《Discussing the Bitcoin Ecosystem CeDeFi Platform BitFi: Why is CeDeFi an Inevitable Path for the Development of Our Industry?》
After Bitcoin became a strategic reserve for the United States, it needed to find a larger narrative space.
My view is that the narrative of Bitcoin will shift from 'digital gold' to 'interest-bearing digital gold.'
Bitcoin now needs to address this important proposition: how to turn Bitcoin into an interest-generating asset?
The core of Bitcoin's interest-bearing aspect is where the interest actually comes from?
In this cycle, we will find that many wealth management products using neutral arbitrage strategies have emerged.
Traditional neutral arbitrage strategies are commonly seen in stock and futures markets, but the rise of projects like Ethena indicates that this strategy is expanding into the crypto asset realm.
The 24/7 trading, high volatility, and cross-chain opportunities in the crypto market provide new soil for neutral arbitrage.
Among them, BitFi applies neutral arbitrage to BTC through the CeDeFi model, filling the gap in the BTC yield market.
This project is very typical, and we can take a closer look. @Bitfi_Org
1. Let's first look at how BitFi operates.
BitFi's CeDeFi model combines the stable income mechanism of CeFi with the openness and composability of DeFi, creating a unique yield generation system.
Its core strategies include:
(1) Neutral Arbitrage Strategy: BitFi captures market fluctuations and cross-platform price differences for low-risk arbitrage, ensuring sustainable returns. This strategy does not bet on the direction of BTC prices but relies on algorithms to capture short-term market efficiency differentials.
(2) bfBTC Asset: Users can stake BTC to obtain bfBTC, which is a BTC-pegged yield asset issued by BitFi. Users can earn additional returns in DeFi protocols (such as Balancer pools or the Hemi ecosystem) while retaining the base value of BTC. Compared to Wrapped Bitcoin (WBTC), the feature of bfBTC lies in its yield generation function.
(3) Layer2 Integration: BitFi collaborates with Bitcoin Layer2 solutions like Bitlayer to reduce transaction costs and enhance the utility of BTC in DeFi.
2. Where does the interest provided by BitFi come from?
The yield sources provided by BitFi for users are mainly divided into two parts: CeFi and DeFi.
(1) CeFi Part
The yield in the CeFi part is primarily realized through BitFi's centralized operations and neutral arbitrage strategies, allowing users to obtain stable returns without directly participating in complex operations, making it suitable for beginners and high-net-worth individuals.
BitFi utilizes neutral arbitrage strategies to capture low-risk returns through cross-platform price differences and market fluctuations, providing users with BTC (bfBTC) and stablecoin yield pools (bfUSD, to be launched soon). Users deposit assets into the pool, and BitFi is responsible for executing arbitrage strategies and returning profits.
To be more specific, the sources of income can be further divided into three categories:
Financing Rates: Utilizing positive financing rates from perpetual swap contracts.
Basis: Utilizing favorable differences between spot and derivative market prices.
Staking Rewards: Integrating staking rewards of the underlying assets.
(2) DeFi Part
The yield in the DeFi part is achieved through BitFi's integration with decentralized protocols and Bitcoin Layer2, allowing users to directly participate in the DeFi ecosystem and gain higher yield potential and flexibility.
Here, the yield is mainly provided by ecological partners.
bfBTC is the yield asset pegged to BTC launched by BitFi, allowing users to invest it in DeFi protocols (such as Spectra Finance, Hemi's Balancer pool) to provide liquidity and earn trading fees and related returns.
3. To summarize
The yield sources of BitFi's CeFi and DeFi form a 'dual-track system':
CeFi provides a stable, low-threshold yield track that attracts traditional investors; DeFi offers a high-potential, composable yield track that attracts crypto-native users.
This dual-track system is not only a competitive advantage for BitFi but also a key driving force for the upgrade of the BTC ecosystem from 'value storage' to 'interest-bearing assets.'
It can be said that BitFi has set a benchmark for the CeDeFi model, potentially triggering other projects to follow suit and accelerate the financialization of the BTC ecosystem.
We can continue to keep an eye on this project.
