BFUSD: Binance’s Latest Margin Asset with Passive Income Potential

What Is BFUSD and How Does It Work? Binance’s New Product Explained

Binance has officially introduced BFUSD, a reward-bearing margin asset, aimed at enhancing users’ passive income through holding or trading futures with the token. The product, which launched on November 27, offers a unique structure that allows users to earn annual percentage yield (APY) without needing to actively trade. According to a Binance spokesperson, holders of BFUSD will earn a Base APY that accumulates daily. Those engaging in USDⓈ-Margined Futures trading can benefit from an increased Boosted APY.

BFUSD’s Reward System and Financing Strategy

BFUSD rewards are generated through delta hedging strategies, using crypto assets between the spot and futures markets to collect funding fees, as well as staking Ether. These strategies aim to provide passive rewards to BFUSD holders. While similar to Ethena’s synthetic dollar (USDe), BFUSD is distinct in that it guarantees rewards to holders, unlike USDe, which requires users to apply it strategically.

Binance has assured users that BFUSD’s reward rate will never drop below zero, even during bearish market conditions. A portion of the generated APY is kept in the BFUSD Reserve Fund to ensure holders are protected from negative funding fees. The reserve fund, initially seeded with 1 million USDT, is designed to support hedging strategies and cover potential negative funding rates. Historical data suggests a positive funding rate for ETHUSDT in 350 of the last 365 days, indicating that BFUSD holders can expect a consistent reward generation.

BFUSD Launch Details and Promotional Offer

At launch, USDT will be the only asset used for BFUSD transactions, with all purchases, rewards, and redemptions conducted in USDT. During the promotional period from November 27 to December 26, users can purchase BFUSD without incurring fees, along with a chance to earn up to 100,000 USDT in bonus APY and vouchers. The current purchase and redemption fee is set at 0.1%, though this may change in the future.

In summary, Binance’s BFUSD offers a unique opportunity for passive income through its margin asset structure, leveraging futures trading strategies and staking to provide rewards.