Yield Overview
Where is the Revenue/Yield from Reflect Protocol generated, How is it handled.
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Where is the Revenue/Yield from Reflect Protocol generated, How is it handled.
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Reflect generates Yield from many diversified sources across extremely low-risk proof of stake-based positions to derivatives markets-based positions. Its primary value proposition is the combination of these yields provided through a Dollar Derivative (stablecoin)
By Operating a Solana-Mainnet Validator Node Reflect Protocol can offer both Native-Stake and Liquid Staking. Both require the Non-Custodial Delegation of Solana (SOL) token in exchange for rewards paid in lamports over time.
These rewards are generated by producing blocks, priority fees, and maximum extractable value (MEV) and are paid either by the network itself or network participants submitting to the network via the use of Gas Fees. The Reflect Validator returns all of these rewards aside from priority fees to its stakers in both Native and Liquid Stake pools.
This form of Yield is the safest form of yield on Solana; it is an inherited function of the network and is designed in such a way that at the individual level, there is no cost other than speculative opportunity cost (the price of Solana changing)
Read more about the Validator here!
In the creation of Reflected Currencies, the Liquid Stake Token (LST) that the user deposits to the program is then deposited into a Decentralized Exchange (DEX) where a short position on a SOL-PERP market is opened equal to the value of the deposit.
This creates a Delta-Neutral position - removing the speculative volatility of the deposit assets if the token goes up or down. We can expect the same $ value regardless of market conditions.
Reflect utilizes with a based liquidity management system. Where depositors to the exchange are paid or pay for their on any given market. Typically short positions are the majority recipients of payments whereby long positions pay for leverage.
You can view the Historical yield APY (%) of the Reflect sourced funding rate here.
Deposits into Reflect Protocol earn additional yield generated from the unique design of its underlying exchanges collateral system. Enabling supply and borrow side opportunities for its users the exchange is able to generate Yield for its users on those deposits. This is done through a series of lending primitives. Learn more about Drift Protocol Collateral Yield below!
Be Aware Financial responsibility is a personal task that involves understanding all the Risks assumed by utilizing digital financial primitives. Especially when dealing with self-custodial systems.
