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description: Yield-Bearing BTC Exposure via On-Chain Vaults
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# shBTC

shBTC is the yield-generating component of Syntetika’s architecture—a tokenized staking position that enables BTC holders to earn institutional-grade yield through professionally managed strategies, while maintaining composability and liquidity across DeFi — transforming Bitcoin from a passive reserve into an income-generating asset.

Built on the [ERC-4626 vault standard](https://ethereum.org/en/developers/docs/standards/tokens/erc-4626/), shBTC represents a user’s staked hBTC position and accrues yield over time, distributed transparently through the protocol’s smart contracts.

### How shBTC Works

The conversion process from hBTC to shBTC is initiated through a simple on-chain staking transaction:

* Users stake their hBTC into the Syntetika vault contract.
* They receive shBTC in return, which:
  * Retains 1:1 exposure to BTC principal.
  * Accrues yield generated from fund strategies operated by Hilbert Group.
  * Remains fully liquid and composable across DeFi protocols (e.g., Aave, Morpho, Pendle).

This ERC-4626 architecture ensures that shBTC can be integrated into the broader DeFi landscape, allowing users to leverage their yield-bearing BTC in lending markets, derivatives platforms, and structured product protocols.

> Yield generation is seamless: users maintain BTC exposure, receive high quality risk/return profile, and retain the freedom to deploy shBTC across the DeFi ecosystem.

### Yield Generation and Strategy Allocation

The yield associated with shBTC is derived from BTC-denominated fund strategies. These strategies follow different mandates—ranging from basis trade, lending, and yield curve trading—and are designed to deliver attractive, risk-adjusted returns independent of market direction.

Full operational details are available [here](../underlying-strategies) in the Underlying Strategies documentation. As the protocol expands, Syntetika will onboard additional strategies, creating a diversified revenue engine that balances risk, return, and exposure across multiple products.

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To manage this evolution, Syntetika will implement allocation rules, defining how capital is distributed across available strategies. These rules will be informed by performance history, risk ratings, liquidity needs, and other similar parameters which will be transparently described in the future sections of the Syntetika's documentation.
{% endhint %}
