> For the complete documentation index, see [llms.txt](https://docs.basis.pro/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.basis.pro/economics-and-rewards/position-unwinding.md).

# Position Unwinding Protocol

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Operator and jurisdiction: BASIS is operated by BASIS DIGITAL INFRASTRUCTURE LTD, a Seychelles IBC (LEI: [254900IX2F2KCWNSSS64](https://lei.bloomberg.com/leis/view/254900IX2F2KCWNSSS64)).
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This protocol defines how BASIS reduces or closes market exposure when:

* users request unstaking followed by withdrawal
* the system enters protective states such as BSCB or DMM

The objective is to minimize:

* slippage
* liquidation risk
* settlement failure
* hedge breakage during execution

## 1) Why unwinding is non-trivial

BASIS strategies may include:

* cross-venue arbitrage positions
* derivative hedges such as perpetuals
* on-chain lending positions
* structural alpha capture workflows coordinated across venues

These positions cannot be closed safely with a simple "sell everything immediately" approach. Unwinds must be sequenced so hedge relationships remain intact while capital is recovered.

{% hint style="warning" %}
Improper unwind ordering can temporarily expose the book to directional risk, margin stress, or forced closure. BASIS uses deterministic execution rules and state machine risk controls to reduce this risk.
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## 2) Canonical unwind sequence

A standard unwind sequence is shown below.

| Step | Action                     | Purpose                                                                                             |
| ---- | -------------------------- | --------------------------------------------------------------------------------------------------- |
| 1    | Close arbitrage legs       | Exit offsetting venue positions and neutralize residual exposure                                    |
| 2    | Close derivative hedges    | Unwind perpetual or futures hedges and restore margin safety                                        |
| 3    | Recover on-chain positions | Repay loans, withdraw collateral, and exit liquidity positions                                      |
| 4    | Reconcile balances         | Confirm asset settlement and internal accounting consistency                                        |
| 5    | Finalize user crediting    | After the mandatory 7-day unstaking buffer, credit claimable stToken proceeds to the Staking Wallet |

This order reduces the probability that a hedged portfolio becomes unhedged during the unwind process.

## 3) Protective-state unwinding: BSCB and DMM

When BSCB is triggered:

* new strategy entries stop
* exposure reduction takes priority over return generation
* routing logic shifts toward capital preservation and execution precision

When DMM is triggered:

* positions are closed methodically
* root-cause analysis is performed
* system resumption requires stability confirmation
* only validated recovery paths are re-enabled

{% hint style="info" %}
BASIS infrastructure is designed around deterministic execution, mathematical constraints, and state-machine-based risk controls. This includes BHLE routing characteristics such as sub-50μs latency, 100K+ OPS handling, and proprietary routing infrastructure to support precise exposure reduction under stress.
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## 4) User-facing implications

Users may observe the following during unwind events:

* withdrawals may take additional time
* reward accrual may pause temporarily
* safety is prioritized over speed
* unstake processing may depend on completion of strategy-side closure steps
* even after an eligible unstake request is accepted, claimable balances are credited only after the mandatory 7-day unstaking buffer

## 5) Relationship to staking and withdrawal flow

On BASIS, rewards accrue in real time in the same stToken denomination.

Unstaking behavior:

* unstake is full-position only
* the unstake amount is auto-MAX
* there is no partial unstake flow
* fixed pools can only be unstaked after the lock-up period ends
* after an eligible unstake request and completion of the mandatory 7-day unstaking buffer, the claimable amount is auto-credited to the Staking Wallet as stToken

After the mandatory 7-day unstaking buffer is complete and the claimable amount has been credited, users may swap 1:1 into the corresponding native asset:

* stBTC → BTC
* stETH → ETH
* stSOL → SOL
* stPAXG → PAXG

Swap rules:

* same-token only
* 1:1 conversion only
* swap fee: 0.01%

Withdrawal rules:

* Funding Wallet holds native assets for deposit and withdrawal
* Staking Wallet holds stTokens for staking and reward accumulation
* withdrawal fee: 0.05%
* typical withdrawal processing targets from the Funding Wallet are:
  * BTC: 10 to 60 minutes
  * ETH, SOL, and PAXG: 1 to 10 minutes
* these withdrawal times apply only after the mandatory 7-day unstaking buffer has elapsed and the user has swapped back 1:1 into the native asset; for fixed pools, the lock-up period must also have ended

## 6) Asset flow reference

{% hint style="info" %}
**Full Asset Flow**

1. **Funding Wallet** (BTC / ETH / SOL / PAXG)
2. Same-token 1:1 swap via BIVB
3. **Staking Wallet** (stBTC / stETH / stSOL / stPAXG)
4. Stake into eligible pool
5. Real-time reward accrual in same stToken denomination
6. Unstake (full position only)
7. Mandatory 7-day unstaking buffer
8. stToken auto-credited to Staking Wallet
9. Same-token 1:1 swap back to native asset
10. **Funding Wallet**
11. Withdraw
    {% endhint %}

## 7) Deposit context for unwind readiness

Deposit methods differ by asset:

{% tabs %}
{% tab title="BTC" %}

* Copy the BASIS-assigned BTC deposit address
* Each account receives a unique BTC address
* No Web3 wallet connection is required
* Minimum deposit: 0.0001 BTC
  {% endtab %}

{% tab title="ETH / SOL / PAXG" %}

* Connect a supported Web3 wallet such as MetaMask
* Deposit the native asset directly
* PAXG support is live and active
  {% endtab %}
  {% endtabs %}

## 8) Operational principle

A survivable system does not optimize only for nominal speed. It prioritizes:

* deterministic execution
* hedge integrity
* settlement certainty
* capital preservation under stress

BASIS combines these controls with research support from Base58 Labs, emphasizing structural alpha capture through disciplined sequencing rather than uncontrolled liquidation behavior.

***

Next: see Worked Examples for scenario-based unwind paths.