changes as well.

For example, a user deposits 1 Bitcoin when $BTC = $100,000, so they have $100,000 equity. The total vault equity is $500,000, so the user has a 20% share. If $BTC increases to $110,000, then equity updates proportionally to $110,000 and their share increases to 21.56%. Therefore, changes in VAC function similarly to deposits and withdrawals.

This fulfils the role of a lending protocol, natively integrated into the VMM. Unlike manual lending protocol and vault strategies, VAC has:

• no liquidations

• no manual rebalancing

• capital efficiency with collateral priced exactly at mark

Profit and Loss

Positive yield on VAC is denominated in USDT. Realized losses on VAC will be deducted according to the mark price at withdrawal. Unrealized losses will not swap out VAC for stablecoins.