Will Yield Basis completely solve Impermanent Loss? The DeFi revolution by the founder of Curve.

The DeFi world has long been plagued by Impermanent Loss, with countless Liquidity Providers suffering losses due to price Fluctuations. As the founder of Curve Finance, Michael Egorov returns to the battlefield with his new project Yield Basis, aiming to fundamentally change this situation. The protocol secured $5 million in funding in early 2025, with a valuation of up to $50 million, and oversubscribed 15 times in a short period, demonstrating the market's high expectations for its solutions.

Yield Basis adopts an innovative 2x leverage AMM model, redesigning the automated market maker mechanism to allow Liquidity Providers to earn trading fees while avoiding the worries of Impermanent Loss.

With the Curve DAO passing the Yield Basis proposal on September 17 and the upcoming token generation event (TGE) on October 1, can this protocol truly fulfill its promises and become the next rising star in the Decentralized Finance space?

01 Project Origin: Stablecoin Protocol with Market Maker Background

Yield Basis, created by Curve Finance founder Michael Egorov, is one of the most anticipated projects in the DeFi space for 2025.

The project successfully raised $5 million in early 2025, with a valuation reaching $50 million, strong investor demand, and oversubscription exceeding 15 times.

Egorov, as a seasoned entrepreneur in the DeFi field, has been deeply involved in the development and operation of Curve Finance. He has accumulated rich experience in the DeFi sector but has also faced liquidation crises multiple times due to high-leverage CRV positions.

Unlike many projects that only attract attention through concepts, Yield Basis has received formal approval and support from Curve DAO and plans to launch the protocol by selling $60 million worth of crvUSD stablecoins.

On September 22, mainstream CEX announced the launch of Yield Basis on its new platform, further expanding the project's market influence.

02 Core Mechanism: Dual Token System and Leverage AMM Model

The core innovation of Yield Basis lies in its redesigned automated market maker (AMM) model, which aims to eliminate Impermanent Loss, a long-standing pain point in the DeFi space.

Leverage AMM Model

The protocol adopts a 2x leverage liquidity strategy, expanding the liquidity position by borrowing Curve's crvUSD stablecoin.

When a user deposits wBTC worth 100 dollars, the protocol uses that wBTC as collateral to borrow crvUSD worth 100 dollars, and then deposits a total asset value of 200 dollars into Curve's wBTC/crvUSD Liquidity Pool.

This mechanism fundamentally eliminates Impermanent Loss by changing the relationship between the value of the Liquidity Provider's position and the price of the underlying asset from √P to P through mathematical principles.

Dual Token System

Yield Basis adopts a dual-token design:

• ybBTC/ybETH: Represents the derivative tokens of users' leveraged liquidity positions.
• YB: The governance token of the protocol, using a ve-tokenomics model similar to Curve.

Users can obtain ybBTC or ybETH by depositing BTC or ETH, and these tokens automatically accumulate transaction fees, which can be further staked for additional rewards.

03 Token Economics: YB Token Model and Distribution Mechanism

The tokenomics design of Yield Basis is meticulous, integrating Curve's veTokenomics experience and making targeted optimizations.

Token Allocation

The total supply of YB tokens is 1 billion, with an initial circulating supply of 87.9 million (accounting for 8.79% of the total).

The token distribution plan is as follows:

• 30% for community incentives, distributed through Liquidity Mining.
• 25% allocated to the team
• 15% as development reserve
• 10% for Curve technology licensing
• 10% for collaboration program
• 5% as ecological reserve
• 2.5% for presale
• 1.3% for Liquidity Provision

The team's and investors' tokens have a 6-month lock-up period, followed by linear unlocking over two years.

Governance Mechanism

YB adopts a voting custody model (veYB), and token holders must lock their YB to participate in governance and earn protocol fees.

veYB holders can earn up to 2.5 times the yield enhancement and protocol revenue sharing, which encourages long-term participation and reduces market selling pressure.

04 Market Performance: Overview of Financing and Revenue Data

Yield Basis has shown impressive data performance during the testing phase, particularly its historical backtest returns have attracted the attention of many investors.

According to the project's backtesting data:

• From January 2019 to November 2024, the average APR is approximately 20.5%
• Average APR of about 9% from January 2023 to November 2024
• During the 2021 bull market, the APR reached a maximum of 60%

These yield performances rely on Curve's CryptoSwap AMM technology, focusing on low volatility mainstream assets such as BTC and ETH.

In terms of financing, the project raised $5 million through the sale of YB tokens at the beginning of 2025, selling 10% of the total supply of tokens, with a valuation of $50 million.

The protocol is the first project launched on the Legion and CEX joint launch platform, where the community can participate in its token sale.

05 Competitive Advantage: Addressing Core Pain Points of DeFi

Yield Basis has several differentiated advantages in the competitive field of Decentralized Finance, giving it the potential for long-term development.

Impermanent Loss Solution

The core advantage of the protocol lies in its innovative Impermanent Loss elimination mechanism.

Through 2x leverage and dynamic rebalancing, Yield Basis allows Liquidity Providers to earn trading fees without bearing the risk of Impermanent Loss, addressing a long-standing pain point in the DeFi space.

Market Maker Background and Experience

Egorov, as the founder of Curve Finance, has extensive experience in AMM algorithm design, having successively launched the stableswap and cryptoswap algorithms.

The project inherits the resilience of Curve's five years of infrastructure and has innovatively optimized it based on that.

Diversified Income Sources

Unlike many DeFi protocols that rely on a single yield strategy, Yield Basis diversifies its sources of yield, including funding rate arbitrage, cross-exchange spread arbitrage, and other strategies that market makers excel at.

This diversified yield basis allows it to potentially maintain stable returns under different market conditions.

06 Risks and Challenges: Complex Mechanisms and Market Uncertainty

Despite the innovative solutions proposed by Yield Basis, investors still need to be vigilant about the associated risks and challenges.

Technical Complexity Risk

The dynamic rebalancing mechanism of the protocol requires continuous monitoring of market prices and adjustment of positions, which increases the complexity of the system and potential operational risks.

Under extreme market conditions, the rebalancing mechanism may not work as expected, resulting in positions deviating from the intended leverage ratio.

Market and Regulatory Risks

The YB token is 100% unlocked at TGE, which minimizes the cliff effect but increases the risk of short-term price fluctuations.

Like most crypto projects, Yield Basis faces a complex regulatory environment, where different jurisdictions may have varying classifications and regulatory requirements for its tokens.

relies on the Curve ecosystem

Yield Basis is highly dependent on the Curve ecosystem, particularly its crvUSD stablecoin and Llama Lend lending protocol.

If there are issues in the Curve ecosystem, it may trigger a chain reaction on Yield Basis.

07 Future Outlook: Expanding from Bitcoin to Multi-Asset

The future development roadmap of Yield Basis demonstrates its ambition to expand its application scope and influence.

Although the protocol initially focused on Bitcoin, Egorov stated that its impermanent loss solution could potentially extend to Ethereum, tokenized commodities, and even stocks, potentially expanding the range of on-chain yield assets.

The protocol plans to gradually increase the deposit limits after launch. In the initial phase, each of the three funding pools has a deposit limit of $1 million to control system risks and allow for gradual expansion.

In the long run, Yield Basis aims to transform idle crypto assets into productive assets by creating the "Bitcoin Black Hole" vision, significantly enhancing the on-chain BTC liquidity depth.

Conclusion

As the token generation event on October 1 approaches, Yield Basis is sparking widespread discussion in the DeFi community. Its innovative leveraged AMM model and Impermanent Loss solution are indeed bringing new technical ideas to the DeFi space.

However, the success of the project depends not only on technical feasibility but also on long-term validation from the market. The stability of the dynamic rebalancing mechanism under extreme market conditions, the potential risks highly reliant on the Curve ecosystem, and the selling pressure brought by the 100% unlocking of tokens are all factors that investors need to evaluate cautiously.

For the DeFi sector, Yield Basis represents a new attempt to address the core pain point of Impermanent Loss. Regardless of whether it ultimately fulfills its promises, this innovation is driving DeFi technology forward.