Umoja, a decentralized finance (DeFi) protocol, introduces a new service for holders of Coinbase wrapped Bitcoin (cbBTC) which allows them to earn a 6% annual yield on the Base layer-2 network.
Key Points:
- Investors can deposit cbBTC into the Umoja platform to achieve a 6% yield.
- The protocol utilizes various trading techniques, including covered calls and arbitrage—a practice where an asset is purchased on one exchange and simultaneously sold for a higher price on another.
Umoja has implemented a strategy involving both centralized and decentralized exchanges. For instance, a Japanese company started yielding benefit from Bitcoin by purchasing put options while selling the premium when prices dipped.
It is crucial to understand that cbBTC is not the same as Bitcoin (BTC) itself; it is an ERC-20 token that maintains a 1:1 backing with Bitcoin stored at Coinbase.
One of the collateralized Yield Vault Tokens (YVTs) includes yBTC, which is minted when users deposit cbBTC into the Umoja protocol.
The concept of generating yield on BTC through DeFi mechanisms has been contentious, especially among Bitcoin purists who typically express skepticism towards altcoins and the broader DeFi ecosystem. Nonetheless, as the price of BTC continues to fall—from a peak of over $100K to $74.8K on April 7—investor interest in yield strategies as a hedge against value depreciation is anticipated to rise.
Recently, the firm Metaplanet has begun to achieve yield on Bitcoin by executing simultaneous purchases of spot assets and put options, capitalizing on the premium during price declines.
