FAQ

Balance Fluctuations & Understanding "Temporary Loss"

Why is my ybBTC balance value fluctuating?

Your ybBTC balance can show temporary fluctuations during periods of high volatility, affecting both staked and unstaked positions. This happens because YieldBasis maintains a 2× leverage position on your BTC, and when BTC price moves significantly, the protocol needs to rebalance.

What causes the fluctuation: During extreme volatility, the underlying Curve pool value changes rapidly. The pool needs to be rebalanced, arbitrageurs restore the system to its target 50% debt-to-value ratio. Until this rebalancing completes and the pool re-stabilizes, you may see temporary differences between your deposit value and your current balance value.

Key point: These fluctuations are typically temporary and resolve as trading fees accumulate and the pool stabilizes. High gas costs during volatility spikes can delay arbitrage.

In updated vaults (v2), these fluctuations are typically much smaller. The recovery mechanism ensures values return to their expected levels over time.

Is this the same as impermanent loss?

No. This is fundamentally different from impermanent loss:

Traditional impermanent loss:

• Happens in regular AMM pools when price moves away from your entry point
• Your position value grows as √p instead of linearly with p
• Permanent unless price returns exactly to entry

YieldBasis temporary fluctuations:

• Caused by volatility-driven rebalancing events
• Your position still tracks BTC 1:1 by design
• Recovers through accumulated trading fees
• The 2× leverage mechanism eliminates traditional impermanent loss

YieldBasis eliminates impermanent loss through its leverage design. What you're seeing is a temporary effect from rapid price movements that gets recovered through fee earnings.

What causes these temporary value differences?

The main causes are:

• High volatility events: Large, rapid BTC price movements (especially dumps with high volume)
• Rebalancing lag: During extreme volatility, gas prices spike and arbitrage becomes expensive, causing temporary delays
• Pool size: Smaller pools face larger percentage impacts during volatility
• Fee accumulation timing: Recovery happens through trading fees, which take time to accumulate

How long does recovery take?

Recovery time depends on pool volume and trading fee accumulation rate, value recovers through natural pool rebalancing as volatility subsides.

Important caveat:

• Recovery is not guaranteed to be linear, it depends on trading volume
• Further high-volume volatility can increase the recovery time
• If too few tokens are staked (below MIN_STAKED_FOR_FEES), the recovery mechanism operates differently. Normal admin fee distribution continues even during losses

Understanding Staked Vault (sybBTC) vs Yield Bearing Vault (ybBTC)

What's the difference between sybBTC and ybBTC?

These refer to the same underlying token (ybBTC) in different states:

ybBTC (Yield Bearing Vault):

• Your LP tokens when NOT staked
• Earn trading fees from the underlying BTC/crvUSD pool
• Fees automatically compound into token value

sybBTC (Staked Vault):

• Your ybBTC tokens when staked
• Forgo trading fees
• Receive YB token emissions instead

The "s" prefix indicates "staked"

How does the loss recovery mechanism work?

The recovery mechanism handles both staked and unstaked tokens differently based on what happened during the loss:

During a loss event BOTH staked and unstaked share the loss proportionally:

• The total value drops
• This loss is distributed across all token holders based on their share
• Both staked and unstaked ybBTC values decrease

Special rule for losses:

• Admin fees are PAUSED until staked tokens fully recover
• Staked tokens recover to their pre-loss value
• Only AFTER full recovery do admin fees resume
• Unstaked tokens continue earning their share, but with admin fees paused, they get a larger percentage during recovery

After staked recovery completes:

• Normal distribution resumes
• Admin fees start being collected again
• Unstaked continue earning their standard share

Fee Distribution

How do I actually receive trading fees?

Trading fees are automatically compounded into your ybBTC token value - you don't need to claim them manually.

How it works:

1. The underlying BTC/crvUSD pool generates trading fees
2. These fees are harvested by the protocol
3. 50% goes to rebalancing the pool
4. 50% is distributed based on the dynamic admin fee
5. Your share increases the value of each ybBTC token

When you withdraw:

• You burn your ybBTC tokens
• You receive BTC based on the current value per ybBTC
• This value includes all accumulated fees

Think of it like: 1 ybBTC today is worth more BTC than 1 ybBTC yesterday, because fees have compounded in.

Protocol Update: Legacy vs Updated Vaults

Why is there a protocol update?

The YieldBasis team identified an issue in the legacy vault (v1) implementation that causes excessive value fluctuations, particularly affecting staked vault depositors. An updated vault (v2) has been developed that significantly reduces these fluctuations.

The code is publicly available for both versions: (1) the legacy code in question (2) the updated version.

Impact on users:

• Staked vault depositors: Experience sudden losses that take extended time to recover through fee accumulation
• Unstaked holders: Receive sudden gains from these value shifts
• Consecutive volatility: In the legacy vault, staked positions can experience new losses before fully recovering from previous ones, potentially keeping them underwater indefinitely

What does the updated vault fix? The updated vault changes the value calculation to use price_scale instead of price_oracle, making it consistent with the AMM's pricing mechanism.

What stays the same:

• ~2% baseline volatility during extreme market movements will still exist (this is inherent to the 2× leverage mechanism)
• The 1:1 BTC tracking and impermanent loss elimination remain unchanged
• All core protocol mechanics (staking, fees, emissions) function identically

Do I Need to Migrate?

Yes, migration is highly recommended. The legacy staked vaults face:

• Risk of staying below full value with consecutive volatility events
• Unfair value transfers between staked and unstaked holders during volatile periods
• Extended recovery timeframes that may not complete before the next volatility event

For new depositors: All new deposits will be directed to the updated vaults.

How does migration work?

Migration process:

1. Audit completion: YieldBasis is awaiting the final security audit report on the updated vault contracts
2. Dedicated migration contract: A specialized "zap" contract will be deployed to handle migrations
3. One-click migration: Users will approve the migration contract and execute migration in one transaction
4. Position preservation: Your ybBTC position value transfers to the equivalent updated vault

Important considerations:

• Migration is voluntary - the protocol is immutable and legacy vaults will continue functioning
• YieldBasis cannot force migration (that's what makes it DeFi)
• However, legacy staked vault depositors are strongly encouraged to migrate due to the value recovery issues
• Your YB emission rates and any accumulated fees will be preserved during migration