DeFi OG’s new project review: Curve founder builds BTC pool, Andre Cronje wants to build a universal exchange

Two new projects by DeFi veterans are dedicated to solving on-chain liquidity problems and bringing innovative trading and investment mechanisms. This article originates from an article written by Ash, which was organized, compiled and written by DeepChao TechFlow.
(Previous summary: Four Cents of Ambition: How DeFi is disrupting the stablecoin market through vertical integration)
(Background supplement: Vitalik’s new article: Low-risk DeFi is to Ethereum as search is to Google)

Table of contents

Curve Finance founder @newmichwill is launching @yieldbasis, a Bitcoin AMM without impermanent losses Liquidity platform (Deep Wave Note: IL, impermanent loss, refers to the loss you may suffer when you provide funds to AMM as a liquidity provider compared to simply holding these tokens);

At the same time, the founder of @yearnfi and the god of DeFi @AndreCronjeTech is building @flyingtulip_, a unified AMM+CLOB (Deep Wave Note: Automatic Market Maker + Central Limit Order Book, AMM Providing continuous liquidity and automated pricing, CLOB provides more precise price discovery and order execution) exchange).

Two different attempts to solve the same problem - how to make on-chain liquidity really work:

• Yield Basis ($YB): A Curve-native AMM that eliminates impermanent losses from BTC liquidity providers by holding a constant 2x leveraged BTC-crvUSD liquidity pool (the value of LP remains 1:1 with BTC while earning transaction fees). Users can mint ybBTC (yield-based BTC).
• Flying Tulip ($FT): A unified exchange on the chain (including spot, lending, perpetual contracts, options and structured income), based on a volatility-aware hybrid AMM+CLOB architecture, combined with a slippage-aware lending mechanism, and ftUSD (a delta-neutral dollar equivalent) as the core of the incentive.

Yield Basis

• Traditional AMMs allow BTC liquidity providers to sell when the price rises, or buy when the price falls (√p exposure, deep tide note: market risk exposure measured in units of the square root of the price), resulting in impermanent losses that typically exceed the fees earned for providing liquidity.
• The specific mechanism of Yield Basis will be introduced in detail later, but the core is: users deposit BTC into the platform, and the protocol borrows an equal amount of crvUSD, forming a 50/50 BTC-crvUSD Curve liquidity pool and operating with 2x compound leverage.
• A re-leveraged AMM and virtual pool will keep debt equal to approximately 50% of the liquidity pool value; arbitrageurs profit by keeping leverage constant.
• This allows the value of the liquidity pool to scale linearly with BTC while earning transaction fees.
• Liquidity providers hold ybBTC, a yield-based BTC receipt token that automatically compounds transaction fees denominated in BTC.
• The platform also provides governance token $YB, which can be locked into veYB and used for voting (such as selecting liquidity pool reward distribution).
• Yield Basis is primarily intended for BTC holders who want to release productive BTC and earn fees in a protocol that solves the problem of impermanent loss.

Flying Tulip

• The user experience and risk settings of traditional decentralized exchanges (DEX) are often static. Flying Tulip aims to bring centralized exchange (CEX)-level instruments onto the chain by adjusting the AMM curve based on volatility and adjusting the loan-to-value ratio (LTV) of lending based on actual execution/slippage.
• Its AMM adjusts the curvature based on measured volatility (EWMA) - that is, it tends to be flat (close to constant sum) in the case of small fluctuations to compress slippage and impermanent losses; it is more multiplicative in the case of large fluctuations to avoid liquidity depletion.
• ftUSD tokenized delta neutral liquidity pool positions are generated and used for incentive mechanisms and liquidity plans.
• Platform token $FT may be used for revenue buyback, incentive and liquidity programs.
• Flying Tulip is a DeFi super app: an exchange that supports spot, lending, perpetual contracts and options simultaneously.
• Execution quality relies on accurate volatility/impact signals and robust risk controls in stressful environments.

Outlook of the two projects

Yield Basis hopes to become a platform for BTC liquidity; while Flying Tulip is committed to becoming a platform for native transactions on all chains. In the current era when perpetual contract decentralized exchanges (Perp DEX) are becoming mainstream, the launch of Flying Tulip seems to come at the right time. Frankly speaking, if it can bring the best execution effect, Flying Tulip can even divert future BTC traffic to a fund pool like YB. If Yield Basis is successfully implemented, ybBTC could become Bitcoin’s “stETH” primitive: BTC exposure + liquidity provider (LP) transaction fees, and no impermanent losses. Flying Tulip has the potential to launch its integrated stack, giving users access to centralized exchange (CEX)-level tools; try “one-stop trading, covering all DeFi.” While cautiously optimistic about these two projects, it cannot be ignored that the projects of these veteran founders and top teams are still untested, and the founders have to juggle the development of other protocols such as Curve and Sonic.

The above picture is compiled by Shenzhen TechFlow as follows: