Yield Generation

The native yield is generated by the assets in the bentoX reserve through specific yield-bearing assets and yield-generating strategies on DeFi protocols. The Bento protocol supports a range of whitelisted yield-bearing assets across stablecoins, ETH, and BTC, implementing adaptive strategies to optimize risk-adjusted returns. By leveraging blockchain technology and smart contracts, DeFi enables novel ways for users to access and provide liquidity, such as staking, market making, lending, farming protocol incentives, and fee sharing from protocol earnings.

Here are high-level yield sources for bentoX assets:

Yield bearing assets: Yield-bearing tokens are assets in DeFi that have native yield and generate returns exceeding their underlying value by automatically compounding earned yield. Deposits assets are converted to these YBAs and further used to generate yield on various DeFi protocols. Some of the YBAs used as collateral assets backing bentoX assets:

Yield Bearing Stablecoins: sDAI, sUSDe etc.

ETH Liquid Staked Tokens (LSTs): stETH, rETH etc.

ETH Liquid Restaked Tokens (LRTs): eETH, ezETH etc.

BTC Liquid Staked Tokens (LSTs): LBTC, eBTC etc.

Tokenized Real World Assets (RWAs): USDM, USTB, USDtb etc.

Over-collateralized Lending: Bento programmatically deposits the underlying collateral assets to decentralised lending markets such as Aave, Compound, Morpho etc., earning interest on the deposits paid by the borrowers. Bento only utilises the following top money markets which have a proven track record, audited smart contracts, and have successfully lent hundreds of millions of dollars without issue.

Automated Market Making: Bento programmatically routes collateral assets into top-performing liquidity pools based on factors like TVL, trading volume, and rewards. By participating in AMM liquidity provision, Bento earns fees and rewards for providing liquidity. The yields generated are then distributed to bentoX stakers and lockers, ensuring they benefit from optimized liquidity and rewards.

Rewards: Bento automates the harvesting of yield and rewards through bentoX while automatically accumulating points, token rewards and airdrops from whitelisted protocols based, making the rewards directly accessible to users. Harvested yield and rewards are automatically reinvested to compound returns over time.

Algorithmic Market Operations (AMOs): Bento protocol engages in AMOs, also known as Direct Deposit Modules, which play a crucial role in boosting liquidity of bentoX tokens and optimizing yield generation. AMOs allow contracts to mint bentoX tokens without immediate collateral backing, while the protocol retains control over these minted tokens. In lending markets, an AMO mints bentoX tokens and deposits them into platforms like Morpho, allowing users to borrow them if they provide sufficient collateral. These tokens are only considered part of the open market when borrowed and at this point, they are backed by the collateral deposited in the lending protocol by the borrowers. This mechanism enables the protocol to generate additional yields from interest payments, further increasing the overall yield of bentoX.

The above opportunities to earn yield are native to the blockchain and thus come with their own unique risk vectors. bentoX reserve is designed to enhance the system resilience by isolating the associated risks from each other, ensuring that losses in one sub-system do not impact others. New collateral assets and strategies are introduced over time to maximize returns while minimizing risks and dependencies, all in accordance with DAO governance rules and the established risk framework. Apart from the risk assessment for the selection criteria, additional measures are in place including minimum and maximum weight to each collateral asset and maximum exposure to any DeFi protocol. The DAO appointed risk managers monitor the risk factors on an ongoing basis and provide their analysis to the DAO in order to make well-informed decisions related to managing the underlying collateral and protocol.