Binance officially launches 'Interest-bearing Margin BFUSD', features, up to 30% revenue sources, and risks?

The exchange Binance announced today the launch of the interest-bearing margin asset BFUSD, stating that users can start purchasing it through the contract trading platform from 10 AM tomorrow. What are the features of BFUSD, and what are the benefits and risks of holding it? (Background: Meme coins WHY, CHEEMS listed on Binance experiencing a "margin call-like crash", with large holders urging: Please slow down the sell-off) (Background information: Is listing on exchanges always profitable? IOSG delves into Binance's token listing model and reform suggestions) The world's largest exchange, Binance, today (26th) announced the launch of the interest-bearing margin asset BFUSD, stating that users can purchase BFUSD through the Binance contract trading platform starting from 10 AM on November 27, 2024 (UTC+8). According to the announcement, BFUSD is designed specifically for active contract traders on Binance, not only providing additional return opportunities but also serving as margin in multi-asset mode futures accounts. It is understood that BFUSD is not an ordinary stablecoin, cannot be withdrawn from Binance's contract accounts, or traded in the public market, and can only be used as margin in Binance contract trading and can be exchanged 1:1 with USDT. However, some may still remember that according to previous reports, Binance announced the launch of BFUSD last week (18th) and introduced that the asset has an annualized yield of 19.55%, but due to widespread misunderstanding in the community that BFUSD is a stablecoin, Binance had to urgently clarify and retract the announcement. Further reading: Binance BFUSD annualized 19.55%! Triggering LUNA crash trauma response, officials rush to extinguish the fire: This is not a stablecoin.. What are the benefits of holding BFUSD? According to official documentation, after enabling multi-asset mode, users can use BFUSD as margin to trade USDⓈ-M contracts. Additionally, users who meet the following conditions can receive daily USD stablecoin rewards based on the applicable return rate: Base Annual Percentage Yield (base APY): Applicable to BFUSD holders with no USDⓈ-M trading activity. Enhanced Annual Percentage Yield (boost APY): Applicable to BFUSD holders with qualifying USDⓈ-M trading activity, generally yielding higher return rates. Furthermore, the daily base rate and enhanced rate will vary. If you want to know more about the rate calculation, please refer to the Binance documentation. Current annualized rate for BFUSD. Source: binance BFUSD Revenue Source The document further states that Binance primarily utilizes the following two methods to provide daily revenue sources for BFUSD: 1. Funding Fee Revenue Binance adopts a neutral hedging strategy, charging funding fees through hedging futures and spot positions. The funding fee is a regular payment between long and short sides in the perpetual futures market, used to keep futures prices aligned with spot prices. When the funding rate is positive, Binance profits from short futures positions without bearing significant price volatility risks. 2. Staking Rewards Binance stakes crypto assets to earn revenue, for instance, by staking ETH through Binance Earn to receive WBETH staking rewards. What is the BFUSD reserve fund? How does it work? Additionally, to support the stability of BFUSD, Binance has established an initial reserve fund valued at $1 million to cover potential funding fee costs and support the management of the BFUSD collateral pool and hedging portfolio: When the funding rate revenue is positive, part of the revenue will be allocated to the reserve fund; when the rate is negative, the reserve fund will cover the corresponding costs. The reserve fund will be audited and adjusted as needed to ensure stability and security. What are the risks of holding BFUSD? On the other hand, while BFUSD offers high yield opportunities, it also carries the following risks: Negative funding rate: When the funding rate for short futures positions is negative, it may lead to an inability to pay returns to BFUSD holders. Credit risk: Holding BFUSD means assuming Binance's credit risk; if Binance fails to repay or operate, users may not be able to redeem BFUSD or receive returns. Redemption restrictions: Redemptions may be delayed due to high demand or market volatility, but users' BFUSD can still serve as margin for futures accounts. Variable transaction fees: A fee is charged for buying or redeeming BFUSD, and Binance can adjust the rates at any time, with specific costs displayed before the transaction. It is worth noting that the current high annualized return rate is related to the ongoing bull market, and if it returns to a bear market, the return rate would theoretically drop to single digits. Related reports: DeSci track surges, decentralized science potential explained with investments from Binance and backing from CZ Will Binance "settle for life" with the SEC? A look back at projects that have paid hefty fines to the SEC $USUAL lists on Binance new coin mining Launchpool, pre-market, what is the decentralized stablecoin protocol Usual? "Binance officially launches 'Interest-bearing Margin BFUSD', features, up to 30% revenue sources, and risks?" 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