Risk

Ascent Yield is a highly stable market with virtually no security concerns.

Funding rate risk

Since ascentBTC uses perpetual futures for hedging and earns funding fee yields, the funding rate can be both positive and negative. When the funding rate is at a low level, our protocol may potentially incur losses. However, historically, this situation rarely occurs because people are generally in long positions.

Even when the funding rate is negative, we can still ensure positive returns for users through our insurance mechanism. Moreover, our protocol's income is not solely dependent on funding rates; other revenue streams significantly outweigh funding rate yields. Therefore, from an overall perspective, this aspect will not affect the users' yield curve.

Liquidation risk

Since we use perpetual futures for hedging, there is a theoretical risk of liquidation. However, due to our hedging strategy, liquidation will never actually occur. From a higher perspective, liquidation is essentially just the exchange forcibly adjusting our positions. In reality, our protocol constantly adjusts positions to ensure our hedging positions remain within a reasonable range. (For more details, please refer to the Positions Management section)

Moreover, historically, the relative volatility between ETH/BTC has been very low. Through backtesting, we've found that liquidation scenarios are extremely unlikely to occur, barring a black swan event.

In the extremely unfortunate event of a forced liquidation under extreme circumstances, users would not actually incur losses. This is because we can utilize the remaining margin to reopen positions, ensuring that all ETH remains in a hedged state. Our program includes logic to handle this scenario. (Some exchanges charge liquidation fees, and these losses would be covered by the insurance fund.)

Assets Risk

All Assets deposited as collateral in our protocol will be stored through custodians. Our project team itself will not hold users' funds; the security of users' funds is guaranteed by the custodians.

This approach is typically called "Off Exchange". Users' funds do not directly enter an exchange (preventing FTX-like incidents) but are instead held by a custodian.

We use custodians such as Copper, Ceffu, and Fireblocks. For detailed information on this approach, please refer to the Collateral Management section.

Exchange Security Risk

Due to our funds being held in custodial services, our capital security remains guaranteed even if an exchange faces bankruptcy risk. Moreover, through the OES (Off Exchange Settlement) mechanism, we can easily migrate positions from one exchange to another.

Lido Risk

Since we need to stake ETH in the Lido protocol, Lido's security also affects our protocol. Additionally, the price of stETH impacts us. However, we use highly reputable and secure Liquid Staking Tokens (LSTs), so such issues are extremely unlikely to occur. If they do happen, it would likely be due to a systemic impact affecting the entire ecosystem.

stETH:ETH swap rateDuneAnalytics

Contract Security Risk

We have two sets of contracts: one for Buying and Selling aBTC, and another for Staking and Unstaking. The contracts are relatively straightforward, following official Ethereum standards, and have been audited. For more details, please refer to the Solutions section.