5.1 Pool Structure Overview by Phase
BELTA IL Hedge Protocol's capital structure operates in two configurations based on growth phase. Phase 1–2 uses a single Underwriter Poolto simplify the structure, Phase 3–4 transitions to Treasury / Senior dual poolto separate risk.
| Category | Phase 1~2 | Phase 3~4 |
|---|
| Pool Structure | Single Underwriter Pool | Treasury / Senior Dual Pool |
| Treasury Concept | None (entire Pool) | 20% of Senior (first-loss) |
| Senior APY Target | 5% (Phase 1) / 6% (Phase 2) | 7% (Phase 3~4) |
| LP Premium | 12% of fees | 12% (unified across all Phases) |
| Pool Size | — (P1 Testnet) / $100K (P2) | $10M (P3) / $20M (P4) |
5.2 Single Pool Structure (Phase 1–2)
In the pilot phase, a single Underwriter Pool operates without Treasury/Senior distinction. The entire Pool receives Aave/Morpho yield and LP premiums, and IL payouts are funded from the entire Pool.
LP Fees
22.4%/yr
→
Gross Premium
12% of fees
→
BELTA Labs
15% Deduction
→
Single Pool
Aave 5% + Net Premium
| Item | Phase 1 | Phase 2 | Notes |
|---|
| Pool Size | —(Testnet) | $100K | Single Pool (Treasury/Senior undivided) |
| Aave/Morpho Operations | 5% APY | 5% APY | USDC-based stable operations |
| Target Pool CAGR | 5% | 6% | Aave + Premium combined |
| LP Premium Rate | 12% of fees | 12% of fees | IL moral hazard prevention |
| Coverage | 35% of IL | 35% of IL | Partial hedge ensures Pool stability |
5.2.1 Liquidity Risk Response — Liquid Reserve + Epoch Settlement
If the entire Pool is deposited to Aave/Morpho, black swan events may trigger simultaneous IL payout demands and Aave liquidity shortages. Two mechanisms defend against this.
① Liquid Reserve — 10% of Pool maintained in USDC cash at all times. Small IL payouts settled immediately in cash; only large events trigger Aave withdrawals.
② Epoch Settlement — IL settled in periodic (Epoch) batches, not real-time. Aave withdrawal timing managed systematically to minimize liquidity shock.
Result: Structurally eliminates IL payout default risk even during black swan events.
5.3 Dual Pool Structure (Phase 3–4) — Premium Flow and IL Payout
BELTA Labs takes 15% off the combined LP premium and DEX cash contribution. The remaining 85% (net) plus Aave yield funds IL payouts, Senior APY, and Treasury reserves in order. Senior operates as compound accrual— interest accrues daily to sb, with principal + interest together serving as IL buffer.
⚠ Note: Below are Phase 4 steady-state theoretical values (Pool $20M, LP TVL $120M, including DEX Payment). See Section 7 for backtest v4.4.0 actual results. Backtest: Phase 3–4 Treasury CAGR +10.2%, BELTA Labs revenue $31,565/yr (TVL utilization 15.7%).
LP Premium + DEX Cash
gross ~$4.01M/yr
→
BELTA Labs 15%
$602K/yr first deduction
→
IL Payout
From net + Aave
① Treasury first-loss
→
Senior 7% APY
Aave 5% + topup 2%
② Compound accrual
→
Treasury
Surplus accrued
③ Surplus → BELTA Labs
| Order | Item | Annual (Mid fee) | Description |
|---|
| Inflow | gross (LP Premium + DEX Cash) | $4,012,800 | LP TVL $120M basis |
| Aave Yield (Senior × 5%) | $800,000 | Daily accrual based on Senior compound balance |
| Deduction | BELTA Labs 15% | -$601,920 | Gross first deduction → BELTA Labs |
| ① IL Payout | Coverage 35% (Epoch Settlement) | -$2,002,391 | Treasury first-loss → Senior order |
| ② Senior | topup (7%−Aave 5% = 2%) | -$320,000 | Priority funded from net, compound accrual to sb |
| ③ Treasury | Net surplus accrued | +$2,008,873 | Target surplus ~$984K → BELTA Labs, remainder retained |
* Senior compound accrual: Interest accumulates daily to sb, with principal + interest contributing to IL buffer. Treasury depleted first, then Senior balance used for IL payouts. BELTA Labs total cash revenue = $602K (deduction) + $984K (distribution) = ~$1,586K/yr.
| Pool | Allocation | Target Return | Characteristics |
|---|
| Treasury (BELTA Holders) | 20% | T-CAGR +10.2%
(Including LUNA·FTX across all periods) | Black swan first-loss absorption then recovery. Surplus distributed to BELTA Labs |
| Senior (General Investors) | 80% | APY 7.0% | Compound accrual — Aave 5% + Premium 2% daily sb accrual |
* Treasury=CAGR (compound growth, recovery after first-loss absorption), Senior=APY (compound accrual, principal + interest grow together).
5.4 Phase 2→3 Transition — Forced Split and BELTA Token Grant
When the single pool accumulates $2M+ at end of Phase 2, it transitions to dual pool structure via forced split. Existing investors receive BELTA tokens as compensation for their Treasury conversion share.
Forced Split Method:
End of Phase 2: Pool balance 20% → Treasury Pool
End of Phase 2: Pool balance 80% → Senior Pool
→ BELTA tokens granted for the 20% conversion share (Protocol revenue participation right, tradeable later)
⭐ Phase 1–2 Early Investor Incentive
Phase 1–2 operates as a single Underwriter Pool. Participants during this period receive additional BELTA tokens equivalent to 20% of their total stake — while their existing stake (Senior 80%) remains intact.
Example: $10,000 deposited in Phase 2 → at Phase 3 transition, holds Senior Pool $10,000 + BELTA tokens ($2,000 equivalent) simultaneously
These BELTA tokens can be staked as xBELTA for continued protocol revenue participation, or held for potential appreciation at Phase 4 governance activation and DEX listing. As the protocol grows, Phase 1–2 BELTA token value appreciates, offering early participants the highest potential returns.
5.5 Treasury Profit Distribution Mechanism
After paying Senior 7% APY, remaining profits are automatically distributed based on Treasury buffer status.
treasury_target = max(initial_treasury, senior_pool_balance × 20%)
if treasury > target → surplus: 80% to BELTA Labs + 20% reflected in xBELTA exchange rate
if treasury ≤ target → 20% of net profit reflected in xBELTA rate + remainder fully accrued to Treasury
* Treasury target buffer = max(initial_treasury, Senior Pool × 20%). Early TVL uses initial_treasury (fixed); auto-increases during rapid TVL growth. xBELTA rate component (20% of net profit) deducted from Treasury → accrued to xBELTA pool → ~12%/yr rate appreciation for BELTA holders.
5.6 Self-Healing Mechanism
When Pool balance decreases from initial levels, protocol fees are automatically adjusted to accelerate recovery.
| Pool Health | Protocol Fee | Status |
|---|
| ≥ 60% (Normal) | 15% | Normal operations |
| 30–60% (Caution) | 5% | Accelerated recovery |
| 10–30% (Warning) | 2% | Emergency recovery |
| < 10% (Critical) | 0% | Maximum recovery |
5.7 LP TVL Measurement — Price-Linked Model
In backtest and protocol internals, LP TVL is calculated as token quantity × current price, not fixed dollar value. This method accurately reflects the true cause of TVL changes during market downturns.
LP TVL = token_qty × current_price
When ETH price drops -40% → LP token quantity unchanged, only dollar TVL decreases -40%
→ This is a price decline effect, not LP attrition
Empirical data: During the 2022 FTX collapse, Uniswap V3 dollar TVL decreased ~12%, but most was automatic contraction from ETH price decline — actual LP exits were minimal. Without this approach, bear market TVL is underestimated, leading to understated premium revenue calculations.
