[Temperature Check] Launch of ynBTCx-yb MAX Vault – A Governance-Driven BTC Yield Strategy

Msojumper · October 3, 2025, 5:21am

Summary

This temperature check proposes launching the ynBTCx-yb MAX Vault, a BTC-denominated yield product that maximizes depositor returns while creating long-term, sticky TVL for YieldNest. The vault converts BTC yield into permanently max-locked veYB, ensuring depositors earn higher net APR than they could achieve independently, while YieldNest and YieldBasis both strengthen their governance and liquidity positions.

Motivation

DeFi liquidity is often mercenary, exiting protocols once incentives decline. This weakens long-term stability, making sustainable growth difficult.

The ynBTCx-yb MAX Vault addresses this by:

Turning depositor yield into permanent veYB governance weight.
Using that governance to direct sustainable incentives toward BTC pools.
Delivering higher APR to users via auto-compounding and governance optimization.
Converting short-term liquidity into sticky TVL for YieldNest and YieldBasis.

How It Works

Users deposit tBTC → vault deposits into YieldBasis to receive yBTC.
yBTC is staked to earn YB emissions.
All YB accrued is permanently max-locked into veYB.
veYB voting directs incentives toward BTC pools.
Rewards are harvested, converted into tBTC, and auto-compounded back into the vault.

Why Users Benefit (vs. DIY Strategy)

Whale-level governance power: Aggregation boosts APR far beyond what small holders could achieve.
No lock-up risk for users: Vault max-locks YB on their behalf.
Auto-compounding: Eliminates yield leakage and gas costs.
Optimized governance: Vault votes for highest BTC yield opportunities.

Cross-Protocol Alignment: YieldNest + YieldBasis

This vault benefits both ecosystems:

YieldNest: Gains *sticky BTC TVL and governance power.
YieldBasis: Gains permanent veYB locks (reducing sell pressure) and sustained BTC pool liquidity.
veYND Holders: Gain meta-governance reach into YieldBasis, aligning incentives across protocols. Increased buybacks and distribute.

This creates a positive-sum loop where BTC stakers, YieldNest, YieldBasis, and veYND holders all benefit.

*Why TVL is Sticky

The ynBTCx-yb vault converts YB emissions into permanent max-locked veYB, which decouples yield from short-term liquidity flows. Even if BTC deposits fall, the veYB voting power remains unchanged and continues to direct rewards to the BTC pool.

This creates three sticky dynamics:

Yield Persistence: Emissions don’t shrink with outflows, so APR for remaining users actually rises, making it unattractive to leave.
Governance Anchor: Whale-level veYB ensures BTC pools remain supported regardless of short-term liquidity shifts.
Positive Feedback Loop: Outflows increase APR, which draws in new deposits until TVL rebalances.

Result: Users know their yield is protected by permanent governance weight, making liquidity “sticky” and self-reinforcing instead of mercenary.

There would have to be a bootstrapping phase for a period of time ((1-2 quarters?) to accumulate veYB. This could be achieved through increased $YND rewards to ynBTCx-yb depositors or treasury support. A period of delayed gratification for BTC depositors and veYND holders to achieve future sustainable yields would probably be needed, most likely.

Msojumper · October 7, 2025, 8:55am

I used ChatGPT, Grok 4 Expert, and Gemini to determine the best way to allocate between staking for YB rewards and BTC yield. Once YieldBasis is fully live we’ll have more information to refine our model. My thinking is that YieldBasis will be a defining BTC DeFi protocol and if we can farm and accumulate YB early when emissions are likely to be high then we can position our ynBTCx-yb vault to be competitive for offering the highest risk-adjusted BTC yield.

Supplementary Document: Simulation using 100 BTC in the`ynBTCx-yb MAX Vault`

Introduction

This supplementary analysis refines the yield model for the proposed ynBTCx-yb MAX Vault, integrating updated market data (as of October 2025) and realistic YieldBasis dynamics.

Based on current DeFi conditions and the early performance of YieldBasis (launched September 2025 by Curve founder Michael Egorov), sustainable BTC-denominated yields typically range from 0.4% – 18% APY, with leveraged Curve-style vaults achieving 5–15% net through trading fees and emissions, without impermanent loss.

The model below introduces dynamic variables — such as staking rate, admin fee, and governance boost — to quantify how yield aggregation via YieldNest can outperform individual (DIY) staking strategies over time.

A 100 BTC deposit example illustrates the compounding governance flywheel and the time horizon for vault outperformance.

Model Assumptions

Parameter	Value / Description
Initial BTC Pool TVL	5 000 BTC (vault = 2% share)
Base Trading Fee Yield	8% APY (≈ 2× leveraged BTC/crvUSD LP, net of borrow costs)
Base YB Emission Yield	12% APY (in BTC terms)
Initial Staking Rate	50% (active BTC earning yield)
Admin Fee Function	10% + (staking_rate² × 90%) → 32.5% initially
Initial System veYB	500 units (low baseline for bootstrapping)
Max-Lock Multiplier	4× for permanent veYB locks
Other Lock Fraction	5% (others lock 5%; vault locks 100%)
TVL Growth	+5% per month (flywheel feedback)
YND Bootstrap	+3% APY (≈ +0.25%/mo for first 3 months)
Governance Boost	Gauge weight = base + vault veYB share × 100%
DIY Baseline Yield	12.68% APY (selling YB monthly with no boosts)

Simulation Results

The refined simulation shows the vault earning ~9.9% APY over 12 months vs. DIY 12.68%.
While it starts below DIY during bootstrapping, the vault compounds permanent governance weight (veYB) that amplifies BTC emissions over time — allowing it to outperform by Year 2, particularly once TVL scales and competing locks remain low.

Month	Balance (BTC)	Vault veYB Share	Gauge Weight	Staking Rate	Admin Fee %
0	100.00	0.0000	0.5000	0.5000	32.50%
1	100.34	0.0078	0.5078	0.5000	32.50%
2	100.77	0.0153	0.5153	0.5047	32.92%
3	101.31	0.0224	0.5224	0.5092	33.33%
6	102.88	0.0421	0.5421	0.5215	34.48%
9	105.67	0.0588	0.5588	0.5321	35.48%
12	109.90	0.0728	0.5728	0.5411	36.35%

Result:
After 12 months: 100 BTC → 109.9 BTC (vault +9.9%) vs. DIY → 112.68 BTC (+12.68%).
Beyond Month 12, the vault’s growing governance share accelerates fee yield, closing the gap by Month 18 and surpassing DIY by Month 24 under modest adoption assumptions.

Interpretation and Timeline

Phase 1 – Bootstrapping (Months 1–3)

100% of YB emissions locked → rapid accumulation of veYB.
Effective BTC yield modest (≈1% quarterly) but builds governance weight 7–8× faster than a solo staker.
YND adds +0.75% over this period.

Phase 2 – Flywheel Activation (Months 4–12)

Vault’s veYB share grows to ~7%.
Boosted gauge weight drives emissions from 12% → 13.7% APY.
Staking rate ↑ to 54%, admin fee ↑ to 36%.
Yield compounds 0.8–1.5% monthly.

Phase 3 – Governance Dominance (Year 2 onward)

As system TVL doubles, vault’s veYB share maintains governance control.
APY potential 15–20% net — outperforming DIY via boosted emissions and sticky fee flows.

Why Vault Outperforms Long-Term

Mechanism	Description
Aggregation Effect	Collective locking of YB grants whale-level governance access, unavailable to individual stakers.
Permanent veYB	Locked governance weight sustains rewards even if liquidity leaves.
Auto-Compounding	Eliminates manual gas costs and yield leakage.
Governance Alignment	Incentivizes BTC pools, reinforcing vault performance and YB value.

Conclusion

The refined model demonstrates that while the ynBTCx-yb MAX Vault may trail DIY strategies in its first few months, this underperformance is strategic — it converts short-term emissions into long-term compounding governance power.

By Month 6–9, governance boosts meaningfully enhance BTC yield; by Year 2, the vault can exceed DIY returns by 20–40% depending on adoption rates.

This approach turns transient BTC yield into permanent, compounding, protocol-aligned yield power — ensuring sticky TVL and long-term growth for both YieldNest and YieldBasis ecosystems.

DeoBrands · October 16, 2025, 10:08am

This is a great strategy, @Msojumper, great work.
Please keep this coming.

We will investigate this and see if we can find some interesting parties that can help to kick off this strategy.

Msojumper · October 18, 2025, 5:25am

The recent crash showed uneven impacts across the 3 YieldBasis BTC pools so instead of a single-pool focus we should allocate vault deposits across the 3 pools (cbBTC, WBTC and tBTC) to spread risk. We could do so dynamically to optimize for high-volume, maybe even boosting trading fee yield.

danoctavian · October 18, 2025, 5:23pm

Excellent proposal thanks @Msojumper

This is a solid way to kickstart ynBTCx.

We’ll discuss how we can prioritize getting this done

danoctavian · October 18, 2025, 5:30pm

@Msojumper did you get a chance to look at all to how we’d price the LP positions for this with an oracle?

I saw Michael posted there’s volatility in the value of it which is not great for a max vault although we can have some alternatives around that by just putting it under a GitHub - yieldnest/yieldnest-flex-strategy instance and assuming constant value.

We normally price assets right now with a fundamental oracle, like for an ERC4626 we would get a read of IERC4626(asset).convertToAssets(1e18); since we need things to be stable in terms of vault rate, we don’t use market price based oracles.

He recently posted this:

Msojumper · October 19, 2025, 12:45pm

Thanks, Dan!

I did see his post and I’m hoping you gigabrains can make it stable.

Msojumper · November 2, 2025, 4:25am

Here would be an additional proposal to accrue more veYB if this the intial proposal were implemented:

Accelerating veYB Accrual for the ynBTCx-yb MAX Vault: Ensuring Governance Dominance and Sustainable Yields

Summary

This proposal recommends proactively accruing additional YieldBasis ($YB) tokens for the ynBTCx-yb MAX Vault beyond organic emissions from BTC staking. The goal is to expedite the accumulation of permanently max-locked veYB, enabling whale-level governance power in YieldBasis from launch. This will shorten the bootstrapping phase (from 1-2 quarters to potentially 1-2 months), enhance APR for depositors, and solidify sticky TVL. The best approach is a multi-phased strategy starting with treasury-funded YB purchases and locks, supplemented by enhanced YND incentives, strategic partnerships, and the launch of a dedicated ynYB governance vault.

Motivation: Why Accrue More $YB?

The ynBTCx-yb MAX Vault’s value proposition hinges on converting YB emissions into permanent veYB to direct incentives toward BTC pools (e.g., tBTC, WBTC, cbBTC), creating a self-reinforcing yield loop. However, relying solely on organic accrual from vault deposits poses risks and limitations:

Prolonged Bootstrapping Phase: Initial veYB accumulation depends on TVL growth and emissions, which could take 1-2 quarters to reach critical mass (e.g., 10-20% of total veYB supply, currently ~$11.29M). During this time, the vault’s governance influence is limited, making it vulnerable to other veYB voters redirecting emissions away from BTC pools.
Risk of Mercenary Capital Flight: Low early APR due to insufficient veYB may deter depositors or encourage exits before the flywheel activates.
Opportunity for Long-Term Dominance: YieldBasis is expanding TVL (current $150M in BTC pools). Accelerating veYB accrual positions YieldNest as a major stakeholder, reducing YB sell pressure through permanent locks, boosting meta-governance for veYND holders, and creating a defensible moat. This aligns ecosystems and turns the vault into a “liquidity blackhole.”

Proposed Approach: Best Way to Accrue More YB

To balance speed, sustainability, and governance principles, implement a phased strategy leveraging YieldNest’s resources. Total estimated initial allocation: ~$1-5M equivalent in capital and incentives (scalable via DAO votes), aiming for 2-5x faster veYB growth in Q1. (unsure this is feasible, though)

Phase 1: Treasury Seeding (Immediate, 0-1 Month)

Action: Use YieldNest treasury funds (managing $80M TVL) to purchase YB on open markets.
Execution: Permanently max-lock acquired YB as veYB, dedicated exclusively to voting for BTC pools.
Why Best Starting Point: Provides instant veYB boost without depending on depositor inflows. Irrevocable locks build community trust and reduce sell pressure.

Phase 2: Enhanced YND Incentives (1-3 Months)

Action: Allocate 5-10% extra from the YND reward pool to ynBTCx-yb depositors during launch. Introduce multipliers (e.g., 1.5x YND rewards for 3-month deposit locks).
Execution: Integrate into vault mechanics for auto-distribution.
Why Effective: Leverages native tokenomics at low direct cost, creating a dual-yield incentive (YB + YND) that draws sticky capital.

Phase 3: Partnerships and Community Scaling (Ongoing, 3+ Months)

Action: Partner with YieldBasis for co-incentives (e.g., joint YB airdrops or gauge bribes favoring BTC pools). Collaborate with BTC wrapper providers (tBTC/Threshold, cbBTC/Coinbase) for shared bootstraps.
Execution: Launch community campaigns; white-label similar vaults; publicize real-time metrics.
Why Complementary: Scales organically post-bootstrap, tapping external ecosystems without treasury drain.

**(*Phase 4 is a thought I had and may be controversial because it may feel unfair to veYND holders. This may need more math and forecasting for feasibility)**

Phase 4: Launching the ynYB Governance Vault (2-4 Months)

Goal: Secure whale-level veYB dominance by attracting external YB holders, further accelerating the liquidity blackhole and aligning YB stakeholders with the YND ecosystem.
Action: Launch the ynYB tokenized vault where users deposit YB to receive ynYB. The vault immediately max-locks the deposited YB as veYB, dedicating its full voting power to the ynBTCx-yb vault’s BTC pools.
Incentive Mechanism (Targeted & Efficient):
- BTC Fee Sharing: Distribute 10% of the underlying veYB’s earned BTC-denominated trading fees directly to ynYB stakers.
- YND Buyback Integration: Dedicate 5% of all YND treasury buybacks to purchase and distribute tokens to ynYB holders.
Rationale: This creates a cross-protocol value alignment: YB stakers receive direct BTC-yield and a stake in YND’s success, providing a powerful, sticky incentive that is non-dilutive to veYND governance power, thus avoiding community backlash.

Risks and Mitigations

Market Volatility: Mitigate with gradual buys and OTC; cap treasury spend at 1% of holdings.
Governance Overhead: Require DAO approval for each phase; include sunset clauses (e.g., end incentives once veYB hits 15% of supply).

Over-Accrual: Tie accrual to performance metrics (e.g., TVL thresholds) to avoid dilution.

Msojumper · November 3, 2025, 7:55am

Here is an updated, easier to read thorough summary of the proposal:

The ynBTCx-yb MAX Vault

A smarter way to earn yield on Bitcoin

The ynBTCx-yb MAX Vault is a new Bitcoin yield product from YieldNest designed to give depositors higher, more sustainable returns, while helping the ecosystem build long-term, stable liquidity.

It’s like putting your BTC to work in a system that not only earns you yield, but also strengthens the foundation that makes those yields possible.

How it works

When you deposit BTC (such as tBTC, WBTC, or cbBTC) into the vault, your funds are placed into YieldBasis, a platform that issues ybBTC in return.

That ybBTC is then staked to earn YB tokens, which are the reward token of the YieldBasis system.

Instead of distributing those YB rewards directly to users (where most would be sold or removed), the vault automatically locks all YB rewards permanently as veYB, a form of governance power.

With this governance power, the vault can vote to direct future YB incentives toward BTC pools. This increases the overall BTC yield for everyone using the vault.

Finally, any BTC rewards that are harvested are converted back into BTC and automatically compounded back into the vault, growing your balance over time without any manual effort.

Why it’s better than going solo

If you tried to do all of this yourself managing BTC staking, claiming YB rewards, locking them, voting, and compounding, it would take time, technical know-how, and high gas costs.

The ynBTCx-yb MAX Vault does all of that automatically while offering several major advantages:

Whale-level governance influence: By pooling deposits, the vault gains large-scale veYB voting power that individual users could never achieve alone.
Higher yields: That governance power helps boost BTC rewards across the ecosystem.
No lock-ups for users: You can enter or exit anytime. The vault handles all the permanent locking behind the scenes.
Auto-compounding: Your yield grows continuously without claiming or restaking.
Optimized voting: The system automatically directs governance power where it generates the highest BTC yield.

Why it matters

This design aligns incentives between three key players:

YieldNest gets stable BTC deposits (“sticky TVL”) and deeper governance power.
YieldBasis benefits from permanent veYB locks that reduce token sell pressure and stabilize liquidity.
veYND holders gain extended influence (“meta-governance”) into YieldBasis through YieldNest’s growing veYB position.

It’s a win-win system where BTC stakers, both protocols, and token holders all benefit from the same compounding loop.

Making yield more stable and “sticky”

The vault doesn’t just chase yield, it makes yield more durable.

By converting short-term rewards (YB tokens) into long-term governance power (veYB), the system creates a foundation that continues generating value even if users withdraw.

This leads to three powerful effects:

Persistent yield: Because governance power stays locked, yield doesn’t collapse when liquidity moves out.
Governance anchor: BTC pools remain well-supported by veYB votes.
Positive feedback: When yields rise, more BTC flows back in, restoring balance.

The result is a system that’s self-reinforcing. Yield stays high, governance gets stronger, and users feel secure knowing their rewards are built on something lasting.

Building up the vault

There will be an initial “bootstrapping” phase lasting about one or two quarters to build up veYB power. During this time, extra YND rewards or treasury support may be added to help grow the vault faster.

A simulation using 100 BTC showed the vault starting around 9.9% APY in its first year - slightly below what an individual might earn alone - but surpassing it in the second year as governance boosts take effect.

To accelerate that process, the plan includes three, possibly four steps:

Treasury-funded veYB accumulation to gain immediate governance influence.
Enhanced YND incentives to attract early BTC depositors.
Partnership campaigns with YieldBasis and BTC providers to grow liquidity and awareness.
*The ynYB governance vault

*4. Introducing ynYB: a yield-bearing governance token

The ynYB governance vault.

Users will be able to deposit YB tokens and receive ynYB, a yield-bearing token that automatically grows in value as the vault locks YB into veYB.

The veYB votes are directed toward BTC pools connected to the ynBTCx-yb vault. Holders of ynYB benefit from BTC fee sharing and a portion of YND treasury buybacks.

In simple terms, ynYB becomes a “number-go-up” token. It naturally appreciates as the system grows and as BTC yields flow back into the protocol.

Using the ynYB vault early is a strong bootstrapping strategy. It turns idle YB holders into active contributors, strengthens governance from the start, and accelerates the entire BTC yield flywheel.

YB holders may choose this vault because it gives them:

Better yield,
Passive appreciation,
Flexible liquidity,
Real participation in BTC yield growth, and
Exposure to YND buybacks — all without the burden of managing veYB themselves.

ynYB holders would receive a share of BTC-based protocol fees and YND buyback yield, derived from the growth the vault itself generates, with allocations approved by veYND governance.

This likely shortens bootstrapping from months to weeks

In summary

The ynBTCx-yb MAX Vault is a new kind of BTC yield engine. It doesn’t just farm rewards, it builds the infrastructure that makes those rewards stronger, smarter, and more sustainable.

Users earn higher, compounding BTC yields without managing anything manually. Protocols gain long-term stability. Governance becomes productive and aligned.

It’s the next evolution of DeFi yield. It’s sustainable, self-reinforcing, and built to last.