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Expanding Bitcoin's Utility Expanding
Bitcoin's Utility

Fragments is a perpetual tranching protocol. We introduce low and high volatility derivatives of cbBTC. They are durable risk-adjusted assets.










($26.5 trillion) Motivation

Bitcoin is high-performing, sovereign-independent, and inflation-resistant. Still, significantly greater utility can be unlocked by reorganizing the volatility of bitcoin into senior and junior derivative assets. This expands the market by allowing investors to access a full spectrum of risk-reward profiles.

The First Leg: A Lower Volatility Bitcoin

On negative-return years, bitcoin's historical average is a striking -55.94%. That is to say, if you unexpectedly needed to withdraw from value held in bitcoin, you might be prohibitively down. At (1/5th) volatility, however, bitcoin is extremely usable as a near and medium term store of value.

Backtesting 1/5th volatility bitcoin (rebalanced annually) shows an average downside return of -11.73% compared with bitcoin's -55.94%; and an ARR of 34.48%. Meaning as a holder of this asset, you would be generating a 34.48% return annually; and if you unexpectedly needed to withdraw on a bad year, you would have only been down -11.73%.

Avg ReturnAvg Up YearAvg Down YearWorst YearUp yearsDown years
BTC175.68%252.88%-55.94%-73.56%9.03.0
SrBTC (20%)34.48%49.89%-11.73%-16.87%9.03.0

Putting this into perspective, a risk-adjusted 34.48% ARR outperforms the average global hedge fund, money market fund, and private equity fund.

Asset ClassAvg ReturnEstimated AUM
Global Private Equity10.5%$13.1T
Global Hedge Funds6-8%$3.5T
Global Money Markets2.91%$9.9T

Combined, we estimate low volatility assets (LVA’s) to be a $26.5T market opportunity. SrBTC is a weath accumulator's asset and a significant bull case for BTC.

The Second Leg: A Higher Volatility Bitcoin

In creating low volatiliy bitcoin, we produce a corresponding high volatilty bitcoin, further expanding utility. Read about the motivation for higher volatility bitcoin.





How it works

The Fragments protocol works by reorganizing the volatility of an input asset (cbBTC) into senior and junior perpetual tranches. Sr tranches are lower in volatility than their underlying asset; and Jr tranches are higher in volatility than their underlying asset.


cbBTC
Sr
Jr

Holding both Sr and Jr perpetuals in the right ratio is equivalent to holding the underlying asset because net volatility is conserved.

The system has configurable hyper-parameters (including fee rates). These parameters and any balance of assets accrued by protocol fees; are governed by the FORTH token. For more details see the documentation.





Use Cases

  Low Volatility
SrBTC is a wealth accumulator's asset. It is comfortable to hold and borrow against across a broad range of time scales.
  High Volatility
JrBTC is a trader's asset (signal-rich, high-beta). It provides magnified BTC exposure without liquidation risk.

 


Initial Mint

Follow the release schedule of SrBTC and JrBTC on Twitter (X) and learn the mechanics by reading the docs. Contact us below if you're interested in becoming a TVL or distribution launch partner.


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