Staking hBTC
Activating BTC Yield through On-Chain Infrastructure
After minting hBTC—whether via native Bitcoin deposits or EVM-based onboarding—users must stake it to begin earning yield. This staking process converts hBTC into shBTC, the yield-bearing token that reflects accrued returns from Hilbert Group’s BTC-denominated strategies.
The shBTC staking mechanism allows users to transform their hBTC holdings into a yield-bearing position by interacting with a standardised and composable on-chain architecture. At the core of this system is an implementation of the ERC-4626 Tokenized Vault standard, which governs deposits, shares, and yield distribution in a transparent and interoperable way.
Technical Overview
Vault Standard: ERC-4626
Underlying Asset: hBTC (ERC-20)
Vault Token: shBTC (ERC-20, yield-bearing)
Mechanism: hBTC is deposited into the vault; users receive shBTC proportional to their share of the vault.
Redemption: When shBTC is redeemed, users receive their original hBTC plus accrued yield.
Accounting: Internal vault accounting tracks
totalAssets,totalSupply, andpreviewRedeem()logic as per ERC-4626 specifications.
This standard ensures consistent behavior across DeFi protocols, enabling:
Accurate tracking of user share value
Seamless integration with aggregators and DeFi vault managers
Transferability and use of shBTC in other smart contracts while retaining exposure to yield
Staking Process (Flow)
The staking process converts passive hBTC into active, yield-generating shBTC. The process can be broken down as follows:
hBTC Minting Users deposit BTC via supported custodians or EVM-compatible bridges, minting hBTC at a 1:1 ratio.
Vault Deposit The user deposits hBTC into the shBTC Vault, triggering an ERC-4626-compliant
deposit()function.shBTC Issuance In return, the contract issues an equivalent amount of shBTC, representing the user’s share in the vault.
Yield Accrual As the underlying BTC is deployed into yield-generating strategies by Hilbert Group, the vault’s total assets increase. The value of each shBTC token increases proportionally.
Redemption Upon calling
redeem()orwithdraw(), users return shBTC and receive their hBTC plus accrued yield over the staking period (net of any protocol-defined fees, if applicable).
Yield Mechanics and Risk Considerations
Source of Yield: Yield is sourced from institutional-grade BTC strategies executed by Hilbert Group AB, including delta-neutral arbitrage, basis trades, and off-chain lending.
Accrual: Yield accrues in the vault and is reflected in the appreciation of shBTC’s redeemable value per token over time.
Risk Profile: Strategies are designed to be delta-neutral; however, yield is not guaranteed.
In low-volatility or stressed market conditions, returns may fall to zero or become negative.
In such events, Syntetika’s Reserve Fund is designed to intervene to maintain solvency and uphold redemptions.
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