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26 June, 2020

The BitPRO (BPRO), a token to earn income for Bitcoin Holders with free leverage

This article is the first in a series where the BitPRO, or BPRO, according to its “ticker”, will be explained in detail. The BPRO is one of the Money On Chain tokens, a DeFi for Bitcoin platform. This token was designed to generate profitability in Bitcoin in a decentralized way. In this article we will explain about the free leverage in Bitcoin that the BPRO has.

Introduction to the BPRO

The purpose of the following articles is to clearly display the incentives for Bitcoin holders to convert their Bitcoin to BPRO tokens.. For many Bitcoin users, whom Bitcoiners call Hodlers, the increase in the value of Bitcoin in the long term is very attractive. When the MoneyOnChain protocol was designed, special consideration was given to Hodlers, and different incentive alternatives were evaluated to increase  contributed collateral to the protocol. This is how the BPRO was born.

For those who are not familiar with the MoneyOnChain protocol and its tokens, including the BPRO, we can recommend various articles, technical documents and also videos. In this series of articles we will review these concepts, and analyze them in detail. Among the articles mentioned, in the article "Deep dive into Money On Chain", it is explained that the BPRO receives:

  • Free leverage, provided by DOC token holders.
  • Passive income (interest in Smart Bitcoins, or rBTC), paid by traders who carry out BTC leveraged transactions on the platform.
  • Fees paid by the users of the platform.
  • Incentives in MOC tokens for having BPRO.

In this first article on the BPRO we will explain about the first of the mentioned components, the free leverage in Bitcoin.

BPRO's Free Bitcoin Leverage

The BPRO was designed so that Bitcoin Holders receive income in Bitcoins. One way to obtain it is through free leverage, which is given by the holders of DOC Tokens (DOC is a MoneyOnChain protocol token that is the first Stablecoin collateralized with Bitcoin). You can see an example of how the model works in a video. As a result of this leverage, when the price of BTC increases, the BPRO token will increase a bit more.

If you enter the Money On Chain application, and go to the metrics section (https://alpha.moneyonchain.com/metrics), you can see the leverage of the BPRO (See BPRO Current Leverage). We can explain it with an example, using the information available in the MoneyOnChain system at the time of writing this article (Friday, June 26, 2020).

Leverage in Metrics Jun 26 2020
Figure 1: Visualization of Money On Chain Metrics - DeFi for Bitcoin

Figure 1 shows that the leverage of the BPRO at that time was 1,2003. That means that if the price of bitcoin at that time will increase by $ 100, the price of the BPRO would increase 120.03. This leverage can also negatively impact the BPRO holder, because a drop of $ 100 at that time would cause the BPRO price to drop 120.03. 

A frequently asked question about the BPRO is what is the leverage that can be expected from the BPRO. That leverage cannot be determined a priori, because it depends on multiple factors, such as the demand for DOC, BTCX, BPRO, and the rise and fall of the price of Bitcoin. But in the following table you can see what has been the historical leverage of it (which has usually been above 1 and below 1.25):

BPRO Leverage
Figure 2: Historic leverage of the BPRO token - historical chart

Another frequently asked question by users of the MoneyOnChain protocol is how this leverage impacts the price of the BPRO. Although, as we have mentioned before, in the face of a drop in the price of Bitcoin, leverage can play unfavorably for BPRO holders, simulations carried out based on historical prices have shown that this free leverage is likely to generate an appreciation in the price of BPRO above the price of Bitcoin. On the other hand, an analysis of the historical evolution of the price of the BPRO vs the price of Bitcoin (see graph BPRO_Technical_Price / Bitcoin), also shows a positive trend as the price of Bitcoin appreciates over time. So far these simulations based on historical BTC prices, and on the other hand the actual behavior of BPRO vs BTC since the launch of the platform, show that for a BTC hodler who believes that the price of BTC is going to rise, BitPRO is a good token to evaluate, because in the long term it will increase in price even more. But these two analyses (the one of simulations on the historical prices of Bitcoin, and the analysis of the real evolution of the price of the BPRO), are the subject of future articles.

BPro Technical Price Bitcoin
Figure 3: Bitcoin profitability of the BPRO - Historical table

Next articles in this series

Stay tuned for the next articles we will publish about BitPRO, which allow Bitcoin Holders to earn Bitcoin income. They will explain the other three BPRO incentives mentioned at the beginning of this article:

  • Passive income (interest in Smart Bitcoins, or rBTC), paid by traders who carry out BTC leveraged transactions on the platform.
  • Fees paid by the users of the platform.
  • Incentives in MOC tokens (tokens that allow you to govern the MoneyOnChain protocol, and obtain fees charged in it).

In addition, we will present summaries of multiple simulations on the performance of the BPRO based on Bitcoin's historical prices, an analysis of the historical performance of the BPRO token since the protocol was deployed on the RSK Mainnet, and an analysis of the robustness of the MOC system to avoid eventual liquidation of this token.

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