> 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/readme/temporary-redemption-discount-trd.md).

# Temporary Redemption Discount (TRD)

TRD is the central risk that ybBTC holders face. When the underlying Curve Cryptoswap pool that backs ybBTC becomes imbalanced — typically because BTC price moved faster than the pool's internal price (`price_scale`) could update — redeeming ybBTC for BTC incurs a discount.

Formally:

$$\mathrm{TRD} = 1 − \frac{\mathrm{redemptionPPS}}{\mathrm{fundamentalPPS}}$$

TRD is unbounded: it can grow up to 100% in extreme downside imbalance, and there is no guaranteed timeframe for it to revert.

The BTCD Portfolio does not eliminate TRD — it absorbs it. By using look-through accounting, we are able to compute the full BTC exposure of ybBTC, $$\omega\_{yb}$$, including the TRD dependence. When $$\mathrm TRD > 0$$, the exposure of ybBTC differs from pure BTC, that is, $$\omega\_{yb}\ne 1$$. By hedging our portfolio to $$\omega\_V=0.5$$ using this $$\omega\_{yb}$$, our protocol can hold ybBTC, harvest its yield, and present the resulting yield to BTCD/sBTCD users without exposing them to TRD-driven drawdowns. See our [Mathematical Foundations page](/research-and-mathematical-foundations-1.md) for more details.

The quantities $$\omega\_{yb}$$ and TRD are conceptually related but fundamentally different mathematically:

| $$\omega\_{yb}$$                                                                                        | TRD                                                                                         |
| ------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------- |
| An exposure metric. Tells the portfolio how the USD value of ybBTC changes given a change in BTC price. | An impairment metric. Tells the portfolio what the current USD value of ybBTC is.           |
| Used to rebalance the portfolio to 50/50 exposure                                                       | Used to compute portfolio value                                                             |
| Can be > 1 (when pool is BTC-heavy) or < 1 (when pool is USD-heavy).                                    | Always ≥ 0 in normal regimes; reaches 0 only when the pool is balanced for the current LTV. |

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