Skip to main content

Staked and unstaked economics

Staking gives up fee growth for YB emissions and adds watermark risk: after losses, your staked shares can redeem for less than your deposit until later gains close the gap to the watermark. Stake only when the emissions you expect exceed the Fundamental yield you give up.

The two positions​

Unstaked yb-LP stays in your wallet. Staked yb-LP sits in the gauge, the market's staking contract. In the following table, Fundamental Value is the value of one share on the vault's books. The table compares how the two positions earn and what risks they carry:

Unstaked yb-LPStaked yb-LP
How you earnFundamental yield (shown as FT APY in the app): Fundamental Value growth from trading feesEmissions APR (shown as Token APR in the app): YB emissions, pro rata within the gauge
When earnings accrueContinuouslyContinuously. You can claim the emissions at any time.
Claim on Fundamental Value growthYesNo, except during watermark recovery
Absorbs pro-rata lossesYesYes
Has a watermark, and can sit below itNoYes
TransferableYes (ERC-20)Yes (gauge shares are ERC-20)

Never add the two rates for one staked position.

The following diagram shows how trading fees and YB emissions reach each position:

Two streams. Trading fees, after the admin fee, become Fundamental Value growth for unstaked yb-LP in your wallet. YB emissions flow from the emission reserve through the GaugeController, weighted by veYB votes, and the gauge pays them to staked yb-LP. Admin fees go to the FeeSplitter, which pays the net-pressure reserve and veYB holders.Two streams. Trading fees, after the admin fee, become Fundamental Value growth for unstaked yb-LP in your wallet. YB emissions flow from the emission reserve through the GaugeController, weighted by veYB votes, and the gauge pays them to staked yb-LP. Admin fees go to the FeeSplitter, which pays the net-pressure reserve and veYB holders.

Fees reach unstaked yb-LP as Fundamental Value growth. Emissions reach only staked yb-LP. Staked yb-LP shares in fee growth only during watermark recovery, and only up to the gap.

Where the value goes​

LT (the market's vault contract) splits each fee increment between unstaked holders and veYB along a square-root admin-fee curve in the staking ratio. The curve sets the admin fee. LT sends admin fees to the FeeSplitter, which pays a DAO-set share to the net-pressure reserve and the rest to veYB holders. veYB is vote-escrowed YB, which you get when you lock YB. The staking ratio is the share of the market's yb-LP that is staked in the gauge.

The more LPs stake, the larger the admin-fee share. Unstaked holders keep less, but there are fewer of them, so the return per unstaked share can rise. As the staking ratio approaches 100%, the admin fee approaches 100% and that return rises sharply. This asymmetry is intentional: it pulls LPs back toward unstaked. For the admin-fee formula, the onchain cap on the per-step rebase, and the split at each staking ratio, read Fees and veYB revenue.

The watermark, in brief​

Only staked positions have a watermark, the level that their value must regain after losses. Until later gains close the gap to the watermark, your staked shares can redeem for less than you deposited. This holds even with no Temporary Redemption Discount (TRD), the gap between what a withdrawal returns and Fundamental Value. For how the gap opens and closes, read Watermark and recovery.

When to stake​

Stake when these conditions hold:

  • You expect the YB price and your gauge's vote weight to pay for the Fundamental yield you give up and for watermark risk.
  • You intend to hold for a long time, and you can wait through a drawdown.
  • You want veYB voting power through YB accumulation and a lock.

When not to stake​

Stay unstaked when any of these holds:

  • You want no exposure to YB emissions or to YB tokenomics, as in a passive hold.
  • You must rebalance or exit at short notice.

Breakeven​

The following example uses illustrative rates and assumes no watermark shortfall. It takes the 1 cbBTC position deposited at a BTC price of $100,000 (How YieldBasis works) over 30 days:

  • Unstaked, Fundamental Value grows 0.5%: 0.5% × $100,000 = $500.
  • Staked, the shares earn an Emissions APR of 18.25%: 18.25% × $100,000 / 365 = $50 per day, and 30 × $50 = $1,500 in total.
  • Staking is ahead by $1,500 − $500 = $1,000.

For a staked position to outperform an equal unstaked one over horizon TT, this condition must hold:

YB_emissions_to_you⏟what staking pays  ≥  PPS_growth_forfeited⏟what staking costs  +  E[watermark drag]⏟tail risk\underbrace{\text{YB\_emissions\_to\_you}}_{\text{what staking pays}} \;\geq\; \underbrace{\text{PPS\_growth\_forfeited}}_{\text{what staking costs}} \;+\; \underbrace{\text{E}[\text{watermark drag}]}_{\text{tail risk}}

The following table gives what sets each term and its value in the example:

TermWhat sets itIn the example
YB_emissions_to_youweekly_gauge_emission × (your_staked / total_staked_in_gauge) × YB/USD. Gauge emission depends on the total YB mint rate (a function of rate_factor), your gauge's vote weight, and its sqrt(staked/total_supply) adjustment. veYB gives no per-user multiplier.$1,500
PPS_growth_forfeitedThe fee growth that you give up, read as the change in LT.pricePerShare() over TT. It varies and can be negative.$500
E[watermark drag]A tail risk. A drawdown recovers only through later gains, with no admin fee during recovery.$0

The comparison fails when the YB price falls before you sell. After a 70% fall, the same emissions are worth $450, and staking trails unstaked by $50 ($500 − $450). A watermark shortfall adds to that cost.