Binance on BFUSD: Not a Stablecoin, High-Yield

Binance on BFUSD: Not a Stablecoin, High-Yield

Critics have had significant doubts about the viability of the BFUSD’s yield model, with comparisons to previous high yield failures. The critics include RunnerXBT and Jameson Lopp who took negative positions

Binance has clarified the nature of its new asset, BFUSD, stating that it is a reward-bearing margin asset rather than a stablecoin. The statement posted on X (formerly Twitter) came after users raised questions on the platform due to a previous post by Zoomerfied, a crypto news aggregator. The post stated that a new stablecoin named BFUSD would yield a massive 19.55% per annum, which was met with comparisons to the downfall of TerraUSD.

Reactions and Parallels to TerraUSD Collapse

The first post received a lot of response from the crypto community, with many people comparing it to the recent failure of TerraUSD (UST) in 2022. UST is an algorithmic stablecoin that offered a 20% annual yield through the Anchor Protocol but which fell below $0.01 in May 2022 after depegging from the dollar.

This collapse erased hundreds of billions of dollars in market capitalization and affected the entire crypto space. UST’s sister token, LUNA dropped from a price of $80 to a fraction of a cent within a few days.

Critics have had significant doubts about the viability of the BFUSD’s yield model, with comparisons to previous high yield failures. The critics include RunnerXBT and Jameson Lopp who took negative positions. Some users such as RunnerXBT accused platforms like Anchor of making unrealistic promises, while others wondered if the yield might be generated from users themselves, which added more suspicion.

BFUSD a Reward-Bearing Asset for Margin Trading

To counter the rumors, Binance stated that BFUSD is a margin asset designed for use in the futures market, not a stablecoin. This does not require users to stake or lock up their tokens as collateral in order to use them. BFUSD will be held in a UM wallet, where traders will get daily airdrops depending on the hourly balance of their positions. These rewards will then be transferred to the users’ UM Futures Wallet respectively. It will be based on the users’ social credibility score or the VIP level of the Binance exchange platform.

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