The "Traditional" Yield-Bearing Stablecoin Model
A traditional yield-bearing stablecoin (YBS) will typically operate like this:
User deposits collateral (usually battle-tested stablecoins like USDC/USDT/DAI/etc) into the YBS protocol
User receives newly-minted YBS's at a roughly 1:1 ratio
Underlying collateral is farmed in stablecoin farming strategies, producing yield
Yield is sent to User's wallet every day as more YBS tokens, in proportion to their YBS holdings against all YBS's in circulation (this is called the "daily rebase"). The stablecoin yield is kept with the protocol, maintaining 100% collateralization
A user can redeem their YBS tokens for the underlying collateral at any time, as long as there always remains a 1:1 ratio of YBS tokens in circulation to collateral stablecoins in the protocol.
This is a simple and efficient way for a user to pass along the management of stablecoin farming to a third party - usually in return for that third party taking some percentage of the daily yield as compensation.
The YBS protocol will automatically place user funds into a diverse basket of stable farms that (presumably) are safe and lucrative. The user is now "farming" while remaining completely hands-off.
If the user approves of the strategies that the YBS protocol farms in, everyone wins.
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