Hey Edge readers,

Friendly reminder that we launched BTC deposits last week with a limited-time 3% APY promo! In this issue, we’re exploring new ways to stack Sats, starting with eBTC, a synthetic Bitcoin asset inspired by Liquity’s LUSD design. Plus, we’re bringing you the latest news on our downgrade of Maker’s DAI stablecoin, Compound governance, and Polymarket’s record usage.

Here's what we're covering:

• What is eBTC?

  Learn how you can earn a 20%+ APY on BTC today.

• Maker’s DAI asset rating cut 🗞️

  Get the latest on Compound governance truce, Polymarket record usage, and more.

Stay sharp. 🫡

-The Exponential team

What is eBTC?

eBTC is a synthetic Bitcoin asset designed to allow anyone to borrow BTC using Lido’s staked Ether (stETH) as collateral without any borrowing fees. Inspired by the resilient design of Liquity’s LUSD stablecoin, eBTC employs immutable and governance-minimized smart contracts to create a more trustless solution for Bitcoin in DeFi.

How does eBTC work?

The eBTC protocol operates by allowing users to deposit stETH or ETH, which is subsequently converted to stETH. This stETH serves as collateral for borrowing over-collateralized eBTC, all without incurring interest fees. The protocol’s revenue comes from the accrued staking yield percentage from the system’s collateral, known as the “protocol yield share.”

eBTC follows the collateralized debt position (CDP) model, except in this case, the CDP is soft-pegged to BTC instead of a stablecoin. When the collateral ratio of a CDP dips below a set threshold, the protocol has a liquidation mechanism to maintain solvency. Liquidators can settle outstanding debt in exchange for surplus collateral. Redemptions enable users to exchange eBTC for stETH at face value based on the latest Chainlink oracle price for BTC/stETH.

Why choose eBTC?

eBTC offers a unique opportunity to leverage the Ethereum ecosystem while maintaining exposure to Bitcoin. Here’s why eBTC stands out:

1. ETH/BTC trade: At its core, eBTC serves the same purpose as other CDPs like Maker and Liquity—enabling users to go long on the collateral asset (ETH) while shorting the debt asset (BTC) in a capital-efficient manner. The ETH/BTC ratio is one of the most traded pairs in the industry, and eBTC allows for decentralized trading of this pair.

2. Exposure to BTC with ETH collateral: eBTC allows Ethereum users to gain exposure to BTC and benefit from potential price increases, while retaining their ETH exposure.

3. Minimized liquidation risk: eBTC’s structure reduces liquidation risk since ETH and BTC prices are historically correlated, unlike other CDPs that lend stablecoins.

4. BTC yield seekers: For those seeking yield on BTC, eBTC plans to launch a staking vault where a portion of the stETH staking yield will be redistributed, providing a sustainable source of yield for BTC.

Yield strategy for eBTC

Below is a strategy to earn a 20%+ APY on BTC today.

1. Deposit stETH or ETH: Start by depositing stETH collateral. For a limited time, you can earn 10%+ APY over the next month.

   

2. Choose your Collateralization Ratio (CR): Select a CR that matches your risk preferences. A lower CR means a riskier position, while a higher CR offers a greater buffer against liquidations.

   

3. Mint eBTC: Once you have decided on your CR, you can borrow eBTC.

4. Earn more yield: Put your newly minted eBTC to work in DeFi. Deposit it single-sided into the Curve eBTC-tBTC liquidity pool. This pool is currently paying a ~25% APY (10% from CRV rewards and 15% from additional BADGER incentives).

   

Happy stacking! 🥞

In the news

• Maker’s DAI Asset rating cut at Exponential after collateral strategy review - Read

• Vitalik says Ethereum and rollups are ready to support millions of users - Read

• Polymarket sees record numbers across usage stats in July - Read

• Solana flips Ethereum for the first time in monthly DEX volume - Read

• Compound considers fee redistribution after governance attacker returns $24M COMP - Read

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