> For the complete documentation index, see [llms.txt](https://docs.btcd.fi/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.btcd.fi/internal-rfq-system.md).

# Internal RFQ System

### The Coincidence of Wants

The BTCD Portfolio and the Vaults rebalance on opposite signals. When BTC price rises:

* BTCD Portfolio: needs to sell BTC for USD to maintain 50/50 exposure.
* USD Vault: needs to sell sBTCD for wBTC (to repay debt as LTV rises).
* BTC Vault: needs to borrow USD to buy more sBTCD (LTV is falling).

These flows are natural counterparties. Rather than every party going to external markets and paying spread, slippage, and MEV, the protocol matches them internally at fair mid-prices.

### How the RFQ Works

The Portfolio gives the Vaults special permission to access discounted mint/redemption of BTCD using both wBTC and USDC. When the vaults need to rebalance their leverage, they can initiate a trade with the Portfolio. The Portfolio fills the trade when it is beneficial for its own rebalancing needs.

### The Safety Valve

If no internal counterparty is available, the Portfolio falls back to external market execution. External venues are a backstop, not the primary route. As vault TVL grows, so does portfolio TVL, ensuring internal rebalancing capacity is sufficient.

<br>