DeFi Strategy – Full Strategy Description

DeFi Strategy uses the asset you allocate (the "Strategy Asset") as collateral in a delta-neutral interest-rate arbitrage constructed in two forms: cross-exchange arbitrage (the main form) — holding matched long and short positions in the same underlying asset across selected exchanges, protocols, or trading venues, in order to earn interest-rate and funding-rate differentials between venues; and a single-exchange variant — a cash-and-carry (spot–futures) trade on the funding rate, built within one exchange.

In both forms, positions are matched by delta exposure: the strategy is designed so that the amount of directional exposure purchased is offset by an equivalent amount of directional exposure sold, and it does not seek to generate returns from an increase or decrease in the price of the underlying asset.

How to read this document. Sections 2 and 3 describe how the strategy works and what you receive. They state design and intent, not outcome. Section 4 sets out what can go wrong, and the qualifications to sections 2 and 3 are stated there; it is not an exhaustive list of the circumstances in which a loss may arise. This document is information about a product. It is not investment advice and not a recommendation to deposit; take independent advice if you are unsure.

2.1 Collateral and venues. The Strategy Asset is used as collateral on selected exchanges, protocols, or trading venues.

2.2 Cross-exchange arbitrage. When an attractive rate differential is identified between two or more venues, offsetting long and short positions are opened in the same underlying asset across the relevant venues. The positions are matched by delta exposure, so that the amount purchased on one side is designed to be offset by an equivalent amount sold on the other side. As a result, the strategy does not seek to generate returns from an increase or decrease in the price of the underlying asset.

This form seeks to earn returns primarily from the difference between interest rates or funding rates available across the selected venues: each position may earn or pay the applicable rate on its venue, and the strategy seeks combinations where the rate received on one side exceeds the rate paid on the other — after applicable trading fees, borrowing costs, funding payments, transfer costs, and execution expenses.

2.3 Single-exchange variant (cash-and-carry). A similar delta-neutral position can also be built within a single exchange, as a cash-and-carry (spot–futures) trade on the funding rate.

Borrowing and leverage. The Strategy Asset is deposited with the exchange as collateral, and a stablecoin loan is drawn against it. The variant uses borrowed funds; effective leverage varies with the value of the positions and with the collateral value recognised by the exchange.

The position. Borrowed stablecoins are used to purchase an asset (for example, ETH or SOL); the purchased asset is staked to earn staking yield; and a short position of equivalent delta is opened against it on the same exchange's derivatives market. This variant seeks to earn returns from the perpetual-futures funding rate and the staking yield on the asset, net of borrowing costs. The underlying construction is the same as in the cross-exchange form — the pair is designed to offset the price direction of the traded asset — executed within a single trading venue.

Collateral valuation and leverage management. Where the exchange values collateral at a discount it sets, available margin is the discounted value of the collateral. Effective leverage rises when the collateral value recognised by the exchange falls relative to the loan — whether because the collateral's market price falls, or because such a discount is increased. As effective leverage approaches predefined thresholds, the company's automated deleveraging process seeks to reduce positions and lower leverage.

Scope of the hedge. In both forms, delta matching applies to the traded asset of each position pair. The Strategy Asset placed as collateral is not part of the traded positions: it serves as collateral throughout.

2.4 Position management, reallocation and reinvestment. Positions and collateral are actively monitored and may be adjusted or rebalanced as rates, prices, liquidity, collateral requirements, transfer conditions, and execution costs change. Capital may be reallocated between eligible venues when a different rate opportunity offers a more attractive expected return within the applicable risk limits. Strategy earnings may be automatically reinvested.

3.1 Your result. Participant results are calculated in the Strategy Asset; rewards are calculated and accrued daily for USDT, USDC and TON, and monthly for ETH. A result may be positive or negative.

3.2 Costs the strategy bears. Trading, borrowing, funding, transfer and execution costs. These reduce the strategy's result before anything is attributed to participants.

3.3 Fees and conditions. The fees, minimum amounts and withdrawal terms applicable to this strategy are set out in the strategy's conditions in the platform, and prevail over any figure repeated elsewhere.

3.4 Taxes. Any taxes arising from your participation are your responsibility, in accordance with the jurisdiction in which the company operates and your own. The company does not provide tax advice and does not determine your tax position.

Participation in the strategy involves risk. A participant may lose part or all of the funds allocated to the strategy. Descriptions of monitoring, limits and controls in this document describe how the strategy is designed to operate, not a promise that it will.

4.1 Rate risk. Interest-rate or funding-rate differentials may decrease, disappear, or reverse after positions have been opened. This may reduce or eliminate the expected return and may result in a loss after transaction and execution costs. For positions built within a single exchange, the perpetual-futures funding rate may decrease, turn negative, or remain negative for an extended period, which reduces the return on that variant or makes it negative for that period.

Mitigation: positions and collateral are actively monitored and may be rebalanced as rates, liquidity, costs, and market conditions change; rebalancing does not offset returns already reduced or turned negative.

4.2 Basis risk. Prices of the same underlying asset or related instruments may diverge between exchanges, protocols, spot markets, derivatives markets, or wrapped representations. Such divergence may negatively affect strategy performance even when the positions remain matched by delta exposure.

4.3 Hedging and execution risk. The strategy holds long and short positions that are designed to be matched by delta exposure — across venues in the cross-exchange form, and within one venue in the single-exchange variant. However, partial order execution, delays between transactions, insufficient liquidity, slippage, price divergence, transfer delays, technical failures, or the liquidation of one position may temporarily disrupt the hedge and create residual directional exposure.

4.4 Collateral and liquidation risk. Changes in asset prices, collateral values, margin requirements, or borrowing conditions may require additional collateral or result in the partial or full liquidation of a position. In the single-exchange variant, the deposited Strategy Asset is not covered by the variant's offsetting positions: a decline in its market price — or, where the exchange values collateral at a discount it sets, an increase in that discount — reduces the collateral value recognised by the exchange and increases effective leverage even while the long and short positions remain matched. If effective leverage rises far enough, the exchange may liquidate positions. This applies in particular where a volatile asset (for example, BTC or ETH) is used as collateral. Where liquidation occurs, collateral may be sold in part or in full to repay borrowing, and a participant may receive back fewer units of the Strategy Asset than were allocated.

Mitigation: the company's automated deleveraging process seeks to reduce positions as effective leverage approaches predefined thresholds; it operates on the company's own model of the exchange's margin requirements, while the exchange calculates margin and liquidation under its own methodology, and it does not prevent liquidation.

4.5 Protocol and smart contract risk. DeFi protocols and smart contracts may contain vulnerabilities, coding errors, configuration mistakes, governance risks, or malicious mechanisms. An exploit or failure may result in a partial or complete loss of funds.

4.6 Oracle risk. Incorrect, delayed, manipulated, or unavailable oracle data may cause incorrect asset valuations, failed transactions, improper liquidations, or other losses.

4.7 Blockchain and network risk. Network congestion, consensus failures, validator problems, blockchain reorganizations, transaction delays, or increased network fees may affect access to funds and strategy execution.

4.8 Bridge and transfer risk. Cross-chain bridges and other transfer mechanisms may be exposed to smart contract vulnerabilities, validator failures, operational problems, or cyberattacks. Delayed or failed transfers may prevent the timely rebalancing of positions.

4.9 Exchange and counterparty risk. Centralized exchanges, custodians, brokers, market makers, protocols, and other counterparties may experience operational failures, cybersecurity incidents, liquidity problems, withdrawal restrictions, regulatory actions, or insolvency. The strategy may spread positions across multiple venues; venue diversification is intended to reduce dependence on any single counterparty and does not eliminate the risks of the venues used.

4.10 Strategy Asset risk. The value of the Strategy Asset may fluctuate. Stablecoins may lose their intended peg, while wrapped or yield-bearing representations may trade below the value of the underlying asset or become difficult to redeem.

4.11 Liquidity risk. Limited market depth, reduced protocol liquidity, withdrawal restrictions, or rapidly changing market conditions may prevent transactions from being executed at the expected price or within the required period.

4.12 These conditions arrive together. The risks above are not independent, and the conditions in which each is most likely are the same conditions. In a sharp market-wide fall, the Strategy Asset placed as collateral in the single-exchange variant falls in price; where the exchange values collateral at a discount it sets, that discount may be raised in response to the same volatility; the funding rate may turn negative; borrowing costs may rise; market depth thins and prices diverge between venues, so rebalancing and transfers cost more or arrive late. Each of those raises effective leverage or reduces available margin, and they can arrive at once. The automated deleveraging process then has to reduce positions in precisely the conditions in which reduction is most expensive, acting on the company's model of exchange requirements the exchange may be changing at the same time. A loss in such a period can be larger than the sum of the risks taken separately.

4.13 Other risks, and past performance. The value and performance of the strategy may be affected by market, political, economic, credit, regulatory, operational, technological, and other conditions. Past performance is not a guarantee of future results.

5.1 Changes. The company may change the parameters of the strategy. Reallocation between eligible venues occurs within the strategy's operation as described in 2.4. Venues, for their part, may change their own terms, including margin requirements, under their own rules; where a venue values collateral at a discount it sets, that discount may also change. The strategy's current conditions are shown in the platform.

5.2 Status of this description. This description explains how the strategy operates. Your relationship with the company is governed by the User Agreement and the documents it incorporates, including the strategy's conditions in the platform; where this description differs from them, they prevail, and nothing here extends the company's obligations. It is a summary: it does not describe every feature of the strategy or every circumstance in which a loss may arise. Statements about how the strategy is designed to operate, how markets, protocols or venues behave and how third parties may act are the company's present understanding, not representations or warranties. Words such as "seeks", "intended" and "designed" describe objectives, not outcomes.

The strategy may use borrowed funds and operates on cryptocurrency exchanges and on-chain protocols, where positions can be liquidated. Deposit only an amount you could lose without it affecting your circumstances.

5.3 Definitions.
​Strategy Asset — the asset a participant allocates to the strategy.
​Venue — an exchange, protocol, or other trading venue on which the strategy holds collateral or positions.
​DeFi (decentralised finance) — financial services delivered through on-chain protocols rather than centralised intermediaries.
​Arbitrage; interest-rate arbitrage — seeking to earn the difference between two related prices or rates; in this strategy, differences between interest rates or funding rates across or within venues.
​Collateral — assets pledged to secure borrowing or to support positions.
​Stablecoin — a crypto asset designed to track the value of a fiat currency.
​Discount (haircut) — a reduction a venue applies to the market value of an asset when counting it as collateral.
​Margin — the collateral value a venue recognises as available to support open positions.
​Effective leverage — the ratio of total position value to the collateral value recognised by the exchange.
​Underlying (traded) asset — the asset in which a pair of offsetting positions is held; it is distinct in role from the Strategy Asset placed as collateral.
​Delta — the sensitivity of a position's value to a change in the price of the underlying asset; two positions are "matched by delta" when that sensitivity is equal and opposite.
​Perpetual futures — derivative contracts without an expiry date, traded on an exchange's derivatives market.
​Funding rate — a payment periodically exchanged between holders of long and short positions in a perpetual futures contract.
​Cash-and-carry — a purchased asset combined with an offsetting derivative short position in the same asset.
​Basis — the difference between prices of the same underlying asset or related instruments on different markets or in different forms.
​Staking — committing an asset to support the operation of its blockchain network in exchange for rewards.
​Consensus failure — a failure of the process by which a blockchain network agrees on its state.
​Blockchain reorganization — the rewriting of a blockchain network's recent transaction history.
​Oracle — an external data feed on which an on-chain protocol relies.
​Bridge (cross-chain bridge) — a mechanism that moves assets between blockchain networks.
​Wrapped / yield-bearing representation — a token that stands in for another asset; a yield-bearing one is designed to accrue yield to its holder.
​Peg — the intended fixed relationship between an asset and its reference asset or currency.
​Counterparty — a party to a transaction or arrangement whose failure to perform affects the strategy.
​Reinvestment — using strategy earnings to increase the strategy's positions rather than paying them out.
​Liquidation — the forced reduction or closing of positions and/or sale of collateral by an exchange or protocol under its own methodology when its collateral or margin requirements are not met.
​Slippage — execution of an order at a worse price than expected at the time it was placed.