Binance has launched BFUSD, an innovative margin asset inspired by Ethena (ENA) to facilitate efficient financial management without disrupting stablecoin trading. Designed for active contract users, BFUSD offers rewards and acts as a flexible margin asset in Binance’s joint margin model, enabling users to optimize returns while participating in the platform's ecosystem.
What is BFUSD?
BFUSD is an interest-bearing margin asset that provides rewards to users engaged in contract trading. It can also serve as collateral in the joint margin model, offering the dual benefit of earning rewards while maintaining liquidity for trading activities.
Income Source: Delta Neutral Strategies
BFUSD adopts a delta-neutral strategy to generate income, mirroring the model used by ENA. The strategy leverages stablecoins to hedge contract positions against spot positions, minimizing exposure to market volatility while collecting funding fees.
Example:
A user holds 1 ETH in spot and shorts 1 ETH in the contract market.
Regardless of ETH price fluctuations, the position remains secure, avoiding liquidation risks.
The income is derived from funding fees, settled every 8 hours.
For ETH, the funding rate is 0.01%, resulting in an annualized income of approximately 11% (0.01% * 3 settlements/day * 365 days/year).
Additionally, users earn staking income on the spot portion, further enhancing their overall returns.
Advantages of BFUSD Over ENA
BFUSD introduces several benefits that improve upon the ENA model:
1. Enhanced Safety:
All operations are conducted within Binance’s exchange, eliminating on-chain risks.
2. Efficient Fund Utilization:
BFUSD serves as collateral in the joint margin mode, allowing users to earn passive income without interrupting their trading activities.
3. Scalability:
Supports all currencies compatible with U-based contracts, enabling users to implement delta-neutral strategies across a wider range of assets.
4. Cost Efficiency:
No gas fees or handling charges for transactions within Binance. Currently, purchases are free.
How to Participate and Benefits
Who Benefits from BFUSD?
BFUSD is ideal for users seeking a low-risk financial management tool that generates consistent passive income.
Daily Reward Rates:
Base Interest Rate: Rewards for BFUSD holders who do not engage in U-based contract trading.
Increased Interest Rate: Higher rewards for BFUSD holders actively participating in U-based contract trading.
Key Features:
Exchange Ratio: BFUSD can be exchanged with USDT at a 1:1 ratio, with a 0.1% fee for both purchase and redemption. Purchases are currently free.
Maximum Purchase Limit: Each account has a cap of 100,000 BFUSD, sufficient for most users.
Important Notes
1. Unified accounts currently do not support BFUSD; users must switch to normal mode to participate.
2. Higher interest rates are applicable to users holding U-based contract positions.
3. BFUSD offers a flexible solution with competitive returns, making it an appealing option for traders and investors alike.
By introducing BFUSD, Binance provides users with a secure, cost-effective, and scalable financial management tool that seamlessly integrates into its ecosystem. With its innovative delta-neutral strategies and reward mechanisms, BFUSD is poised to become a game-changer for passive income generation in the cryptocurrency market.