Binance Unveils BFUSD: Reward-Bearing Margin Asset

Binance officially unveiled BFUSD on Tuesday, a unique “reward-bearing margin asset” designed for futures trading and passive rewards. The product is set to launch on Wednesday, November 27, at 02:00 UTC, Asia time.

What Is BFUSD?

BFUSD enables users to earn passive rewards while serving as margin for Binance’s USDⓈ-Margined Futures. These contracts use stablecoins like USDT and USDC as collateral, ensuring a stable trading experience free from crypto price volatility.

“BFUSD holders will enjoy a Base APY [annual percentage yield] accruing daily even without trading futures. Those with qualifying trading activity can earn a higher Boosted APY,” Binance said in a statement.

Key Features of BFUSD

1. Rewards and Returns
   • Base APY (historically ranging between 12%-35%) applies to all BFUSD holders.
   • Boosted APY (historically 15%-47%) rewards users with active trading.
   • APYs are distributed as daily USDT rewards and will vary with market conditions.
2. Margin Asset, Not a Stablecoin
   • BFUSD is not withdrawable or tradable on the open market.
   • It can only be used as margin for futures trading or redeemed for USDT.
3. Zero-Negative APY Guarantee
   • A Reserve Fund, seeded with 1 million USDT, ensures holders are shielded from negative returns during bearish market conditions.
4. Operational Strategies
   • Delta hedging between spot and futures markets to earn funding fees.
   • ETH staking to generate consistent APY.

How It Works

BFUSD generates rewards by leveraging delta hedging and staking:

• Delta Hedging: Balances price risks by offsetting spot positions with opposing futures positions, earning funding fees.
• ETH Staking: Adds a consistent layer of returns through decentralized finance.

“In bullish markets, funding rates are positive, and BFUSD’s returns rise. In bearish markets, reserve funds shield users from negative returns,” Binance explained.

Launch Details

• Launch Date: November 27, 2023, at 02:00 UTC.
• Purchase Fees: Initially set at 0.1% but waived during a promotional period (Nov. 27 to Dec. 26).
• Supported Asset: USDT for all purchases, rewards, and redemptions.

During the promotional period, Binance users can compete for a 100,000 USDT bonus APY and USDT vouchers.

Comparisons and Challenges

While BFUSD’s mechanics resemble those of Ethena’s USDe, Binance differentiates it by making BFUSD inherently reward-bearing. Binance also guarantees a zero-negative APY, a promise Ethena doesn’t extend for USDe holders.

Outlook and Implications

Binance’s launch of BFUSD marks another step in its innovation-driven approach to futures trading, targeting both retail and institutional investors. With guaranteed positive APY and a strategic Reserve Fund, BFUSD aims to attract users in a volatile market while cementing Binance’s role as a leader in crypto derivatives.