Just yesterday, Binance announced that it will soon launch a new reward-based margin asset called LDUSDT. This is another stablecoin financial product that can be used as a margin for contract transactions after the launch of BFUSD in November 2024. What is it and how is it different from BFUSD?
Stablecoins that are not stablecoins
LDUSDT is a income-based margin asset designed specifically for futures trading launched by Binance. The official specifically points out that it is not a stablecoin. Users can exchange their USDT simple income elastic product assets for LDUSDT.
LDUSDT has two functions. It can be used as trading margin and earn income at the same time. Binance allows users to use LDUSDT as the trading margin of perpetual contracts (U-based contracts). At the same time, users holding LDUSDT can continue to obtain real-time annualized returns from Binances guaranteed principal and profitable coins current product.
Simply put, like the previously launched BFUSD, LDUSDT allows users assets to have low-risk returns and liquidity at the same time. At the same time, it is also very beneficial for Binance, which can earn more loan interest and more contract funding fees. The founder of the old crypto community Benmo Community proposed that if Binance chooses to use FDUSD to rebuild the liquidity of loans and perpetual contracts, the underlying USD can also earn US bonds. According to the reserve report presented by First Digital Labs on February 28, 85% of the underlying USD of FDUSD is US Treasury bonds. This is equivalent to three sculptures in one. In essence, LDUSDT is a product that Binance shares the above benefits with users.
How is it different from BFUSD?
After Binance launched BFUSD on November 27, 2024, similar products appeared on exchanges such as Dex Backpack and HUOBI, but none of them had as much influence as BFUSD launched by Binance. However, after the launch of BFUSD, although the model was novel and participants generally believed that the model could improve liquidity, at the same time, some problems with the product also emerged.
The income is highly volatile. The income of BFUSD includes the base interest rate and the transaction markup, and the holding limit is linked to the VIP level. This model is highly dependent on market conditions and the users own trading activities. Although it can reach an ultra-high APY of 38% at its peak, if the market is unilateral or the trading volume is insufficient, the actual income may be lower than expected, or even close to the minimum value of the base interest rate. At the end of last year, when the market liquidity was quite high, it could be maintained at around 20-30%, but starting from February to March this year, APY was almost close to 0% in many cases.
The interest rates for retail investors and professional traders are different. The additional rewards of BFUSD are linked to the users futures trading volume. High-frequency traders or large traders can significantly increase their income, while ordinary users with low trading volume may only get the basic interest rate, which is not cost-effective. This makes the design of BFUSD more biased towards professional traders rather than ordinary retail investors.
Although LDUSDT is very similar to BFUSD in usage, its income structure is different. BFUSD is based on hedging strategies and staking, while LDUSDTs income comes from the annualized income of Simple Earn shared by Binance and users, which includes part of the platform fees, lending income, or returns on some low-risk investments.
Because of the above two reasons, BFUSD is not popular in the current market. Unlike BFUSD, which fluctuates greatly due to fluctuations in funding rates, LDUSDT has the advantage of being relatively stable, but the cost is that the yield will not be so high. These yields may be completely insignificant in a bull market, but at a time when liquidity is relatively exhausted, it is a very good choice for those who want to maintain stable returns and liquidity at the same time. The operation of trading strategies that do not rely on the users own is relatively simple, and can popularize more retail investors to participate.
What does Binance want to do by launching yield-generating stablecoins one after another?
In general, BFUSD is more like an investment tool, creating additional value for users through Binances proactive behavior. It is an additional buff for traders to gain profits from frequent trading in a bull market, while LDUSDT is a door that opens the channel between Simple Earn and futures trading, and is a product that encourages conservative users to trade in a bear market.
KOL Loki_Zeng lamented, Binance was too aggressive. They thought that the separation of interest and circulation of stablecoins would be an inevitable outcome, but they didnt expect that it was Binance itself that would revolutionize Binance in the end. Whether it is BFUSD or LDUSDT, what Binance wants to do is to activate a large number of stablecoins that are idle on the exchange and put them in a leveraged shell, and let them stay in the Binance ecosystem to continue to provide vitality for actual business.
The water in this liquidity towel is squeezed by a pair of bigger hands. Can it help us survive the dry time before the water is released? At present, Binance has not released more detailed information about LDUSDT. BlockBeats will continue to pay attention to this matter.
