Each exchange user will hold a limit quota of the asset. The value will depend on each person's ranking within their account.
Binance launches a new digital dollar aimed at offering passive rewards.
Binance, one of the world's largest cryptocurrency exchanges, launched its new BFUSD coin that offers interest. The system allows for the purchase and redemption of the token.
Along with its launch, a base annual yield of 14% was announced, although it is unknown whether this value will be maintained in the future.
BFUSD maintains parity with the US dollar. However, the firm indicated that it is not considered a stablecoin since the token's use is limited on the platform.
The token "is designed as a margin asset for futures trading while offering passive rewards," detailed Binance.
Additionally, the company indicated that holders of the asset will be able to take advantage of a base annual percentage yield (APY) that "accrues directly, even if they do not trade futures."
An important clarification is that those engaging in qualified margin futures activities with stablecoins will receive an increased APY that day. The exchange has taken measures to ensure that the APY is never negative. For example, the creation of the Reserve Fund, which holds part of the profits to cover future losses.
Thus, BFUSD is the new star of the crypto market.
On the paid interests, the yield will come from "delta hedging" and from the sizing of ether, the digital currency of Ethereum.
Regarding the first, it is a technique that reduces the risk of spot market fluctuations, where assets are bought and sold at the current price, and futures. This balances price differences between markets.
According to the information on the official website, each Binance user possesses "a limit quota of BFUSD, and the size of the quota is based on the user's VIP level."
BFUSD leverages financing fees, which are the payments made between operators with long and short positions in futures contracts.
Finally, the firm indicated that the only asset accepted for BFUSD transactions will be USDT. This means that all purchases, rewards, and redemptions will be paid in that asset.