cap

【Supplement | Why I think Yield Vault might have a negligible impact on $BR ?】

Based on TVL data from Bedrock & Cap, @Bedrock has invested over 50% of platform assets ($BTC ), which poses a high concentration risk within a single protocol, leading to the following impacts:

➤ Existing User Risk Appetite
In the current market environment, with frequent DeFi security incidents, Crypto users are showing a trend towards risk mitigation in their investment preferences, especially cautious of complex risk sources.

From Bedrock's perspective, they naturally believe they have fulfilled their duty to audit counterparty risks of institutional capital; however, from the perspective of uniBTC users, Bedrock, Cap, and institutional capital, which involve third-party credit, are all sources of risk.

Thus, the first point of concern would probably be: when existing users realize their invested BTC is heavily concentrated in Cap credit loans, will there be a wave of user fund withdrawals?

➤ Allocation of Existing Funds
According to Bedrock 2.0, it will introduce at least four vault strategies, but just the Yield Vault alone has already consumed over 50% of existing funds, crowding out the deployment capabilities of other vault strategies.

From this perspective, if existing funds are largely deployed in a single strategy, can other strategies still achieve a good leverage effect to create returns that outperform the market with a smaller amount of capital?

➤ Uncertainty of Incremental Funds
Considering the above two points, once existing funds are nearly fully allocated, the breakthrough move would be to attract new capital.

However, given the current market atmosphere, it's impossible to predict how long the bear market will last; the cash is king mindset is becoming a consensus in the market. Do market users have idle Bitcoin on hand? And are they willing to expose it to DeFi risks?

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● The above content does not constitute investment advice (NFA). Users should operate according to their own risk tolerance, DYOR and participate in the investment market cautiously.

● Attached image is sourced from Cap

#Bedrock #CAP #BR

[What is the Bedrock Yield Vault, and is the tri-party credit structure the solution to unlocking Bitcoin yields?]

I just wrapped up my research on the upcoming first vault strategy (Yield Vault) in the Bedrock @Bedrock 2.0 plan, and honestly, after looking it over, I doubt it'll have a positive impact on the $BR price.

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What is the Bedrock Yield Vault?

In simple terms, Bedrock will use the Cap Protocol as a guarantor on the platform, earning interest from borrowers, while Bedrock users' uniBTC acts as the collateral for this guarantor role.

This tri-party credit structure may seem a bit complex at first glance, but the principle is pretty straightforward.

Take the Bedrock Yield Vault as an example: there’s a group of institutional borrowers in need of funds (Susquehanna, Amber, Flowdesk, Selini) who plan to borrow USDC from Cap to run investment strategies.

As the guarantor for these borrowers, Bedrock will assess the counterparty risks and credit evaluations of these institutional borrowers, then provide collateral, which is uniBTC serving as collateral for the loans. If the borrower defaults, those uniBTC will be liquidated.

However, as the guarantor, Bedrock also takes on the default risk, while collecting interest from these borrowers as income. This creates what Bedrock refers to as: a source for activating $BTC assets to earn reliable yields.

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Essentially, this does differ from the peer-to-peer model used by retail investors on DeFi, adding a layer similar to the role of an underwriter in traditional insurance companies.

Bedrock's emphasis on institutional-grade yields is not an exaggeration, as the counterparties are institutional-grade capital vetted by Cap, while Bedrock, as the underwriter, will select trading partners that match its risk profile.

From Bedrock's perspective, it opens up opportunities for retail investors to connect with institutional capital and ensures that uniBTC users are protected from counterparty risks.

But at this current moment, with DeFi incidents happening frequently, how many existing users or funds are willing to accept the complex, multi-layered risks, including: the protocol risks of Bedrock or Cap, borrower credit risks, token risks, etc.? I really find it hard to say.

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● The above content does not constitute investment advice (NFA); users should operate according to their own risk tolerance, and DYOR before participating in the investment market.

● Attached image sourced from Cap

#Bedrock #CAP #BR

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