📤Liquid Custody

BounceBit introduces the concept of Liquid Custody, enabling staked assets to stay liquid & providing more accessible yield-generating opportunities.

The concept of Liquid Custody is named after Liquid Staking, a mechanism first introduced by Lido on Ethereum, a smart solution to overcome the illiquidity of staked Ethereum. It is similar to liquid staking in the sense that a commitment to a yield generating activity that would lock your assets is offset by generating a derivative bound to the value of the underlying asset.

The parallels to Liquid Staking are very apparent, instead of staking to a protocol for network security, you are committing your assets to centralized custody. Then you are returned a voucher-like token, which allows you to withdraw whatever you staked or committed.

Mechanism

When users deposit their assets (BTC, USD, ETH) on BounceBit, they will receive a token (BBTC, BBUSD, BBETH), which represents their assets in regulated custody on a 1:1 basis. These tokens can be bridged to BounceBit and be further utilized, e.g. BBTC can be staked to the dual-token PoS to receive stBBTC, which then can be restaked. Or you directly participate in the usual yield farming through the DApps within the BounceClub ecosystem.

Additionally, you have now earned the right to participate in delta-neutral Funding Rate Arbitrage strategies, with your assets in custody. You have to lock your Liquid Custody Token (LCT) and can commit it to Premium Yield Generation. Importantly, this feature is optional and not required. For more information about this feature, check out our articles on BounceBit’s integration of Centralized Custody and Funding Rate Arbitrage strategies.

Withdrawal

To withdraw your funds out of custody (not Premium Yield Generation), you naturally have to match the asset with its LCT. For example to withdraw 1 BTC, you have to unstake by depositing 1 BBTC back to BounceBit.