yRUNE
Yield Bearing RUNE (yRUNE) is an auto-rebalancing basket of RUNE and TCY. yRUNE is a liquid asset that captures fees from THORChain system income (via staked TCY) while also providing exposure to the RUNE price.
How are the weights between RUNE and TCY determined?
The weights of RUNE and TCY are set to maximize returns captured from:
TCY Yield (THORChain System income): TCY is a unique asset, as it captures 10% of THORChain's system income. Our contract is whitelisted to receive these staking rewards, enabling yRUNE to fully benefit from the TCY component of the index.
RUNE / TCY mean reversion: Due to price fluctuations, particularly for TCY caused by shallow liquidity, yRUNE captures volatility by automatically rebalancing towards the "cheaper" asset during price swings. This is achieved by keeping yRUNE close to a predefined target ratio between RUNE and TCY.
Liquidity: Safeguards are implemented in the contract to ensure that rebalancing minimizes price impact and slippage.
Taking these three factors into account, initial weights are set to 80% RUNE : 20% TCY. The contracts will initiate rebalancing if the weight is at least 1 percentage point off its target weight.
Current & target weights can be seen on the RUJIRA UI at https://rujira.network/index/yrune.
Rebalancing
Rebalancing occurs automatically with each contract crank (at least once per minute). If insufficient liquidity prevents executing a rebalance, the contract will attempt again later to minimize price impact and slippage.
Risks
Key risks for yRUNE include:
Asset risk of RUNE and TCY.
Smart contract risk of RUJI Nav Index contract (audited).
Rebalancing/Trading risk: The automated rebalancing algorithm aims to maximise returns from trading, but those are not guaranteed and may depend on other factors such as market conditions, liquidity & more. Safeguards are in place to minimize this risk.
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