# Module 1: Golden BASIS (Spot-Perp) {% hint style="info" %} Operator and jurisdiction: BASIS is operated by BASIS DIGITAL INFRASTRUCTURE LTD, a Seychelles IBC (LEI: [254900IX2F2KCWNSSS64](https://lei.bloomberg.com/leis/view/254900IX2F2KCWNSSS64)). Research Partner: Base58 Labs contributes execution research, systems modeling, and risk design. {% endhint %} ## 1) Objective The Golden BASIS module is designed to capture structural alpha from a market-neutral PAXG basis position. This is a classical cash-and-carry framework applied to tokenized gold, with deterministic execution and strict state-machine risk controls. ## 2) The Layman's Guide: Earning Yield on Gold Exposure Imagine you hold tokenized gold (PAXG). Instead of leaving it idle, the strategy pairs that long spot exposure with an offsetting short perpetual position of the same size. This reduces directional gold price exposure while allowing the strategy to collect the spread generated by the derivatives market structure. In simple terms: * Hold PAXG exposure * Short the corresponding perpetual market * Keep the position balanced * Earn when market structure remains favorable after costs The goal is not to predict where gold goes next. The goal is to extract value from the pricing relationship between spot and perpetual markets with high execution precision. ## 3) The Professional's View: Capturing the Basis Premium This strategy performs when the perpetual market trades in contango, meaning the perpetual contract is priced above spot on a sustained basis. In that state, a hedged long-spot / short-perp structure can earn recurring carry, subject to venue costs, borrow terms, execution quality, and market microstructure. The position is constructed as follows: * Long leg: Acquire spot PAXG * Short leg: Simultaneously short an equivalent notional of the PAXG perpetual contract This creates a delta-neutral structure. Spot and perpetual P\&L largely offset each other, leaving the strategy's net result primarily driven by basis capture, execution quality, and cost control. ### Mathematical Formulation A simplified representation of expected carry is: $$ Expected\_Carry \approx Position\_Value \times Net\_Basis\_Yield $$ Where: * `Position_Value` is the deployed PAXG notional * `Net_Basis_Yield` reflects the observed basis premium after transaction costs, slippage, venue fees, and hedge maintenance costs BASIS activates this module only when expected annualized carry exceeds predefined operational and risk thresholds. ## 4) Why This Is a Core BASIS Strategy * Structural alpha: The spread between spot and perpetual markets is a persistent market structure feature rather than a discretionary directional view. * Low directional sensitivity: The hedge is designed to minimize gold price exposure and isolate carry. * Institutional execution profile: The strategy benefits from deterministic execution, mathematical constraints, and routing discipline. * Production scalability: With sufficient market depth, the structure can be deployed systematically across favorable windows. {% hint style="success" %} Execution standard: BASIS uses proprietary routing infrastructure built for sub-50μs latency, 100K+ OPS handling, and deterministic hedge maintenance. This is central to preserving execution precision in spread-dependent strategies. {% endhint %} ## 5) Primary Risks and Controls | Risk | Description | BASIS Control Mechanism | | ------------------------------ | ------------------------------------------------------------------------------------------------------------------------ | --------------------------------------------------------------------------------------------------------------------------------- | | Basis compression or inversion | The spread narrows materially or turns unfavorable, reducing or reversing expected carry. | Eligibility gate: the module activates only above minimum projected return thresholds and de-risks when spread persistence fails. | | Liquidation risk | A sharp move in PAXG can stress the short perpetual leg if margin buffers are insufficient. | Liquidation guard: conservative leverage, margin buffer requirements, and automatic exposure reduction under pressure states. | | Hedge mismatch | Spot and perpetual legs may not remain perfectly aligned because of slippage, market fragmentation, or venue conditions. | Hedge integrity monitor: continuous notional reconciliation, tolerance bands, and auto-rebalance logic. | | Execution slippage | Poor fills can erode spread capture, especially during volatility or thin books. | BHLE routing: proprietary infrastructure optimizes fill quality, queue placement, and timing to protect execution precision. | | Venue and operational risk | Exchange outages, API degradation, or settlement constraints can disrupt hedge maintenance. | State-machine failovers: strategy pauses, exposure caps, and controlled unwind procedures under degraded conditions. | ## 6) Operational Notes for BASIS Users {% tabs %} {% tab title="Deposits" %} For PAXG, deposits are live and active through a connected Web3 wallet. Steps: 1. Go to Assets 2. Connect your Web3 wallet 3. Select PAXG 4. Confirm the deposit transaction 5. Funds arrive in your Funding Wallet Notes: * PAXG is supported as a native deposit asset * USDT is display-only and cannot be deposited * Funding Wallet holds native assets such as PAXG * Staking Wallet holds stTokens used for earning {% endtab %} {% tab title="Swap" %} PAXG can be swapped only 1:1 into stPAXG. * PAXG → stPAXG only * Same-token conversion only * Swap fee: 0.01% This module uses the same asset identity throughout the flow, with stPAXG representing the staking-side receipt asset. {% endtab %} {% tab title="Rewards" %} Rewards accumulate in real time as stPAXG in the Staking Wallet. Key rules: * Rewards accrue continuously * Unstake is full-position only * Claimable amount is auto-credited to the Staking Wallet as stPAXG upon unstake * Fixed pools can be unstaked only after the lock-up period ends {% endtab %} {% endtabs %} ## 7) Research and Infrastructure Context BASIS combines: * Seychelles IBC operating structure * LEI [254900IX2F2KCWNSSS64](https://lei.bloomberg.com/leis/view/254900IX2F2KCWNSSS64) * Research support from Base58 Labs as Research Partner * Deterministic execution architecture for structural alpha capture * Math-constrained risk engines and state-machine controls These elements are intended to reduce operational ambiguity and improve consistency in spread-based strategies where execution quality matters as much as signal quality. *** ### References \[1] Binance. (2024). "What Are Funding Fees in Crypto Futures Trading?" 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