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Basis Trading Vault
When a user deposits assets in the basis trading vault, Lemma uses those assets to automatically mint and stake USDL on their behalf. In return, they receive xUSDL (the staked version of USDL) that increases in value with the yield produced.
How does "leveraged" basis trading work?
In order for USDL to be easily composable, USD pegged and to increase the PnL for our basis trading vault users, we decided to separate the stablecoin from the yield it generates. Only users that stake their USDL will be exposed to the profits and losses of basis trading. Since every USDL is always generating basis trading returns, stakers receive the profits and losses for their own USDL as well as all of the unstaked USDL.
For example:
- 3 users each deposit 1 ETH on Lemma when the mark price of ETH is 1000 USD
- Each user is issued 1000 USDL in exchange
- One user decides to stake all of their USDL. This user therefore receives basis trading returns not only on their own 1000 USDL, but also on the remaining 2000 unstaked USDL
In the above example, the staker gets access to the same return profile as “3x leverage basis trading” with almost no liquidation risk (since Lemma isn’t borrowing additional capital).
The following chart shows the hypothetical returns a staker would’ve made over 5 years if 50% of USDL had been staked (2x leverage basis trade equivalent) and the funding rates were in line with Bitmex’s:
The equivalent of a 2x leverage basis trade outperforms holding Bitcoin by quite a bit, without most of the volatility! Abstracting away the gains and losses of the basis trade has a dual purpose: it eliminates the volatility for the USDL stablecoin and creates a strong yield generation opportunity for stakers.
Unstaking
To prevent any "gaming" of the staking & unstaking mechanism, Lemma will initially have a 8 hour delay after a user unstakes their xUSDL; eg. after user indicates their intent to unstake their xUSDL, it will stay staked an additional 8 hours and only then will the underlying claimed assets (ETH, USDL, USDC...) be released to the user's wallet.
Last modified 2mo ago
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