Automated market maker and yield-optimisation protocol Belt Finance launched its protocol with a very successful initial farm offering. In this article, we take a close look at the project’s $4Belt and beltTokens.
There are many opportunities in Decentralized Finance (DeFi) through which investors can earn passive income. Many platforms have come up with strategies that leverage those opportunities to help investors make the most out of their DeFi investments.
One of such platforms is Belt Finance. In this article, we will take a look at Belt Finance and its strategy towards optimizing the earnings of investors. Then we shall zoom in on Belt Finance’s ecosystem tokens and the unique role they play in achieving the platform’s objectives.
Overview Of Belt Finance
Belt Finance is an automated market maker (AMM) yield-optimization platform deployed on the Binance Smart Chain (BSC). The platform helps investors in DeFi to maximize the earnings on their investments. Belt Finance does this by aggregating the best yielding opportunities in the BSC and allocating investor’s funds to them.
Belt essentially acts like an optimized yield-vault: you make deposits to the vault, then the platform automates the spread of your assets and auto-compounds your earnings from the pool.
Belt started on a very bright note. In an IFO on the leading BSC DEX platform, PancakeSwap, Belt Finance raised more than $800,000,000 in what turned out to be PancakeSwap’s largest IFO at the time of writing. Driven by one of the highest annual percentage rates (APR) of returns at the time, Belt Finance rose to the top two DeFi protocols in terms of transaction volume.
What Is Belt Finance’s Main Strategy?
For the safety of investors’ funds, Belt carefully chose the most trustable and stable yielding BSC platforms. Then, using smart contracts, funds are allocated across those platforms. By allocating funds in the pool to multiple yield platforms, risk exposure is reduced because the funds are not concentrated in one platform only. The allocation ratio is dynamic: to ensure maximum returns, the smart contract adjusts the ratio as the APY on the yield platforms change.
What Are 4Belt And BeltTokens?
These are platform tokens which enable you to take part in Belt’s multi-strategies and earn returns. They could also be used to represent the two approaches that Belt Finance uses in optimising yield for investors.
Strategy refers to the earning platform that the funds in Belt’s vaults are invested into. While beltTokens are issued to any investor that deposits assets into the platform’s pools/vaults, 4Belt applies explicitly to a liquidity pool of stablecoins. Let us look at them in detail.
beltTokens are the tokens that operate the yield strategies of the platform. The tokens are issued to any user who deposits liquidity into the platform. For example, if a user supplies liquidity to a BNB vault, they will receive beltBNB in proportion to the deposited BNB minus deposit fees. In essence, each beltToken is like a share of the total deposit in that vault.
How Do beltTokens Function?
When users deposit assets into a vault, say the beltETH vault, the funds in that vault are not channeled to one yield strategy. Instead, the vault’s funds are spread across several strategies according to a preset ratio. The reason for the spread and the ratio is to reduce risk-concentration and optimize returns. The concept is illustrated in the figure below,
A vault’s returns from the applied strategies are automatically compounded to each depositor’s portfolio every six hours. At any point in time, the value of a beltToken is the sum of the values of the base token and the accrued earnings from the platform’s multi-strategy yield.
4Belt BLP pool is a liquidity pool. The pool comprises four stablecoins: BUSD, USDC, USDT, and DAI. The primary purpose behind the 4Belt liquidity pool is to give those who love holding stablecoins an opportunity to earn more from their assets without compromising their position.
4Belt token is made up of the equivalent beltTokens of the four stablecoins in the BLP pool: beltBUSD, beltUSDC, beltUSDT, and beltDAI. Each has multi-strategy properties; the smart contract can migrate them to another strategy if a more favourable APY appears on the new strategy.
The worth of a 4Belt token at any time is the sum of the average of the stablecoins, multi-strategy yield, and the earnings from trading fees at that given time.
Another feature of the architecture is what is known as the idle ratio. By the principles of liquidity provision, the liquidity pair should be of the same ratio. If you want to provide $100 worth of liquidity to a pool of A-B pairs, you need to split it into $50 of A and $50 of B.
In our case, the 4Belt BLP pool comprises four stablecoins, so the ideal thing is for each of the stablecoins to have 25% of the pool. In practice, trade activities can make the ratios unbalanced. Thus, the stablecoins coins whose ratios are smallest are seen to be idle. They are given first consideration when new deposits come into the pool to restore the balance of the liquidity pool.
Source : bsc.news
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