# How Decentralized Yield can work Source: https://docs.google.com/document/d/e/2PACX-1vSH17C2jJu5MWr8fqRFE-q-i6nyfAPYO1xOWhuSQHGDN_pi6ICjt1QJQDGDSASOj4MnJcXN1R1s-KIV/pub ## Summary The DeYld whitepaper describes a DeFi protocol that aims to earn passive income by arbitraging funding rates between perpetual futures on decentralized exchanges and paying out in USDt. The document says DeYld opens short and long positions on two exchanges when their funding rates differ, closes them once the rate stabilizes, and repeats the process, with users depositing USDt for a one-month cycle. Users pay 10% of earned yield in YLD tokens, and the paper states that DeYld will never promise an exact APY due to market volatility. ## Article DeYld Protocol Whitepaper June 2024 Abstract This document describes the definitions and theory behind the DeYld Protocol explaining the different aspects of the implementation 1.Introduction Recently, the cryptocurrency market has grown incredibly high and many people have earned a lot of money.People have formed an financial safety net, but they do not want to lose money every year due to high inflation.There are many solutions on the market that allow you to earn yield on your investments. DeYld is an innovative platform created to optimize this process of arbitraging funding rates on decentralized exchanges providing users passive income. 2.Problem Volatility A huge problem is that cryptocurrencies are volatile, and Yield is offered to users not in dollar terms but in native tokens of the project. Many users immediately leave such DeFi platforms because they do not understand what is going to happen with their money. Low returns Yield in stablecoins is also a problem for users.On average, the profitability in projects such as Compound,Aave,Ldo ranges from 5-8 percent in stablescoins Risky We all remember what happened to the Terra Luna stablecoin and their Anchor lending platform, which promised 20% of annual revenue.We also remember Waves and their stablecoin which dropped by 95% due to the huge interest that Waves promised to pay 3.Solution DeYld will solve problem of high volatility exchanging all profits from operations in USDt.Due to very high difference between funding rates exchanges DeYld will provide high Yield to its users and DeYldl will never promise exact APY on investment due to high volatility on the market. 4. Basic Principles of work Basics DeYld uses algorithms to analyze real-time market data to identify arbitrage opportunities and automatically capitalize on them. This allows users to earn passive income without spending their time User experience When user A wants to earn yield on DeYld he needs to deposit USDt to the platform.After one month of DeYld work user A can collect his money that he froze+yield that he have earned.In order to collect money and yield user A have to buy DeYld token (YLD) on exchange in the ratio of 10% of the earned yield and deposit it to DeYld 5.Deeper understanding of funding rates Perpetual futures contracts are designed to mimic the price of the underlying asset, such as Bitcoin and Ethereum or others. However, due to market forces and trading dynamics, the price of the perpetual contract may slightly deviate from the spot price of the underlying asset.To align the price of the perpetual contract with the spot price of the underlying asset, a funding mechanism is employed.The funding rate mechanism helps maintain price equilibrium in the market by encouraging traders to enter positions that align with the current market sentiment. When the price of the derivative contract is higher than the underlying spot price, the funding rate turns positive, implying that long position holders pay a fee to short position holders. Conversely, if the derivative price is below the spot price, the funding rate is negative, meaning short position holders pay long position holders. For example,On exchange B funding rate is 0.1% but on exchange A funding rate is 0,5% on asset C. DeYld finds this difference and opens short on exchange A for xxx $ and long on exchange B for xxx$ .After earning funding rate difference in 4 hours DeYld closes positions if funding rate stabilizes 6.Deeper understanding of infrastructure DeYld bridges all Usdt to all networks equally through Stargate API (25%-Eth,25%-Op;25%-Solana) DeYld uses ChainLink in order to find price difference between assets on different exchanges DeYld analyze Open interest and positions that are opened through ChainLink DeYld automatically check fees that should be paid to exchange and to complete transaction via Chainlink DeYld connects to exchanges via API keys and opens positions After receiving funding rate payments DeYld closes the position that are not relevant anyymore DeYld opens as much positions as possible to capitalize on them DeYld calculates how big its positions can be to not break the market balance After closing irrelevant positions DeYld bridges needed funds to all blockchains and loap repeat After one month of work DeYld closes all positions and return Usdt to accounts of users+earned yield\ 6.Cross-chain DeYld will support Solana,Optimism,Arbitrum and Ethereum networks due to the fact that DeYld wants to attract as many new users as possible and capitalize all possible exchanges and blockchains.DeYld will support deposits in USDt on all these 4 chains. 7.Business Model DeYld receives 10% worth of profits from users in Yld native tokens. This encourages us to maximize profits for our users and ensures a sustainable business model. 8.Token in ecosystem Tokens that team will receive will be used to pay operational expenses.50% of tokens left after paying for operational expenses will be burned.Other 50% will be used for marketing campaigns and development of ecosystem 8.Roadmap Stage 1: Research and Development Market research and developing an MVP platform. Partnerships with first decentralized exchanges. Stage 2: Testing and Launch Beta-testing of the platform with a limited number of users. System optimization. Stage 3: Scaling Launch of the platform. Expanding supported exchanges and assets. Marketing campaigns Stage 4: Additional Features Introduction of new financial instruments and new opportunities for arbitrage. Partnership with other platforms and services. 9.Conclusion DeYld is an innovative platform that provides users an opportunity to earn passive income through the arbitrage of founding rates. We will make arbitrage accessible and profitable for everyone using advanced technologies and secure asset management methods. 10. References https://www.investopedia.com/what-is-yield-farming-7098519#:~:text=Yield%20farming%20is%20a%20high,the%20return%20in%20additional%20cryptocurrency. - What is yield farming? https://hedera.com/learning/decentralized-finance/defi-risks - Defi risks https://www.binance.com/en/square/post/1018629 - Funding rates https://www.sciencedirect.com/science/article/abs/pii/S1544612322005359 - USTs crash https://www.reddit.com/r/Wavesplatform/comments/twhyih/what_happened_to_waves_and_their_stablecoin_usdn/ - Waves stablecoin crash