Acre’s 14% bitcoin yield leans on Ethereum DeFi

Bitcoin yield hunters have a new vault option in the form of Acre, with an estimated initial APY of about 14%, auto-compounding in tBTC.

Hitting those early return targets will depend heavily on DeFi incentives and come with a built-in, two-week redemption window.

The goal is to abstract away the complexity of generating yield on bitcoin, according to Acre CEO Laura Wallenda.

“Our first strategy was curated by Re7 Labs and put forth to the Acre Security Council,” Wallendal told Blockworks, describing a BTC-in/BTC-out wrapper that bridges deposits to Threshold Networks’ tBTC on Ethereum and then deploys capital into onchain venues.

For now, 100% of the yield will be generated using tBTC on Ethereum, through activities such as lending, liquidity provisioning in DeFi, and staking, though a portion of assets may be bridged to other networks (such as Starknet) to participate in specific campaigns.

Source: Blockworks Research

So, for example, tBTC will be supplied as collateral to borrow stablecoins, which are then deployed to Re7’s Morpho vaults.

All yield from — both native and token incentives — flows back into the vault’s BTC-denominated headline rate.

“The majority of that yield is coming in other tokens, across different chains and protocols…those need to be sold for tBTC,” Wallendal said.

Withdrawals requests will be honored on a two-week redemption timeline, to allow risk curators to actively manage the unwinding of DeFi positions responsibly and discourage rapid in-and-out behavior during volatility.

Acre is capping capacity at first and planning to roll out multiple curator-managed vaults, with an eye to keep returns up even as supplied bitcoin rises. The first vault’s initial cap was 5 BTC, shortly being raised to 50 BTC. The longer-term capacity target for the Re7 strategy is “about 200 to 300 million,” Wallendal said.

Midas provides an algorithmic infrastructure and 24/7 portfolio monitoring. Wallendal added that a “kill switch” can pull funds from strategies back to a dispatcher contract, maintained by a 3-of-9 multisig, for user-only redemption in the event of a serious issue.

14% may sound like a lot, but Wallendal framed Acre’s goal as sustainable, risk-weighted returns rather than chasing the richest emissions. “We’re not chasing the most degen [yields],” and said a longer-term target is “above 5% APY overall.”

That would put it in line with competing options for bitcoin yield — a crowded and fast-shifting field. Bitcoin staking via Babylon has stalled and like many venues pays in non-BTC incentives alongside a newer risk surface. Bitcoin L2 ecosystems like Stacks (via sBTC), Hemi and Botanix provide alternatives, each with their own bridging solutions. In principle, Acre could deploy on all of these chains, alongside strategies such as providing liquidity to the Lightning Network.

In any case, the end user deposits assets directly from a Bitcoin wallet via the L1, and withdraws back to Bitcoin.

On oversight, Acre leans on a nine-member Security Council that sets a deployment policy and vets curators and strategies.

The members of the council are not disclosed, but “there are nine independent members,” Wallendal said, and “only one from the Acre team.” The risk curators do not sit on the council, she added, in a nod to limit conflicts of interest.